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CEO Staying Power 'Can Be Predicted' : Study

Posted on December 4, 2015 at 2:55 PM

A global study of more than 118 CEOs over 25 years reveals that candidates declared 'ready' by Korn Ferry, the global leadership and talent consultancy, averaged two years and five months longer in the job than those who weren't deemed ready at time of assessment - but later became CEOs.

The average tenure of candidates the firm found to be 'ready' is more than six years. Those whom it did not recommend or who elicited reservations were 1.7 times more likely to leave their CEO positions during the period of study (1991-2015) than those whom Korn Ferry had labelled 'ready.'

Clearly this is jolly useful as marketing for Korn Ferry's services. It claims to measure four behaviours in particular as showing "statistically significant correlation" to a CEO's tenure. They are: the ability to engage and inspire, manage complexity, align execution with objectives and strategy and instil trust.

"No one in the sample who demonstrated high levels of all these competencies left a CEO position within 24 months" says Korn Ferry.

It also quotes research from Stanford University last year that found 40-50% of changes in CEO stemmed from poor corporate performance, with rates of forced departures spiking during the first two years in the job.

Make of this what you will.

Better assessment and better succession planning are clearly both critical to CEO appointments. In the UK, the corporate governance watchdog the Financial Reporting Council (FRC) is casting a beady eye on both succession planning and better evaluation by listed businesses.

"There is a great deal of pressure on boards to appoint a CEO who has real staying power and can positively impact the business. Organisations must identify new CEOs who not only hit the ground running but who also have the endurance to implement their plans - no one wants a CEO to burn out in the first few years of their tenure" says Steve Newhall, managing partner at Korn Ferry.

True, but it's not just about that appointment, surely. As I have just covered for Forbes, organisational 'resilience' is a problem and it is worst, according to an EIU report for the British Standards Institution (BSI) in Europe.

Categories: Governance, Appointments, Scrutiny