Recent research on U.S. CEO tenure varies anywhere from 5 to 8 years, but one thing is certain: CEOs have less time than ever to prove their merit. Part of the reason is market dynamism and the rapid changes taking place in businesses today. A CEO who was a perfect fit when he was hired may not be the right person to steer the company just a few years later.
Two recent blog posts in Harvard Business Review discuss the need to examine the CEO’s fit over time. In When It’s Time for the CEO to Go, Manfred F. R. Kets de Vries says CEOs tell him that about seven years is the right tenure for optimal effectiveness. He outlines three phases that CEOs go through during their tenure – entry, consolidation and decline. To maximize performance, CEOs need to understand what phase they are in at any given time. This also lets them know when it is time to step down.
In Assess Your CEO’s Strategic Fit Over Time, Marc Effron and Miriam Ort cite research about executives showing that “poor fit leads to poor performance.” They recommend assessing the CEO’s fit on strategy and change, two dimensions upon which the chief executive has distinct influence.
Both articles make a great case for why the board of directors must constantly examine how well the current CEO is addressing the strategic challenges of the organization and make changes as needed. As I’ve outlined before, the most important role of a board, especially in private companies, is to hire and fire the CEO. The board’s role is especially critical when CEOs refuse to acknowledge that their performance is subpar and that their unique set of skills and experiences no longer fit the company’s needs. Board members should study the research about strategic fit over time.
How can you keep things fresh as a CEO? Being open-minded, recognizing when market changes demand action, and seeking outside counsel are good ways. When I was CEO of NetQoS, another action I took was bringing in a new executive every 12 to 18 months. In a growing company, this is often a brand new role. I think by refreshing the executive team – and thereby bringing in new points of view and experience – CEOs can expand their productive window.