strategy+business
MAY 15, 2019
CEO SUCCESS STUDY Succeeding the long-serving legend in the corner office
According to the 19th annual CEO Success study by PwC’s Strategy&, boards and new CEOs can reduce the risk associated with handing off the baton after a long tenure.
BY PER-OLA KARLSSON, MARTHA TURNER, AND
PETER GASSMANN
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1 leadership
strategy+business issue 95 Succeeding the long-serving legend in the corner office
According to the 19th annual CEO Success study by PwC’s Strategy&, boards and new CEOs can reduce the risk associated with handing off the baton after a long tenure. by Per-Ola Karlsson, Martha Turner, and Peter Gassmann feature
t’s no secret that life at the top of the corporate world leadership is becoming more challenging. Last year, nearly 17.5 percent of the CEOs of the world’s largest 2,500 companies left their posts — representing the highest rate of departures that PwC’s Strategy& CEO ISuccess study has tallied in its existence. In 2000, a CEO could expect to remain in office for eight or more years, on average. Over the last decade, however, average CEO
tenure has been only five years. 2 And yet a substantial subset of CEOs manages to run the equivalent of a corporate marathon, lasting nearly three times as long as the average boss. Even as the life of CEO becomes nasty, brutish, and short, 19 percent of all CEOs manage to remain at the top for 10 or more years, with a median tenure of 14 years. Some of these long-distance runners, typically company founders or visionaries who transformed their organizations, serve for 20 years, and in some cases for many years longer. All of them have had impressive runs atop their company and
Illustration by Pep Montserrat created a legacy.
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3 leadership with PwC Middle East. Middle PwC with apartner is he inDubai, Based business. consulting strategy PwC’s Strategy&, for East Middle inthe practice leadership and change, organization, the leads [email protected] Per-Ola Karlsson after 10after at top the succeeded by years investment chief was and officer Tim operating chief and officer, or at where McNabbBill Vanguard, resignedin 2018 Howard 2017 succeeded in Schultz was Johnson, by Kevin former the president go smoothly, where at Starbucks, founder case the was long-term and as CEO planned succession followed are and by acompany insider. Most transitions or majority The fraught. vast dramatic of long-serving CEOs leavea in office 126-year history. executivechief first the outsider and of Danaher in CEOas GE’srecruited Culp,tenure, by former the replaced board and the dismissed by he Larry was and appointing disclosures; negativeresults 14 financial monthsinto Flannery’s around troubled the turn conglomerate. dis went quickly amid The plan awry sor, longtime GE executive John Flannery, launched amajor transformation to a17-yearmelt after departed tenure atop 2017, Electric General in succes his through 2018. since hereturns took 2011 over August in impressive averaged an 20.9 percent heir clear shareholderthe apparent. total But done Cook Annualized has well: and operating chief was officer effective shoes —even Cook been had though an Cook ascended to top the job, to it hard how see was heJobs’s could fill colossal founder Steve Jobs stepped for down Tim and reasons ago eight health years go great when Apple’s When along-servingthings CEO departs. legendary To of belong-serving sure, mostare executive chief departures less officers But what happens when baton the Sometimes to runner? next the passed is Sometimes, however, Im transition the up disaster. Jeffrey in winds When
is a leading practitioner in in practitioner aleading is [email protected] Martha Turner PwC US, based in New York. inNew based US, PwC with aprincipal is She Strategy&. for operations
PwC Strategy& Germany. Strategy& PwC with apartner is He Europe. of Strategy& director managing as serves he Düsseldorf, and inFrankfurt Based Strategy&. for industry financial-services inthe practitioner aleading is [email protected] Peter Gassmann
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strategy+business issue 95 featuresfeature title leadership of the article 44 - -
contributing editor Rob Successors to long-serving CEOs, however, face a difficult a Following path. however, CEOs, long-serving to Successors The experiences surrounding long-serving CEOs were a focus of this year’s this focusa of year’s were CEOs long-serving surrounding experiences The As one would expect, long-serving CEOs generally deliver higher shareholder shareholder higher deliver generally expect, CEOs long-serving would As one with their predecessors in terms of their backgrounds, their successors turn of in terms in signifiwith predecessors their legend is not for the faint of heart. Although they often have much in common heart. in common the faint of Although much for they have often is not legend for other regions. The trend is even more pronounced for long-serving CEOs. long-serving for pronounced more is even trend The regions. other for percent in 2014 to 48 percent in 2018, compared with an average of 23 percent percent 23 with an of compared average in 2018, percent 48 to