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The_Life_Cycle_of_a_CEO

The document discusses the life cycle of CEOs, highlighting the challenges they face and the skills required for success. It emphasizes the importance of social skills, adaptability, and effective communication, while also noting the differences between CEOs in public companies and private equity firms. Additionally, it addresses the pressures and expectations placed on CEOs, particularly in private equity, where rapid results and leadership changes are common.

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angel1kapoor
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57 views79 pages

The_Life_Cycle_of_a_CEO

The document discusses the life cycle of CEOs, highlighting the challenges they face and the skills required for success. It emphasizes the importance of social skills, adaptability, and effective communication, while also noting the differences between CEOs in public companies and private equity firms. Additionally, it addresses the pressures and expectations placed on CEOs, particularly in private equity, where rapid results and leadership changes are common.

Uploaded by

angel1kapoor
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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The Life cycle of a CEO

Claudius A Hildebrand and Robert J Stark


Claudius works with Spencer Stuart and
Robert Stark is a CEO coach.
We are engulfed in the cult of the
charismatic leader lionized for confidence,
which single handedly propels a company
to phenomenal success.
Understanding how CEOs succeed requires
understanding how the challenges of the
role evolve over time and how CEOs thrive
to adapt.
We analyzed the 21 st century CEOs of S&
P 500 companies through the years of their
tenure
One reason for the hero mythology of the
CEOs is that coverage tends to focus on
their dramatic moments
The CEO life cycle pattern is as follows
sharp rise in performance in year 1
significant downturn next year
performance rising again for a few years
The first 12 months in the job of a CEO are a
critical period of getting your sea legs while
navigating a torrent of new demands
We use the term hourglass effect – all
things of the company in and out go through
the CEO
CEOs are positioned to be the least
informed people in any company. Many
direct reports and company employees are
unsure about speaking up
CEOs get a honeymoon tailwind in the early
phase
The second year is the calibration phase
and reinvention starts in years 3
No one is prepared to be CEO, no matter
how much they think they are
In our experience, far too many people
focus on getting to the CEO job but haven’t
through what it means to succeed in the
job.
Research shows that social skills are being
increasingly prioritized in CEO hiring

What makes a great CEO is the softer skills,


they empower and inspire people.
The most important people skills for a CEO
are :

Thoughtful and active listening


Expressing and demonstrating empathy
Conveying humility
Collaboration
Fostering psychological safety
Communicating a vision
Many CEOs want to micromanage all
aspects of a business and assert their
views in every meeting. Both are wrong
The most successful CEOs have the ability
to to deeply reflective about themselves
Even after leaders reach the CEO level, they
still have significant gaps in their
experience and leadership capabilities
Most successful leaders seek more
feedback from others. The average CEO
doesn’t take feedback
A mistake CEOs make is trying to get the job
done vs actually rolling up the sleeves and
actually doing the work. This helps learn
extra skills.
We see four routes to CEO

The COO
The divisional CEO
The CFO
The leapfrog candidate
What a COO should do to be CEO
• Developing a longer term strategic vision
• Building the skills to be a powerful communicator
• Widening exposure to finance and marketing, sales
• Understanding the broader range of external stakeholders
What a Divisional CEO should do to be CEO
• Developing stronger relationship with the entire executive
leadership team
• Gaining an enterprise understanding, not just division
• Volunteering for company wide initiatives
• Developing a better sense of company corporate strategy
What CFOs should do to be CEO
• Broadening understanding of the entire stakeholder system
• Devoting time to assess longer term revenue growth
• Seeking ways to lead at scale
• Taking a structured approach to talent management
What leapfrog candidates should do to be
CEO
• Seeking opportunities to get attention of executive team and
board
• Finding ways to gain exposure to external stakeholders
• Deepening understanding of the business
CEOs are the one leader accountable for all
internal and external affairs of the company
“To define the meaningful outside of the
organization is the CEOs first task” - Peter
Drucker
All CEOs say that they feel loneliness
A CEO must be careful of what he shares
with his direct reports.
Developing good channels of
communication deeper into the
organization below will take away some
loneliness of the CEO
CEOs should manage the fine art of ‘sober
selling” to the stakeholders
Building good relations with the board is a
top priority of a new CEO
Always be a step ahead in gathering and
sharing bad news.
Market sentiment is seldom reflective of
reality
A CEO should share the bigger challenges
and seek the board view on them
The best models will always fail at some
point. CEOs must combine information
with intuition in decision making.
Getting out into the field is the best way for
a CEO to see how the moves are unfolding.
Not many CEOs travel to the field.
An organization has a pace, the CEO can’t
be outrunning that
Hard won credibility by no means ensures
all round support for big next steps.
Many CEOs are unable to stay energized
and vigorous in driving change. Hence there
is a temptation to ‘retire in place”
You have to be changing faster than the
world is changing
Business success contains the seeds of its
own destruction
Success tends to breed confidence and the
longer success continues, the more the
likelihood of overconfidence
The line between healthy confidence and
overconfidence is difficult to tell.
Keeping overconfidence in check can be
done by giving credit to more people , to
rivals and the eco system
After many years in the CEOs job, the CEOs
sense of self can become intertwined with
the job
Sociologist Erving Goffman labelled it “
impression management” In much of our
lives he observed, there is a front stage and
a back stage.
Being a great leader needs you to keep your
ego in check
The best CEOs focus on the future to leave
a legacy
Thoughts in the book on Private Equity – PE
companies
The stages for a CEO in a PE firm are
different. PE firms set much more
ambitious deadlines and milestones than a
listed company
A PE board is much more involved with the
company than a listed entity board.

