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How can you maximise success and minimise risk?
A key task for boards of directors is finding the right CEO, someone who can lead the business towards company goals and create value for the owners. Short CEO tenures are extremely costly and demanding. Unfortunately, CEO tenures have become increasingly shorter, except during the pandemic.
The 2018 CEO Success Study published by Strategy&, PwC’s strategy consultancy business, showed that CEO turnover in the world’s 2500 largest companies rose to a record 17.5 % in 2018 – three percentage points higher than in 2017 and above what has been the norm for the last decade. CEO turnover increased in 2018 in all regions except China. According to various studies, including one done by The Conference Board, the number of announced CEO successions has subsequently fallen during the pandemic. For instance, in 2020’s second quarter, the decline among Russell 3000 companies was 11.3 %. There is a tendency to hold out in times of crisis and there is probably a pent-up need for CEO changes as we move out of the pandemic. The reasons for the increased need are planned terminations due to retirement and the simple fact that businesses require different leaders during different growth cycles.
Directives from the owners, the Board’s strategic work and the CEO’s ability to manage the business are critical success factors. As CEO selection has such crucial consequences, the recruitment process should be given the utmost consideration and attention. Boards and everyone involved in the recruitment work therefore should start asking themselves: Are we doing it right? and: How can we improve our process?