in 2014 percent outgoing CEOs holding joint titles in North America has been rising, from 31 in titles America North has 31 rising, been from joint holding CEOs outgoing successions, we found it was a turbulent year, as the percentage of CEO turn CEO as of the percentage year, was a turbulent it found we successions, andCEO chair board departure. their the time of at Overall, this toward trend traded companies from 2004 to 2018. When we isolated the data from 2018 2018 the data from When isolated we 2004 2018. from traded to companies of titles the joint hold likely to and they are more also regions, in other much examined all turnovers of chief executives at the world’s 2,500 largest publicly largest 2,500 publicly examined the world’s at chief executives all of turnovers than long-serving be likely to those AmericanNorth more are companies much head of R&D, whose background is in innovation, mobility, and digital change. mobility, isbackground in innovation, whose R&D, of head Strategy&, Success by CEO study strategy PwC’s which business, consulting at CEOs company. their at carefullya to executive succession insider chosen a 13-year run as head of the automaker. He was succeeded by Ola Källenius, was Ola by He succeeded the run the automaker. a 13-year as of head than rather good be to They great. typically in arranginga key role play a smooth for example, Dieter Zetsche departed two years ahead of schedule in 2018 after Zetsche departed two Dieter in years 2018 example, ahead schedule for of tends average, returns though performance, CEOs, on their than shorter-serving Buckley. In other cases, Insignals other the transition changea in direction: Buckley. Daimler, At page 48). in 2018,” turnover high (see “CEO a record to rose overs Bhagwanjee and Spencer Herbst and s+b Norton contributed this to article. PwC US managers Jennifer
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5 leadership they werethey promoted to their post. 2018,In long-serving percent CEOs 90 been had insiders departing when of all years. CEOs percent), (77 three last the in true a situation especially was that CEOs wereing more to likely be insiders percent) (84 were shorter-serving than heldpercentage fact, in of steady. has, long-serving year CEOs each Long-serv CEOs overing 15 the milestone. of —994 achieved this —had data years The thewho for served had depart 10 moreall CEO.of as than years Nearly afifth to 20182004 of —atotal 5,253 CEOs turnovers identified —and departing all We successions at world’s the all reviewed companies listed from 2,500 largest in toSettling the C-suite succession. successful a produce to CEO foring step out how can they of shadow the of odds the a legend defy and tips to executives who line, in or are under consideration, to along-serv succeed despite adecades-long we provide trend Last, favoring some insider candidates? made for to be more boards open outsiders to hiring to CEO, replace alegendary provide board best the how face, successors can to support? be there Is acase Given long-servingwith themselves: CEOs should long the that be asking odds other CEOs. all to meet or of beat performance struggle the they their predecessors fact, in and, 15-year CEO the during their terms as period we that reasons the studied, and on universe of smaller the who successors particularly havefocusing completed of to successors long-serving the these CEOs, characteristics the examine also how transition. they We analyzing and leaders set these apart that characteristics phenomenon delving of into tumultuous age, long-serving the this the CEO in more to likely be forced aplanned succession. via out to depart rather than have generally performance, worse shortercantly financial aretenures,and much We consider also questions the of boards the directors at that companies year’s this In study, CEO Success we zeroon in anomalous seemingly the - - -
strategy+business issue 95 featuresfeature title leadership of the article 66 - - - -
Several factors may explain these regional differences. Typically, long-serv explain Severalmay thesefactors differences.regional Typically, with years, 4.0 compared is CEO 13.9 a long-serving of medianThe tenure Among industries, CEOs in healthcare were the most likely to be long-serv be likely to the most in CEOs healthcareAmong industries, were Long-serving CEOs are most common at North American North at by companies Long-serving common areCEOs most
more than three times as long. times than three more with 4.0 years for other CEOs — CEOs other for years 4.0 with serving CEO is 13.9 years, compared compared years, is 13.9 CEO serving The median tenure of a long- of a tenure median The more change in industries than is true in more mature regions, with some com change than with in some industries more mature regions, is true in more sometimes shuffles betweengenerallyor is sometimes CEOs within industries, and there where the corporate governance model is of more recent vintage, the government vintage, the government recent more is of model governance the corporate where on to become the chair board succeeds In China, become them. executive as to a younger on typically assumefewonlyyears, a in officemoving careertheir later serve for and norms favor earlier retirement than CEOs is the countries, case retirement earlier other in most favor norms given a certain amount of deference by their boards. But in Japan, where societal where in Japan, boards. their But by a certain deference given of amount industry. by CEOs 122 percent more likely to be long-serving than long-serving be likely the world. to in CEOs the of rest more percent 122 because so are do companies well their performing and periods thus are long for differences long-serving among proportionality few other found We percent). 