Boosting new CEO Success: A data driven look

A recent study by McKinsey&Company looked at nearly 600 CEOs who left S&P 500 companies over a period of 10 years (2004 to 2014) and joined companies that were either under-performing or performing well at the start of their tenure. For each CEO they gathered information regarding their actions in their new roles from a range of sources (i.e. company reports, investor presentations, press searches etc) on 9 strategic moves that CEOs typically make: management reshuffle, M&A, cost-reduction programs, new business/product launches, business/product closures, geographic expansion, geographic contraction, organizational re-design, strategic reviews. The study also looked at the difference in the strategic actions and the number of actions that were taken by CEOs appointed from within versus those brought in externally.

These findings have some potentially significant implications to the organizations and to the Board of Directors that hire the new Chief Executive. I would suggest reading the full report for the detailed charts and analysis. In short, the study results suggest some interesting insights that are likely to affect performance: the importance of (a) adopting an outsiders mindset, even if promoted from within (b) not following the herd and carefully considering the context of the company and understanding more deeply their starting points (c) planning and executing a more comprehensive set of strategic and potentially bold moves and to aim high enough.

The study also reveals that the number and nature of strategic moves made by CEOs who join under or well performing companies are surprisingly similar, while it is the efficacy of the moves that seem to vary more significantly across different groups of companies. Furthermore, it is the sheer number of moves that make the difference, at least when a CEO joins a poorly performing company; and the propensity to act is also markedly greater when CEOs are hired externally.

While this study does not apply to all situations or types of organizations, the study reveals interesting insights for CEOs, Boards of Directors and anyone interested in leadership. The original Mckinsey&Company article by Michael Birshan, Thomas Meakin and Kurt Strovink can be found here.

About author of this article: Kirthi Roberts is Founder of Fiduci Consulting, a boutique Executive Search & Technical Recruitment firm.