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H E S S E L B E I N & C O M P A N Y

sure that new employees at all levelsintegrate well into the organization.All business leaders recognize theimportance of getting things rightfrom the start and minimizing thedisruption that comes with majorpersonnel changes.

But for all the time and moneybusinesses spend to make an execu-

tive’s inbound landingsmooth, we tend topay far less attention tothe process of depar-ture. The departure oftop executives—espe-cially those who haveplayed key roles in cre-ating the company and

its culture—can undermine em-ployee morale, batter share prices,tarnish professional reputations, anddevalue hard-earned brand equity.

Exiting the stage right is compli-cated. Whether you started a drycleaning business in Nashville, builta nonprofit in Phoenix, or—in mycase—founded a Fortune 200

In Tom Emerson’s first severalweeks at Capital One, he tore

through a half-dozen briefings andorientation seminars, participated inan off-site retreat with his directreports, spent an afternoon with thecompany’s founders, met with ahandful of board members, andlogged several hours reviewing ourguidebooks for new executives.Like all our staff, hefaced an exhausting butproductive schedulethat oriented him toCapital One’s leader-ship, culture, and busi-ness.Then, for the next12 months, we kept anexecutive coach at theready for him and assigned externalconsultants to run periodic check-ins with the stakeholders to Tom’sperformance.

Capital One, which I founded in1994 with current CEO and long-time friend Richard Fairbank, likemany companies, makes a massiveinvestment in “on-boarding” to en-

Exiting the Stage Right:Lessons for Smooth

Executive DeparturesNigel Morris

financial services company in Vir-ginia, your ability to remove your-self from the organization youhelped create is key to continuingthat success.

In planning an eventual departure,top executives should review thetypology offered by Yale businessprofessor Jeffrey Sonnenfeld in hisdefinitive book on CEO departures,The Hero’s Farewell.

There are four types of departingCEOs,Sonnenfeld contends, thoughI will expand his taxonomy to in-clude company founders and othertop executives. The “Monarchs”overstay their welcome and areforced from power.The “Generals”are removed by coup but plot theirreturn from the sidelines.The “Am-bassadors” leave gracefully but workto retain influence and close con-nections to the firm.The “Gover-nors” choose a stable time to leaveand willingly move on to newchallenges.

I’ve worked hard to depart CapitalOne as a “Governor.”A graceful exitrequires clever strategic thinking onthe corporate level, but more im-portant, it involves some thoughtfuland honest introspection on a per-sonal level. The recommendationsthat follow address both tracks of theprocess.

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Winter 2006

Leader to Leader

Making the Decision

Challenge your comfortable status quo.Knowing when to leave is the mostchallenging part of the process ofdeparture.Think about the massiveinertial pressures on successful exec-utives: identity, stability, status, con-trol over the creature you gave life.Successful businesspeople tend tohave experienced success—and theaffirmation that accompanies it—since they were children. It shouldsurprise no one that we are hesitantto jump off that train and possiblylose momentum.

Perhaps the fear of uncertainty is thegreatest obstacle to a leader’s deci-sion about when to move on.Whatwill I do? Who will I be? What ifmy best days are behind me?

Every day, executives need to askthemselves whether where they areand what they’re doing is right forthem.This is not a binary decisionof whether to work 80 hours aweek or sit on a beach for the restof your life, but instead whetheryou should consider a major shiftalong the work-leisure continuum.Personally,when I dropped my kidsoff at the bus stop and kissed themgood-bye, I found myself askingwhether I really wanted to continueat this pace,whether my current in-volvement was the best thing formy family and the company, andwhether I was still learning enough

to keep me invigorated about thework. I was honest with myself andrealized I needed a change.

We need to learn not to fear well-reasoned changes in our profes-sional status. For example, MartinJohnson, captain of the nationalrugby team of my native England,recently retired after leading hissquad to a miraculous victory inthat sport’s World Cup in 2003.

Johnson is an immensely talentedplayer and surely could have con-tinued his career on the field. Buthe was honest enough with himselfto know that he had been blessedwith a wonderful playing career andshould leave with his legacy intact.