7 percent in China. In fact, over the last 15 years, in America CEOs North were in the China. last 15 In fact, over 7 percent in stay positions their who those — that say, ing earn is CEOs to tenure their panies failing rising as or the markets fast sold being and the regulatory or envi change. ronment (26 technology in those information by followed probability), ing percent (28 for the BRI countries (Brazil, Russia, and India), 9 percent for Japan, and only and only Japan, the BRI for (Brazil,for countries Russia, and percent 9 India), America were long-serving, compared with 19 percent for Europe, 10 percent percent 10 Europe, for percent with 19 compared long-serving, Americawere a significant margin. Over the full period, 30 percent of the CEOs in Northa significant of CEOs in margin. the the Over fullpercent 30 period,
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7 leadership planned and executed,planned and adecades-long line with in trend global toward planned to continue long notably tenures is performance the unless positive. of boards directors that have gotten suggests stricter about CEOs This allowing amerepercent and 7 percent top the quartiles, in two bottom the in quartile. of performance the improvedlong-servingyears, CEOs has even more, 64 with compared 28 percent with quartile, for shorter-serving three CEOs. Over last the onlyAnd 8percent of long-serving the CEOs were bottom the in performance of TSR compared performance, only with 47 percent of non-long-serving CEOs. Moreover, 59 percent of long-serving the CEOs upper were two the in quartiles over 2004–18 the period — 3.3 percentage for points other higher than CEOs. shareholder total in increases (TSR) for return long-serving 5.7 CEOs was percent outperform their shorter-serving regionally adjusted peers. The median annual haveand influencedthe likely selection many of or mostthem. of long-serving CEOs obviouslytheir departure, know their board members well, joint the with long-serving depart North CEOs America in title. By of time the morehave remained far 67 other in common as many regions. percent than As of overrepresentationthe of long-serving U.S., the CEOs in where joint the titles 21 the as high percent reflects for share again shorter-serving finding CEOs. This as anumber twice more depart, titles is by they that time the board chair than longerthese tenures percent 46 that is of long-serving CEOs hold joint CEO and long. for as years other times One CEOs three —more reason for likely than shorter-serving peers. they generally outperform their tenure oftheseCEOsisthat The mainreason for thelong The great majority of departures of long-serving CEOs are carefully The great majority of long-serving of carefully CEOs are departures reasonBut for long the main the tenure generally they of that CEOs is these
strategy+business issue 95 featuresfeature title leadership of the article 88 , - - 1 3 7 0 208 5 , 1 58 9 , 2 1 5 1 1 15% 18% 18% 22% 32% 85% 82% 82% 78% 68% s s s s s Forced r r r r r We also found that the longer a CEO is in office, the less likely he or she is she or is a CEO inless office,he likely also thatthe the longer found We yea yea yea yea yea
5 – Excludes interim CEOs and turnover events resulting from M&A. Planned 20+ 0 5–10 15 percent for those who make past 20th who their those This obvi it anniversary. for trend percent 15 also in part may larger due the and be fact it CEOs, percentage to that a much 18 percent for those who leave after leave serving and years, 20 who those and just between for 10 percent 18 reflects fact CEOs ously long-serving better performing the are thanthat other falls to 22 percent for those who leave afteryears,10 leave serving who those between for falls five and percent 22 to who depart in the first five years of their tenure are fired. But that proportion proportion Butthat arefired. depart tenure who inyears the first oftheir five to be forced out (see “Planning for transitions”). Thirty-two percent of CEOs CEOs Thirty-two of transitions”). (see “Planning for percent out forced be to and other CEOs. and other resulting from anresulting from M&A transaction CEOs is almost long-serving the same for percent, compared with 76 percent for other CEOs. The number of departures of number The CEOs. other for percent with 76 compared percent, in a planned succession. Over thelast Over threehas in succession. 85 years, a planned to risen the number May 4, 2015). From 2004 to 2018, 82 percent of long-serving CEOs left CEOs office long-serving of percent 82 2004 2018, to From 2015). 4, May previous CEO Success CEO studies are has associ thatprevious successions planned shown successions. And there’s good reason for making for reason good plans. Our such research in And there’s successions. s+b Problem,” Succession CEO Billion with TSRs higher ated (see “The $112 CEO succession reason by outgoing CEO tenure, 2004–18 tenure, CEO outgoing by reason succession CEO Planning for transitionsforPlanning Note: Source: Strategy& 2018 CEO Success study 10–15 15–20
