Guardians of the previous regime: Post-CEO succession factional subgroups and firm performance

How can new CEOs – as the architects of their top management teams (TMT) – compose the executive group to realize high performance? We attend to this question by drawing on the notion of factional subgroups. We argue that TMT change after a CEO succession event can trigger a factional faultline between executives hired by the new CEO, and executives who had been TMT members prior to succession (the “guardians-of-the-previous-regime”). Such faultlines might activate disruptive TMT processes in the succession's aftermath and, thus, hurt post-succession firm performance. We also argue that the detrimental effects of factional subgroups strengthen under conditions of poor pre-succession firm performance and predecessor dismissal, but mute in situations of orderly (follower) succession. Overall, our research links faultlines theory with CEO succession research to advance our understanding of how TMT reconfiguration in strategic leadership transitions impacts organizations.