Contrast that with basketball starMichael Jordan, whose innumer-able retirements dragged him froma pedestal of near-divinity andmade him mortal again. Executivesneed to be even more self-critical,as we don’t tend to suffer the age-related, career-ending physical in-juries athletes do.

As I reflected on my career, Ithought of my working life in these

terms.Ideally,we work from roughlythe ages of 25 to 65.I concluded thatI had spent the first 20 years of myworking life in an accumulation pe-riod: I learned, I absorbed, I created,I was focused, I was driven,and withCapital One we achieved extraordi-nary success.We brought major in-novations to the credit card industry,democratized credit across the entirerisk spectrum,and changed the waysbusinesses collect, analyze, and use

consumer data. We built CapitalOne into one of the great successstories of the financial services in-dustry, with more than 48 millioncustomers and $80 billion in loans.

But in the second stage of my work-ing life—from 45 to 65—I have de-cided that I want to start a givingperiod:spending more time with myfamily,offering business expertise togovernment and nonprofits, andnurturing the dreams of other entre-preneurs.

Top executives have a hard time ad-mitting that they can and shouldmove on, thinking themselves irre-placeable. Before succumbing tosuch hubris, we should recall a fa-

8

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Too many organizations substitute a laundry list

of projects for a clear strategic direction.�

Winter 2006

mous quote by Charles de Gaulle.His aides begged him not to resignas president because he was France’s“indispensable man.”“Mes amis,”hereplied,“the cemeteries of the worldare filled with indispensable men.”

Some milestones—an illness, an an-niversary, a family death—promptthese important questions, but inthe absence of such triggers we mayforget ever to honestly assess ourcommitment to the status quo. Forthat reason, I suggest that executivesmake this introspection part of theholiday period’s emphasis on reso-lutions. Most people use the holi-day season to take stock of theirlives, and these questions aboutwork should be part of that process.

Seek advice from your peers. As mythoughts about leaving the companytook form,I polled about 40 peopleof comparable age and backgroundwho had made similar transitions inthe recent past. I wanted to knowabout the transition to life beyondour common obsessive focus onbuilding a business. People sharedtheir experiences on everythingfrom finances to physical health,buttwo conclusions emerged veryclearly.

First, everyone I polled was pleasedthey had moved on. One inter-viewee—a man in his 60s with anextremely successful real estate busi-ness—told me the one regret he

had was not having made his transi-tion earlier. I heard hardly any com-plaints and this unanimity servedas great encouragement for me toconsider heading in a new direction.

Second,people warned me that thetransition from making the deci-sion to implementing the decisionto leave was a huge challenge thathad yielded very mixed results.Thismade it clear to me that I neededto think through my plans.

The decision to leave should takeinto consideration the experiencesof others like us.Whenever possi-ble, a departing executive shouldsolicit advice from friends and col-leagues who have recently made asimilar move.

Communicating the Decision

Be authentic.When you are ready toannounce your decision to leave, it

is critically important to give a clearand authentic explanation for yourdeparture.The people that matter—at home, in the boardroom, and onWall Street—will see through anyspin and that deception will disruptyour life and your business.

Building trust with colleagues at alllevels has been a top priority ofmine at Capital One. Based on mytraining in psychology, I believestrongly in the power of reciprocity:if I am honest with people, they willfeel more compelled to be honestwith me. I have tried to inculcatecommitment to authenticity in ourwhole workforce. That commit-ment has paid dividends in allaspects of our business practice andcertainly helped smooth my tran-sition from the company.

Make an external and internal commu-nication plan and follow it.When,how,and to whom you disclose yourplans will have a major impact onthe ease of the transition. My de-parture was going to disappointsome of the people I brought toCapital One. As a founder, I am acentral part of the belief system andthe culture. I thought of who wouldbe most affected by my move and

told them first. In some cases, the re-action was dramatic, as if the worldwere coming to an end because Iwas leaving the company. I ex-plained myself multiple times beforethose people really understood.Lessflattering was my realization that

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Top executives have a hard time

admitting they can and should move on.�

9

Leader to Leader

people got over this initial reactionvery easily once they understoodmy motivation and the corporatereorganization to fill my role. Allhands were prepared to carry onwithout me.

