Did you know the average productive lifespan of a person in the role of CEO is just under five years? Neither did we, and it seems like most CEOs don’t know it either. According to a recent report released by the Conference Board, CEOs of S&P 500 companies stick with the job for over nine years, and have been since the early 2000s.
But why does around five years make it the sweet spot for an innovative, motivated CEO? It’s not that they don’t want to do the job well anymore, but that they are influenced by different things. A new CEO at a new company is more in tune with outside influences like the market. After half of a decade with a company, a study by Temple University discovered that CEOs began to focus inward, relying instead on an internal network. This led to a CEO who was less in tune with the market and its customers.
A resigning CEO too, leaves a big position to fill, and many CEO don’t want to create a shakeup, especially if the company’s profits and performance have been improving under his or her wing. Business Insider Australia shared the indicators for when a CEO should consider stepping
1. Burn out or loss of enthusiasm for the job.
“When CEOs begin to realise that their skills aren’t matching up, or their enthusiasm is waning, or they’re tired of the constant responsibility,” explained Charles Wardell, CEO of Witt/Kieffer “they are going to the board and saying, ‘I’m running out of juice here. Let’s think about replacing me over the next year or so.’”
In this scenario, strategic succession planning can make for a smooth transition.
2. External changes in the market.
“Oftentimes the market dictates, causing the business proposition to change so radically that the skills of the CEO don’t mesh up with the needs of the firm,” says Wardell.
A company could have a strategic plan in place, but this is ultimately an external factor out of the hands of the CEO and the company, which can force a more abrupt transition.
3. The board decides enough is enough.
Pushing a CEO out for whatever reason—age, competency, or vulnerability—can cause turbulence and tension within a company, making for a less than ideal transition.
A smooth transition at the top can never be guaranteed. This makes the change in leadership that much more scary, causing CEOs to stay put longer than they should.
Information sourced from Business Insider Australia.