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9 leadership T 2018 in turnover CEO that CEOs were fired in 2018 were dif 2018were in fired were CEOs that reasons the But percent. 20 at trends, recent with line in was turnovers rising”). still ( turnovers all of thirds two- than more for account to ued contin successions Planned trends. long-term with line in — remained M&A-related and forced, — planned, turnovers of types the of Percentages decade. last the for norm the been has what above 2017 in and rate percent 14.5 the than higher points 17.5 2018 —3percentage in percent of high arecord to soared panies T Strategy& Source: 18% 1 CEO turnover rat turnover CEO 2% 0% 6% ide still rising still ide 2000 world’s 2,500 largest com largest 2,500 world’s the at CEOs among urnover The overall rate of forced forced of rate overall The
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strategy+business issue 95 featuresfeature title leadership of the article 1010 8 1 0 2 4.9% - - 6.0% 6 1 0 2 3.6% 2.8% 4 1 0 2 5.2% women CEOs in the U.S. and Canada, the largest share of women CEOs in resulted2018 from sharp increases in Brazil, Russia, India, China, and “other emerging” countries. Among industries, utilities had the larg est share of incoming women CEOs percent),(9.5 followed by commu nications services percent) (7.5 and financials percent). (7.4 The lowest share? No women became CEOs of industrials or information technology companies in 2018. 3.0% -
2 1 0 2 4.3% 2.6% 0 1 0 2 4.0% 3.5% all CEOs has remained steady at five yearsfor the last decade, and the 53-year median age of incoming CEOs has also been steady over the last decade. The share of incoming CEOs with previous experience as CEO of a publiccompany has been increasing for the past several years, particu larly in Western Europe, where 39 percent of incoming CEOs in had 2018 previous CEO experience. CEOs Women The share of incoming women CEOs was percent 4.9 in 2018. This is down slightly from the all-time high of 6 butpercent it continues in 2017, an upward trend from the low point of 1 percent in 2008 (see “Women in the corner office”). Unlike in 2017, when the record high was driven percent spike in incomingby a 9.1 - 2008 1.0% 1.1% 2006 3.4% EO SuccessEO study C 8 1 0 2
2.1% Among industries, turnoverindustries,Among The share of incoming outsider The global median tenure for omen in the corner office corner the in omen 2004 2.4% 1% 6% 4% Global share of incoming female CEOs female incoming of share Global 5% 3% 0% 2% 7% Source: Strategy& W was highest in communication services companies (24.5percent), followed by materials (22.3 percent) percent).and energy Healthcare (19.7 saw the lowest rate of CEO turnover percent.in 2018, at 11.6 CEOs in was 2018 the lowest since percent.2007, at 17 For the first time in six years, insiders outperformed outsiders. Among CEOs who left office in insider2018, CEOs’ median annualized total shareholder returns were 0.8 percentage points higher than those of outsiders. This outper formance, which we discuss in the main article, is reminiscent of the period between 2000 and 2012, when insiders had higher returns than outsiders out years. in 10 of 13
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11 leadership Successor to a to Successor One reason for the small size of this data set, naturally, data One some of that is size reason this for long-serving small the long-servingthe or his CEO her and respective tenures. successor over their full comparison of performance the adirect between make among which we can nomics involved leaves itself. asubset transaction the This in of companies 284 driven is following by factors,mance many transaction the not eco the least group from such events this because often unique, are perfor the and M&A orhis her tenure. We excluded interim transitions CEOs resulted and that from 2018,and or along-serving his finished her and CEO departed successor also when we zoom on in number smaller the of companies at which, 2004 between by successors of faced long-servingThe challenge CEOs comes into focus sharp The successor CEO’s tough road shorter-serving CEOs. role the or assumed at of time the succession, the compared 28 percent with for 48 percent years, three oflast long-serving CEOs either board chair remained as stepping down from executive chief the role aplanned succession. in Over the of their tenure, not at outset.) the most titlethat do of so course the during CEOs the who acquire chairman the oflong-serving holdCEOs joint titles. chair CEO–board (It should be noted Strategy& 2018 CEO Success study Success CEO 2018 Strategy& Source: Total shareholder return of performance long performance Declining Long-serving long-serving Bottom performance quartile performance Bottom successor CEO with CEO turnover Long-serving CEOs were also more likely to remain as board chair after after CEOs more were board chair Long-serving also as to likely remain CEO 10% Third performance quartile performance Third 31% - serving CEO v CEO serving 34% Second performance quartile performance Second s . successor CE successor 32% 50% O , by quartile, 2004–18 Top quartile performance 35% 25% 21% 12% 284 284 - -