The world changes when you in-form board members that you areleaving. I invested quite a bit of timemeeting with board members toanswer their questions and addresstheir concerns. When my decisionhad been explained, the board sawthat I was resolute and that I wasneither positioning myself for a big-ger compensation package norheading for the hills to avoid someimminent disaster.As a result of myopenness, they were supportive andoptimistic about Capital One’s fu-ture without me.

Determine your reorganization or suc-cessor before you announce your plansbeyond top-tier executives. Your an-nouncement will cause uncertaintyabout the direction of the companyfollowing your departure. Instead ofannouncing my plans and then ask-ing, “What now?” our leadership

team developed a reorganized “NoNigel” structure to release with myannouncement, and as a result weavoided uncertainty and panic with-in Capital One and in the equitymarket.

Managing Your Exit Process

Find a coach. The process of leavingis not easy and I couldn’t have doneit without the support of friends andcolleagues. Board members cameand asked me what it would take tokeep me at Capital One. Close col-leagues privately berated me forabandoning the company. The ac-tion of leaving involves emotion andI needed to have someone I couldconfide in—someone without astake in my decision who wouldcoach my thought process and help

me stay true to my resolution tomove on. I engaged Rich Fairbankand America Online founder JimKimsey, a member of our board, asguides. While both clearly had astake in my leaving the company, Itrust them deeply as friends and re-lied on their expert advice on deal-

ing with the process of leaving.I rec-ommend identifying a friend whoknows you and your business andwho commits to offering sound,dis-interested advice throughout theprocess.

Set a substantial but clearly defined exitperiod. I announced in April 2003that I would end my formal rela-tionship with Capital One in twelvemonths.A year struck some as a longphase-out period, but I thought itwas important not to rush out thedoor for a few reasons.

First, Capital One was emergingfrom a particularly challenging pe-riod of increased regulatory scrutinyand I wanted to make sure the cor-ner had been fully turned. I wishedfiercely to avoid the perception thatI was jumping ship and abandoningthe company I worked so hard tobuild. On the contrary, I thought itwas especially important to be onthe field when the goal of over-coming our regulatory challengeswas scored. Demonstrating a com-mitment to the company’s contin-ued well-being is an important partof leaving, with significant implica-tions for audiences inside and out-side the company.

Second, I wanted it to be clear thatI was leaving voluntarily.A long exitperiod discourages chatter amongthe “agenda-meisters”who want tointerpret an executive’s departure in

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Demonstrating a commitment to

the company’s continued well-being

is an important part of leaving.�

10

Winter 2006

the most salacious manner possible.The long departure period has al-lowed me to repeat and clarify myreasons for moving on, allowingtime for intimate discussions withcolleagues and helping avoid un-pleasant gossip that might have anegative impact on our share price.

Finally, I wanted to hand over thereins in a careful and sensitive way.The chaos associated with the de-parture of a top executive shouldbe minimized whenever possibleand my slow phase-out has allowedfor a thoughtful, deliberative evo-lution of the company.

There is a school of thought thatadvocates a quick exit, I found as apolled my peers who had recentlyleft businesses. Make your decisionand get out of the way, they said.Some people announce on Fridaythat they’re leaving the companyand evacuate the office over theweekend.I completely disagree withthat approach. Haste breeds uncer-tainty among employees, share-holders, and analysts; it representsinsensitive and irresponsible man-agement and is the most selfish anddisruptive way to leave a company.

Make a clean break. It would be easyto meddle forever in Capital One’soperations. I am deeply interestedin seeing the company continue tosucceed and there will always beopportunities to help out. Based

on advice from friends and col-leagues who had made similarmoves, I decided to make a cleanbreak to avoid the inevitable feel-ing of “no man’s land” that wouldaccompany an ill-defined phase-out period. Leave when you sayyou are going to leave and give thecompany some space.

Set a standard for future departures.As Iwas planning my exit strategy, I de-cided that I wanted to set a standardat Capital One for smooth transi-tions. In a final contribution to thecompany’s culture, I wanted to es-tablish a procedure and high-watermark for trouble-free departures.While my exit has not been flaw-less, it has established a tested modelfor the future.

