![]() ![]() Penney, their boards had the additional benefit of bringing back leaders who both have experience leading through crisis. ![]() They also have sufficient separation so they won’t be directly associated with the current state of affairs. In other words, returning CEOs know the markets, the talent, and the available options well enough to act quickly - and can be effective captains during disruption. They are familiar with many of the players and can make personnel decisions swiftly. As long as market conditions aren’t radically different than during their earlier tenure, they are likelier than anyone else to understand the company’s true challenges and how it should respond. Even if they’ve been officially out of work, they’re often close to their former organization. Penney and P&G, respectively.Īt a minimum, then, returning CEOs have two features that boards should like a lot: insider status at the companies they are rejoining and, presumably, a track record of having run those companies well. In fact, neither Ron Johnson nor Bob McDonald had been a CEO before taking that role at J.C. And only 16% of the incoming class of new CEOs in 2012 had previous experience being one. You can never be fully prepared for the intensity, scope, and ultimate accountability of the job - you have to experience it for yourself. We also know that you can’t understand the challenges of being a CEO until you’ve actually been one. ![]() It’s no surprise that we have typically found insiders to have generated higher total shareholder returns over their tenures. Insiders know their company, including its capabilities and potential weaknesses, and thus should be better prepared to lead effectively. In the 2012 Chief Executive Study, called “ Time for New CEOs,” we found that 71% of incoming CEOs that year were insiders, and a full 25% had worked at the same company for their whole career. Splashy outside hires may get more press, but Strategy& has studied trends in CEO successions at the world’s largest public companies for thirteen years now, and a preference for insiders has been one constant. One thing we know is that companies prefer insiders - people already at the organization - when they hire CEOs. Lafley and Myron Ullman were not, the rationale for their returns are not entirely dissimilar. While both Jobs and Schultz were founders of the companies they came back to save and both A.G. In fact, sometimes it works spectacularly well - consider the triumphant returns of Steve Jobs to Apple and Howard Schultz to Starbucks. After all, returning the reins to a former leader smacks of desperation and failed succession planning. This back-to-the-future approach to succession isn’t common - and surely most company boards aren’t seeking to make it so. Penney and Procter & Gamble replaced a sitting CEO with his predecessor. ![]()
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