strategy+business issue 95 featuresfeature title leadership of the article 1212 - - 7% Fell 3 quartiles Fell 2 18% 49% 4 percent of the successor successor the of percent 4 2 quartiles , only only , d Fell 1 24% quartile 27% Had no change . e 17% Rose 1 quartile EO and his or her successor left within the study perio C R during their tenur S 6% s T 24% ’ Rose 2 y quartiles 1% Rose 3 84 companies in which a long-serving a which in companies 84 quartiles 2 Close to half of the successors who replaced long-serving CEOs moved the moved CEOs long-serving halfreplaced to the who successors Close of Among this subset of companies, the median successor’s annualized was the median TSR companies, Among this successor’s of subset Excludes interim CEOs and turnover events resulting from M&A. EOs improved the compan 5% 0% C Compare and contrast the At Note: Source: Strategy& 2018 CEO Success study 15% 10% 25% 20% 30% the outgoing CEO was in the top performance quartile, 69 percent of the suc of performance was quartile, percent CEO in the top 69 the outgoing pronounced when the long-serving CEO was a top performer. In cases in which performer. was CEO thetop a long-serving when pronounced hold steady. The performance change pre- and post-succession was even more was more even performance and change The post-succession pre- steady. hold Only 24 percent moved it up to a higher quartile, and 27 percent saw the TSR the TSR saw quartile,a higher to percent up and 27 it moved percent 24 Only 10 percent of their long-serving predecessors (see “Declining performance”). predecessors long-serving their of percent 10 quartiles and contrast”). more (see “Compare or one by down TSR company’s 31 percent of the successors were in the bottom TSR quartile, with only TSR compared in the bottom the successors were of percent 31 their successors (only 37 percent of whom were in the top two in quartiles). the top were Worse, whom of percent 37 successors (only their ing CEOs largely performed better (56 percent were in the top two in quartiles) the top were than percent (56 better ing largely CEOs performed two quartiles. TSR in the bottom up cessors ended performancequartile in they which further fall long-serv The insights. provides Comparing the performance of the two groups of CEOs by looking at the TSR the TSR at looking by CEOs of the twoComparing the performance of groups CEOs have left their position only recently, and is successor their still in place. recently, only left position their have CEOs CEO. than long-serving the replaced that lower of points percentage 4.0 a sobering
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13 leadership Long-serving CEOs Long-serving er leaders board members and investors —and less inclined —are to rock investments company the to that enable to needs Oth make success. future average TSR for of data, alack example, may midterm mask long-term and long-term CEO simply doesn’t set up or his her successor to Above- succeed. of leadership boards directors. and the some In observing and teams ing cases, CEO.ing But we have some on based hypotheses, our own experience advis percent versus 19 percent; “Involuntary see departures”). more significantly likely are they to be theirand forced predecessoroutthan (35 those of shorter leaders the replace far is they than (5.3 versus 13.7 years years), following atenure aCEO with of 20 or more years. for those following a15- aCEO with to tenure, 20-year 25 and percent for those percent 42 comparedyears, 35 with aTSR had top the quartiles, in two percent sor performed. who successors Among replaced atenure aCEO with of 10 to 15 Strategy& Source: Compared to their CEOs successors, fewer long-serving were forced out. departures Involuntary Planned turnover with successor with Successors to Successors long-serving The data doesn’tThe data over why take from us to tell it a so difficult is long-serv Not surprisingly, tenure median the of to successors the long-serving CEOs Moreover, longer the long-serving the CEO’s tenure, worse the succes the
2 turnover 0 1 8 C E CEOs O Success study Success O Forced turnover 65% 81% 35% 1 9% 284 284 - - - -
strategy+business issue 95 featuresfeature title leadership of the article 1414 - - Board members should think should carefully shiftBoard members time to the right from about in the company’s top slot is up to the task as conditions change. the task to is up as conditions slot top in the company’s not a panacea. Boards have to continuously evaluate whether the person sitting the person evaluate whether a panacea. continuously not to Boards have datory retirement ages, or other mechanisms are ages, other aimed limiting at tenure or CEO datory retirement perform. Boards have to take care not to become complacent. Term limits, man Term complacent. take to Boards become to have perform. care not longer the predecessor’s tenure, the more challenging it is for the successor to to thesuccessor challenging is for it the more tenure, the predecessor’s