Strategic Executive Search and Management Recruitment Worldwide
North America  -  Latin America  -  Asia  -  Europe  -  Africa  -  Middle East

Click Here for Quick ART Quotes for Your Article


Vicki L. Parker asked ART's Managing Director to comment on the short tenures of today's CEO's

Question 1: There seems to be a high turnover of CEO's. Why do they only stay on the job for a short time?

ART: "This is an excellent question and it is not easy to generalize for all companies or industries. Often Boards are thinking too short term. Often a US Board's collective emotional highs and lows are based on lifting stock share prices, so if a CEO isn't raising the stock price every single day, the CEO's job could be jeopardized. It just isn't easy to come up with ways to constantly raise stock prices.

"Another reason for the brief tenures of many CEO's is that they were brought aboard specifically to solve one problem or to accomplish one narrow task - turn around sales, bring in a key new customer or market, add a CEO to the management team whose track record would be more attractive to investors in an IPO, or be the key person to help with a merger or acquisition plan. These arrangements are often understood by both parties at the beginning to be largely for a single-purpose objective. If both come into that situation frankly, it could be a fruitful relationship for all concerned.

"A third category of short tenures I would characterize as mutual errors or bad judgments made by the Board and the CEO. This almost always occurs when a Board hires a person because of buzzwords in the CEO's resume that suggest quick-fixes to their problems. For example, a startup or medium sized company might hire a person from a famous-name large company, just because that linkage is “gold” to the investment community. However, it may be possible that a person who did well at a very large company might not know how to do things well at a small or medium sized company. Some multi-billion dollar firms are run in very lean business units where general managers are very hands-on, while other very large firms even in the same industry are exceptionally bureaucratic and a CEO from that world might not know how to function at their best in such a scaled down role. A frightening number of companies hire CEO's who were friends or school chums, and these hires often do not work out. Past friendships or common social ties are not strong enough standards of analysis in judging the suitability of candidates for modern global corporations, especially for posts as critical as CEO. Personal chemistry just is not sufficient grounds to hire a CEO, but that is done very often, to the exclusion of other factors.

"A fourth category I would reserve for the CEO's who talk big but who often disappoint. In my opinion, a CEO who describes themself as 'visionary' has a good chance of fitting into this category. If someone else sees you as visionary, that's OK, but describing yourself as 'visionary' suggests to me several large character flaws - insecurity cloaked in egotism, and the possibility that if one sees oneself as visionary, then one might actually be close-minded to coworkers, shareholders, customers, and competitors. When I see a CEO's resume that starts off saying how visionary they are, I put that resume to the bottom of my list of serious candidates. I want to see in a resume tangible evidence of results - revenues improved, growth, new markets created and developed. Every meaningless adjective used by the CEO that is meant to impress without providing tangible evidence, I consider a demerit against that candidate.

"When we look at candidates for searches such as this, we are mostly looking at a CEO's employment history. We want to see evidence of successes in good times and evidence of durability and resilience in hard times. We want to see creativity and entrepreneurialism. We believe that evidence of past competencies in similar business models offers the best objective rationale for judging if someone might fit a client's needs. We want to look at a candidate's natural and logical career path, because if a particular job does not seem to be in sync with one's long term career goals and tastes, there is strong likelihood that that person will not be long at that new job.

Question 2: What are some of the challenges new CEOs face?

ART: "The first challenge is that the incoming CEO must be able to win over the existing senior management team, probably 90% of whom believe that they should have been chosen as CEO and are disappointed with their firm passing them up. Many members of the management team also might have been loyal to the last CEO or be of a discredited management style that is considered part of the reason for firing the last CEO. Most of these managers, at least for a while, will need to be won over. In most cases, they are going to be good and useful managers that the new CEO will need. To instill confidence in these important managers, the CEO will at first need to be a good listener. This is where a self described 'visionary' CEO needs to shut up and learn from the people who have been with the company. If the incoming CEO is not a very good two-way communicator, then it is possible that many perfectly good managers will bail out of the company just when they are most needed during the transition. If morale is not boosted when a new CEO comes in, I think that the mission of the new CEO is going to be far harder, and that might end up as a shorter stay for the CEO.

"The second challenge is to convince often jumpy shareholders that they made the right choice in the CEO. This is the most difficult challenge, because when someone wants a CEO to suddenly make their stock prices rise, bad mistakes can be made. If there is this kind of immediate pressure, then the CEO might think to create some kind of quick media buzz of press releases or to make a dramatic sounding move. This kind of pressure at some companies can be unrelenting, and if it all just looks like insubstantial PR, rather than improvements, the stock market can be harsh, and one’s tenure could be brief.

"If we ask ourselves why the tenure of CEO's tends to be short, it might be because it is not very practical to have the chief decision maker for a corporation have their job at the mercy of the immediate whims of investors whose money comes and goes and who might not really be fully committed to the long term picture at the corporation. There is a psychic burden on a CEO whose job is wedged between one universe of people working at a company with their careers and hopes depending upon the company, and another universe of essentially constantly changing strangers who want a fast return on profits. This is the dilemma of the American CEO today."

Question 3: Does this hurt or help the company?

ART: "It is good for there to be accountability to shareholders. It is necessary. The shareholders are the owners of the corporation, whoever they may be, and they should have the right to want to see their investments be profitable. The fast and flexible movement of capital in the US also helps create businesses, finance new industries, and create much economic growth. Sometimes a short stint for a single-purpose CEO is the best way to straighten the course of a company that is troubled, but I tend to believe that short tenures of American CEO's are a symptom of a socioeconomic disease, rather than a good sign of business success or of checks and balances.

"It is necessary to keep in mind that today's American corporate models might not be successful in a world where companies in other regions are better organized, somewhat less immediately greed-centric, and therefore more ready to succeed in winning customers and new markets than shortsighted US firms might be. In general, European and Asian corporations try to be organized for the long term. One can have pride in running a real company whose investors want the company to grow and last for decades. A real risk for American corporations is when they decide that it is faster to make money by selling their existing assets than to take a longer term approach and make products that more people would want to buy in more places. I think that a lot of the best CEO's are ready to work hard and build great businesses, but if the attention span of investors is too short, then so might be the longevity of the best CEO’s."


[ For Employers ] [ For Candidates ] [ International ] [ World Press ] [ Job Listings ]
©2023 Atlantic Research Technologies, L.L.C.  All rights reserved.