CEO staying power can be predicted
Global study of more than 118 CEOs over 25 years reveals rigorous assessments can predict which leaders have real staying power. According to research from Korn Ferry.
New research1 from Korn Ferry, the global leadership and talent consultancy, reveals rigorous assessment can help to predict the tenure of CEOs. The Korn Ferry Institute, Korn Ferry’s research and analytics arm,analysed the tenure of 118 CEOs over a 25-year period who earlier in their careers had taken Korn Ferry’s battery of assessments for senior executives or CEO succession assessments which simulate a year in the role of a CEO, in order to determine who is prepared to handle the intricacies and intensity of the role.
Based on their performance in these assessments, Korn Ferry categorised the 118 individuals as candidates declared “ready” (57), “eliciting reservations” (40) or “not recommended” (21) for the CEO role. These assessments were then cross-referenced against the tenure of the candidates when they became CEOs. The results show that candidates declared “ready” by Korn Ferry averaged two years and five months longer as CEOs than those who weren’t deemed ready. The average tenure of “ready” candidates is more than six years.
Separate research2 reveals that 40-50 per cent of changes in CEO stem from poor corporate performance and that rates of forced CEO departures spike during the first two years on the job. It is therefore important for organisations to be able to predict as accurately as possible which CEOs are likely to have staying power. Steve Newhall, Managing Partner of Korn Ferry Leadership and Talent Consultancy, UK, commented: “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.”
Those who were not recommended or who elicited reservations were 1.7 times more likely to leave their CEO positions during the period of study (1991 – 2015) than those declared ready by Korn Ferry. Newhall continued: “Boards of Directors know length of tenure can be critical to the success of CEOs because companies have become global and far flung, increasingly complex and often requiring major transformation to achieve the results desired. Our research shows that, when it comes to forecasting tenure, rigorous simulation assessments can predict which leaders have real staying power.
There are few bigger decisions that a board makes than its selection of the next Chief Executive. What this research proves is that correctly applied assessment science can play a significant role in helping de-risk these critical choices and help boards make decisions that have long-term, positive impact for the company, its shareholders and the CEO.”
What drives longer CEO tenure? Korn Ferry analysis reveals what gives CEOs their durability, as four behaviours showed statistically significant correlation to a CEO’s tenure. These competencies can be measured by Korn Ferry CEO readiness assessments as closely associated with a candidate’s durability as chief executive.
Created on: 17-Dec-15 11:23