longer harder for the successor to flourish following a long-serving predecessor, and the predecessor, long-serving a following flourish to the successor for harder the risk of a failed succession. Our data, as noted earlier, shows that it is much is much that it shows Our data, earlier, a failedthe risk as of succession. noted be delayed in North America compared with the rest of the world, increasing the world, with in America the North of rest compared delayed be overrepresentation of long-serving CEOs suggests that succession decisions may may suggests CEOs long-serving decisions that of succession overrepresentation Boards of North American companies should be especially wary. The strong especially be strong The American BoardsNorth wary. of should companies brings energy and perhaps a new perspective on how to drive the business. the business. drive to how on perspective a new brings energy and perhaps cumbent CEO’s performance is average, or even good but not great. New blood blood New great. not but good even or performance is average, CEO’s cumbent a long-serving CEO to a new candidate a new — especially to CEO a long-serving in cases in the in which or be poached by another company. another by poached be or to hang around indefinitely. They may themselves become impatient and leave, leave, and impatient become may They themselves hangto indefinitely. around the best possible successors within the senior executive ranks willing be executive successors within not the senior may the best possible significantly different from the one they are accustomed to. In addition, some of some In addition, to. one they accustomed are significantly the from different digital technologies, long-serving CEOs are CEOs likely dealing long-serving thatdigital is with a context technologies, locked into a certain frame of mind. Given the rapid pace of change inspired by change by pace of inspired a certainthe rapid into locked frame Given mind. of other hand, virtually everyone grows stale at some point, and can hand, virtuallyother easily point, become stale grows some at everyone long period, and there’s much to be said for continuity and predictability. On the On and predictability. continuity said be for to much and there’s period, long hand, it’s difficult a to makeover well a haschange CEO the performed when hand, it’s For board members, oversight of a long-serving CEO can be tricky. On the one the one On can CEO a long-serving tricky. be of oversight members, board For the successor takesthe successor over. for boardsImplications successors and might be in other circumstances. The problems then become evident only after only evident become then circumstances. in be might other problems The the boat if it is helmed by a long-serving, generally successful generally long-serving, a by is helmed than CEO if it the boat they
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15 leadership better than the other the separate on that better agree than average, governance many experts executivechief we evidence one lack board chair. that Although and performs company the successor. the impeding run and continuing The of rest of to chair the board should the board chair: the be wary when dicey outgoing the ny’s also CEO be is particularly issue can This future. for aplan compa the through he or successor the as she thinking is constraining their not support, are new the CEO they has that that and clear toneeds make a result, board the them. As against deck the stacked with CEOs start serving T Methodology listing of companies that had been been had that companies of listing a For languages. many in sources electronic and printed of variety awide using data cross-checked 31 and December 1and January between event succession executive achief experienced had that 2,500 top the among companies the fied 1. identi We then January on ONE) market capitalization (from Thomson their by defined companies, public Boards should be generally mindful of merits the shouldBoards roles the of be generally mindful separating of to successors long- speaking, need toBoards statistically acknowledge that fied the world’s 2,500 largest largest 2,500 world’s the fied identi study Success CEO he - - ports and other independent sources sources independent other and ports re press Outside succession. the for reason the except elements data most for acceptable was information Company-provided executives). chief interim any as well (as executives chief incoming and outgoing the both on sought —were on so and experience, professional nationality, — title, tenure, chairmanship, details additional and occurred, a change that confirmation for investigated was CEO its changed have to peared Thomson ONE. used also we merged, or acquired Each company that ap that company Each - - period) and annualized. and period) time same the over index regional main the of return the and return company’s the between difference the as (measured adjusted market regionally then was data return Total shareholder any). (if dividends of reinvestment includes and berg Bloom from sourced was tenure aCEO’s over data return shareholder Total 2018 ranking. Programme ment Develop Nations United the lowed fol we economies, emerging and departure. executive’s an con to used were To distinguish between mature mature between To distinguish fi rm the reason for for reason the rm