The CEO has one boss – the partner in the


PE firm
PE has grown at remarkable pace. There
are 8000 PE firms in 2022 in the US alone
According to Forbes, in January 2024, $6.1
trillion in assets were under PE
management and half of that was with the
top ten PE firms.
There were 24 PE funds in 1980, there are
19,000 now
In 2022, PE forms controlled 5 times more
than public listed companies in USA,
however they accounted for only 6.5 % of
the GDP since PE firms hold many small
businesses.
PE firms are sitting on a record $2.49 trillion
of ‘dry powder’, money waiting to be
deployed
76 % of CEOs hiring is from within in the
S&P 500 list, in PE firms, 75 % of CEOs are
from outside the company
In fact leaders at the No 2 level in every
listed company are prime candidates for
CEO roles in PE firms
The big benefit of a PE CEO is that he is
shielded from the harsh glare of the
investing community and shareholders.
PE ownership allows the CEO to focus
internally on running the company

PE ownership also means that the CEO has


a good deal less autonomy than a listed
company CEO
Research reveals that 73 % of PE CEOs are
replaced during the holding period, most
often in the first two years.
The best PE firms now offer a caliber of
input that’s the envy of listed companies
Most companies targeted by PE companies
are small and cannot bring in the kind of
experts and knowledge that a PE firm brings
PE CEOs have to hit the ground running

PE firms act quickly if results are missed.


Research shows that a third of PE CEOs are
forced out in the first hundred days

58 % of PE CEOs are replaced within 2


years
There is more pressure in a PE firm since
you are not updating on a quarterly basis
but almost on a daily and weekly basis.

Boards and PE firms have more data with


which they challenge the CEO and the
management team unlike a listed company
The PE firm first targets efficiency and then
growth.
Most PE CEOs do not have the experience
to make a case to sell to a potential buyer
There is no time for complacency for a PE
CEO
In a PE firm, leadership is a distributed
model

It is the PE firm deal lead, the board and the


management team.

All have access to information much more


than in a listed company
CEOs in a PE firm cannot control the flow of
information the way they do in a listed
company. All information will reach
everyone
PE boards and partners are much more
knowledgeable and involved compared to
listed companies.
There is criticism too – many feel that the
CEO job in a PE company is a COO plus job.
Some PE firms are accused of ‘seagull
management’ – swooping in to engage only
when problems arise.
A PE CEO has to typically replace 30 to 40
% of those reporting to him and 50 to 65%
of those below the direct reports.
Anyone aspiring to be a PE company CEO
must realize that the media and the
shareholders do not shower you with
accolades the way it happens in a listed
company.
PE firms do not invest in leadership
development because they do not see
internal grooming as a necessary thing

They bring all their portfolio CEOs together


sometimes to share knowledge, that’s the
most development they do.
Almost half the companies in any listed
company have no meaningful succession
plan.
The handover to a successor is an
important aspect of a CEO job. Not many do
this well.

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