CEO Insider

Companies Fall Behind When CEOs Overstay Their Welcome

For companies to grow at the rate expected they need to turn over their leadership more often.  Market dynamics are too fluid and fast for a tenured leadership team, their skill sets and ability to adapt to each phase of a company’s growth is not realistic any more. Corporate performance data supports this new management practice.  Less than half of all growth strategies, acquisitions, and back-office optimization efforts produce their intended results.

That is a lot of opportunities lost and money spent that could have been distributed out to shareholders or to reduce debt.

It is no different than how sports teams can’t afford to be held back by a player who isn’t contributing anymore. It’s the same with teams in the business world, and yet many CEOs stay with a company long after their particular skill for the phase the company is in stops being relevant and beneficial.

As we’ll explore, companies need to pivot and change strategy faster than ever before to stay competitive, which leaves no room for unnecessary CEO tenure and longevity. Being a part of modern management means more than knowing how to lead—it means knowing when to leave.

Companies Will Grow More By Changing the CEO Often

Why are startups—led by CEOs who are only two years out of college—leaving more established companies in the dust? Part of the reason for their success is that the new generation of CEOs understands that their personal skill set works best for a particular life stage of a company. Once the company grows out of that stage, the CEO moves on.

In contrast, more experienced CEOs tend to overstay their welcome. They linger at the same company despite being unable to provide the type of leadership and expertise that the company needs after it experiences growth or evolution. People currently in leadership positions don’t want to acknowledge the lack of performance because, reasonably, they believe it would undermine their own credibility and longevity.

Yet, the evidence of low leadership performance is too abundant to ignore. Product development has shrunk from 18 months to a mere six. Strategies shift three times a year instead of once. Meanwhile, only one in five acquisitions brings value to a company, and similarly, only one in five office-optimization projects works.

A staggering half of all strategic initiatives fail. With such low success rates, it’s glaringly obvious that the popular executive-management styles are holding companies back.

Business Woman

Be Part of the Corporate Renaissance or Be Left Behind

With strategies shifting faster than ever before, the churn at the leadership level should also be higher. Established CEOs need to be able to adapt, serve a role, and move on to the next opportunity or risk being outpaced by the market.

The business world as a whole is changing. We’re in the midst of a renaissance of corporate thinking where we’re finally exiting the 1960s dogmatic theory that the purpose of a company is to maximize profits. Today’s consumers expect companies to be ethical, sustainable, responsible, and still profitable. To check all the boxes, companies need to adapt rapidly and be able to pivot.

Companies with leadership stuck with a 60s mindset aren’t getting positive results because they’re making decisions based on medieval thought in a renaissance time. Boards and investors should acknowledgment that stability in leadership is no longer an asset; it’s a liability.

Staying Relevant as a Business Leader

Knowing that turnover is necessary for progress, how do executives find their role in the modern-management world?

Stability creates stagnation because a CEO’s skill set doesn’t transfer from one iteration of the business to the next. To find their place in modern management, established CEOs need to embrace the fact that they have a specialized skill set. To accept a role at the executive level is to acknowledge that your tenure at a company will probably be measured in months, not years.

There’s no shame in admitting that you’re best suited to lead a company of a particular size or stage. Consider a first-grade teacher and their student. The teacher has specialized in child psychology for that age group and knows what first graders need to learn before they progress. Then the student moves to the second grade. Could that same teacher instruct them?

The teacher could probably adapt. What about when the child enters the fifth grade? Eighth? Twelfth? Somewhere along the line, that teacher will no longer be able to meet the child’s educational needs. It doesn’t mean they aren’t a good teacher; it simply means they aren’t a good eighth-grade teacher. But they’re a great first-grade teacher.

When the child ages out, a new teacher, one specialized in instructing an older age group, needs to step in and take over. To stay effective as a leader, you need to move on when your company ages out, too.

Take Your Place in Modern Management

Whether you’re a CEO, CFO, COO, or other leader, it’s in your best interest and the interest of your companies to know what you offer as a professional. Understand your strengths and accept that your skill set will work best in a specific setting for a limited amount of time.

Nobody stays an effective, relevant leader at the same company forever, and that’s okay. Get in, create the biggest impact you can, and get out when your skill set isn’t relevant. By getting with the program, you’ll move from medieval to modern management and experience greater success than you ever would have by stagnating at the same company for years.

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Alex Castro
Alex Castro is the Founder of ReM Score and has helped clients deliver complex corporate strategies for the last twenty years. He finds new approaches to serving and building companies by identifying their operational vulnerabilities and correcting them; ReM Score has evolved from hundreds of engagements into a digital platform tool. Alex is a graduate of Northeastern University, where he was a collegiate rower, and he later went on to coach the University of California-Davis rowing team. He is also an avid mountain biker and has two wonderful daughters who are a constant source of inspiration and joy. He is the author of the #1 Amazon best-selling book, Measure, Execute, Win: Avoiding Strategic Initiative Debacles and Knowing What Your Business Can and Can’t Do Well. Alex Castro is an opinion columnist for the CEOWORLD magazine. He can be found on Linkedin.