Incoming CEOs take two years to prove their performance

The common wisdom is that an incoming CEO has about three months to prove themselves. They either start at breakneck speed, trying to be all things to all people, or stutter on the foundations. But what if incoming CEOs take two years to prove their performance? As we look to new leaders to give direction, stimulate hope and deliver change, it takes time to really see their impact. Additionally, we may not like what we first see or hear, but that doesn’t necessarily impact performance in the short-term. No, the truth is that many organisations can operate just fine for a short time without someone at the helm. After all, the rest of the board, the chair and the management team are still present and correct in most cases. So, today we look at why it takes a bit longer to see the results .

Stumbling and indecisiveness

Don’t get us wrong here, no incoming CEO intends to get things wrong in the first 90 days. However, it should be noted that your actions and words will never be more scrutinised than at the start. After all, you are fresh, new and bring new hope for the future. Sure, a crashing stock price or catastrophe will also bring the microscope. The difference at the start is the goodwill that you have until you build on it or destroy it. Similarly, most will assume that you have massaged the relationships on the board and the management team – that’s why you got the role. The truth is that it isn’t all plain sailing, with a bull in a china shop approach or steady, steady, catchy monkey igniting tensions.

As you would imagine, a combination of stakeholder management, influencing skills and humility are required at the start. Similarly, many incoming CEOs are reliant on the handover from their predecessor – someone who may have had a say in your hiring. Getting the foundations right is key, including selecting your new management team quickly. Similarly, you don’t want to put yourself in a position to be overwhelmed with issues. You also do not want to make too many bold statements and proclamations, which may come back to haunt you further down the line.

Patience and preparation

Recent research suggests that incoming CEOs who rush out of the starting blocks, tend to have lower performance in the long run. Similarly, those who alienate key stakeholders, fail to kindle the delicate flames of hope or fail to build trust around them, fail to achieve long-term success. So, what is the key to success beyond the first 3 months? How do we know that after two years, the incoming CEO delivered better performance?

To understand this, let’s take the case of Satya Nadella, CEO at Microsoft. He generated urgency, laid out his vision, bagged some key wins that he could communicate and recruited for the gaps in his team. Now, after 10 years at the helm of Microsoft, the market capitalisation of Microsoft is $3.4tn (at the time of writing). This is about 11 times more valuable than when he joined and they are second only to Apple Inc. His bold vision helped to transform Microsoft, making bold bets on AI and Cloud, making them relevant again after missing out on the mobile revolution.

Satya Nadella slowly built trust, gained the support of all stakeholders, build a long-term strategy and paced his change. Nobody heard stories of breaking a few eggs, how he disparaged his predecessors, sacrificed dead weight or angered shareholders. No, Mr Nadella embarked on the equivalent of the Camino de Santiago, not first to the gatepost.

Incoming CEOs from within vs external

One obvious challenge with hiring a new CEO is where the incoming CEO is coming from. In many organisations, they follow a careful succession plan. That means that the new CEO was nurtured and groomed for the role, including appropriate training and mentoring. Internal CEO candidates face two major challenges when stepping up. Firstly, there is the challenge of getting others to see you as the right strategic leadership choice. Ultimately, you were part of the management team one week and steering the ship the next. Secondly, it will take a little while for people to get used to that and for you to differentiate yourself.

The second option is typically more costly and has its own challenges. External hires may be taken as a signal that no other talent was available internally for the position. That in itself may create waves in the management team who had their own personal ambitions. Such hires have to spend huge amounts of time managing stakeholders, building relationships and learning the organisation. They also need to shadow the outgoing CEO, learning all they can whilst bringing their own vision to bear. Similarly, an external incoming CEO can become a bottleneck as they navigate proliferating and competing priorities. Deciding what is important and urgent, choosing the right battles and understanding and enabling your team are key to keep things flowing.

A final word on incoming CEOs

Sure, it is easy for us, some consultants at Think Beyond, to pass comment on one of the toughest jobs there is. The entire organisation is looking to understand where you want to go, why it is the right thing and how we are going to get there. Similarly, some organisations turn the choice of incoming CEO into the longest interview process imaginable. Others simply propel those who talk the talk and walk the walk to the top, seemingly unhindered.

Where some incoming CEOs work really hard in the first few months to build a foundation for long-term success, others quickly make enemies and score points against their peers and team. For every successful hire, demonstrated by consistent results above historical returns and market cap, another organisation fails to plan appropriately. One of the UK’s largest financial services organisations had to bring in an interim CEO until their chosen candidate became available. So, whatever your tendencies, just remember that slowly building trust, key relationships, your team and your knowledge may lead to long-term performance.

Supporting CEOs and management teams

Think Beyond works with CEOs and management teams to improve the performance of the organisation. Sometimes, the CEO role is the loneliest in the organisation, lacking appropriate peers and sources of confidential advice. We offer support with vision, strategy, plans and performance, whether you need help to see or fear your own potential blind spots . Additionally, we don’t judge and we treat discussions with directors and CEOs with the utmost confidence.

So, if you would like support with your long-term business performance, simply drop us a quick email. Alternatively, if you know specifically what you want, request a service on our website .

Finally, why not check out our AOP/MTP/LTP service or read a related article about significant decisions .