Planning the Next Step

Commit not to commit. Successfulpeople do not like to lie aroundwhile others do important things.As soon as your intention to leave isknown, offers are likely to flood infor next steps.Headhunters will callwith tempting new prospects, part-ners will approach you about newinvestment opportunities, and your

friends in government and the non-profit sector will want to apply yourbusiness expertise to their projects.Their proposals will flatter and in-trigue you, but you must not com-mit to new projects immediately.One recently departed executive Iinterviewed urged me to use thefirst phase of my new freedom to

experiment with different interests,to get hands-on experience in var-ious fields.

The first active step was sittingdown with my wife, Lori, to writeout our core operating principles,in which we identified our priori-ties and goals for this new phase oflife.Then I defined five “vectors” Iwanted to explore professionally,including venture capital, nonprof-its, and government. Given thesetwo sets of parameters, I am far bet-ter equipped to pursue projects thatsuit my lifestyle, as opposed to hav-ing to closely scrutinize every offerand request I get.

By committing to myself not tocommit to others, I have guaranteedmyself the reflective period I sobadly need. I have identified five

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Successful people do not like to lie around

while others do important things.�

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Leader to Leader

areas I want to explore; more im-portant, I have determined what Idon’t want to do.

Conclusion

As Jeffrey Sonnenfeld notes, thereare many ways—some good, manybad—to exit the company. I haveoffered my strategic and tactical rec-ommendations on how to leavewith the least possible disruption tobusiness. These guidelines servedme well and I think they have near-universal applicability to peoplewho have founded and run com-plex organizations.

My exit has not been perfect. Forall my planning and soul-searching,I failed to adequately manage myfamily’s expectations for our newlife.

The morning after I announcedpublicly that I was retiring fromCapital One, my 12-year-old sonsaw me putting on my jacket andasked, “Where are you going? Ithought you were finished work-ing.” I responded to him that whenyou’re driving a car really fast, youcan’t just hit the brakes and come toa screeching halt.You need to slowdown and come to a restful stop.Heseemed satisfied with that answer,but I felt bad that my children hadmisunderstood my plans. In plan-ning your departure, the key is bal-ancing the demands of those who

matter—colleagues, analysts, share-holders—with the needs of thosewho matter most—your family.

I offer two concluding observations.

First, leaving an organization youhelped build can be a huge educa-tional experience. The great ironyin this experience is that I decidedto leave Capital One because Iwasn’t learning as much anymore,but in this slow process of extricat-ing myself from the company I havelearned fascinating new thingsabout our corporate culture and myown leadership style. I am confidentthat this process has left me a bettermanager for the future: it haschanged the way I would enter anorganization, how I would buildthe organization, and how I wouldallocate time and energy.

Finally, I have realized that how youdepart depends on how you lead. Isee my smooth departure as a signof a successful journey at CapitalOne. But the real victory is thatRich and I have created a dynamic,trusting company that can easilywithstand the departure of one ofits leaders. Recruiting bright peo-ple and trusting them to performwell, innovate, and adapt is at theheart of our business model. I can’tsay with certainty that I will be asenthusiastic about the decision toleave Capital One in a year as I amtoday. Regardless of that unknow-

able condition, seeing this adaptiveculture outlive my day-to-day pres-ence at Capital One is, to me, themost rewarding outcome of thisgraceful exit.

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Nigel Morris co-foundedCapital One Financial

Services in 1994 with RichFairbank. Capital One

quickly grew from an indus-try fledgling to one of thegreatest success stories in

the financial services indus-try. As the co-architect ofCapital One’s successful

Information-Based Strategy,Mr. Morris has presentedkeynote addresses at inter-national forums hosted bythe Financial Times, Busi-nessWeek, and the Ameri-can Banker. He has earned

numerous awards andaccolades, including Entre-preneur of the Year fromLondon Business School.

He is now on the boards ofthe Economist, New Phil-anthropy Capital, QuantaCapital Holdings, and theLondon Business School.