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strategy+business issue 95 featuresfeature title leadership of the article 1616
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For executives who may be in line to succeed a long-serving CEO, allthe CEO, succeed a long-serving inbe to line may who executives For Boards should also consider whether the best candidate succeed a long- to whether alsoBoards consider should
board expectations. the concurrent position of board chair, who has no COO, and who faces and who high has COO, who no chair, board of position the concurrent is that in the current climate of disruption, technological advances, technological and chang disruption, climateis of that in the current an previous and a variety our across sectors, management of with top trenches hold not does who experience, CEO prior no but the company of knowledge come in as outsiders outperformed insiders. One hypothesis for this for differential hypothesis One insiders. outperformed in ascome outsiders in Calling the experience our applies. standard CEOs new upon for advice has who deep inside came from who an up executive serving — namely, CEO out, 24 percent of those with joint titles were dismissed ethical for were titles lapses, com with those joint of percent 24 out, examined we years, departing when had the performance of who those CEOs, the in-house candidates. long- especiallysuccessor to a of the usefulthe fit typical who those profile for ethical lapses. In our 2017 study, we found that among CEOs who were forced forced were who that CEOs among found we study, ethical 2017 In lapses. our of lastsix the In five than rather serving an an be insider. may CEO outsider backgrounds, and skill perspectives, possessed those sets by from are different They CEOs. are new successpractices to that for will substantially contribute roles are the best practice, and governance standards have moved in that direc standards are the best and practice, governance moved roles have increases the risk of the roles that know combining do We in many regions. tion only. with those title the CEO of percent pared with 17 dynamics, effective the most candidatesing competitive whose those be may several game-changing identified nual surveys Success, CEO we’ve exploring Boards should be generally be generally should Boards
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strategy+business issue 95 featuresfeature title leadership of the article 1818 - - -
, May 15, 2017: The 2017 CEO Success The 2017 2017: study, May 15, + As Katzenbach colleagueour notes Jon , the informal, emotional elements of the orga of elements , the informal, emotional Get the culture working with you. Pursuing these agenda items is not an ironclad guarantee an success. ironclad AndPursuing of is not these agenda items 5. The Critical Few Critical The in his book, new Every time a long-serving CEO is replaced, whether it is by an insider or an or out an is by insider it whether is CEO replaced, timea long-serving Every the aggregate data on successions does not dictate the destiny of anthe dictate of destiny individual. not does the aggregatesuccessions data on will have a greater opportunity to succeed. to opportunity will a greater have company forward. the structuralaware of challenges they face these at vitalthey points, inflection nization are as important as the formal, rational elements. A CEO must under must A CEO arenization as as important elements. rational the formal, the strengths move hidden to and use the organization’s these operate stand how Still, if are boards and leaders and unpredictable. is delicate the transition sider, Resources Per-Ola Karlsson, DeAnne Aguirre, and Kristin Rivera, CEOs “Are Less Ethical Than in the Past?”showed a significant s+b increase in numberthe of CEOs fired or replaced owing to ethical lapses. Katzenbach,Jon James Thomas, and Gretchen Anderson, The Critical Few: Energize Your Company’s Culture by Choosing What Really MattersKoehler, A guide 2019): (Berrett- to identifying and leveraging a company culture’s four most critical elements: traits, keystone behaviors,leaders, authentic and informal metrics. “Unraveling the fabric ceiling: Tracking female leadership in the apparel industry,” PwC, hold only percent Women 12.5 2019: of the CEO spots at Fortune 1000 retail and apparel companies, even though such women-led companies are significantly more profitable than thosewith male CEOs. CEOPwC’s Survey, 2019 “CEOs’ Curbed Confidence Spells Jan. Caution,” PwC’s2019: 22nd Annual Global CEO Survey shows chief executive officers are increasingly concerned about the potential of trade conflicts, political upset, and a projected slowdown in global economic growth. The Strategy& CEO Success 2018 study (https://www.strategyand.pwc.com/ceosuccess): The full report and dataanalysis of this year’s study. More thought leadership this on topic: strategy-business.com/leadership strategy+business magazine is published by certain member firms of the PwC network. To subscribe, visit strategy-business.com or call 1-855-869-4862.
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