The Five Stages of CEO Leadership Success

The Life Cycle of a CEO is the result of a five-year study that included a rigorous analysis of the performance of every 21st century CEO of the S&P 500 throughout the years of their tenure, followed by interviews with more than 100 CEOs and board directors. Interviews revealed how the demands of the CEO job change over time, the leadership decisions CEOs have to make, and how CEOs develop the mental fortitude, emotional resilience and self-awareness required to learn and grow, seize new opportunities, and overcome emerging challenges. This research led to the discovery of the CEO Life Cycle, a series of five distinct stages of tenure. Each stage presents a unique set of headwinds and tailwinds that require CEOs to grow in new ways.

Launch

CEOs often get swept up in a powerful “honeymoon” tailwind of optimism during their first year, and this optimism often leads to a boost in share price. This early period is the time for CEOs to invest in building relationships with the board as a whole and with individual directors

In a CEO’s first year, companies outperformed the S&P 500 by 10^% on average

~88^% of new CEOs continue past the first year

Throw out the playbook filled with actions and instead bring one full of questions.

Joe Hogan, former CEO of ABB

Calibration

Boards, markets and other stakeholders reassess the CEO’s performance in the second year, and share price often falls back down. For their part, CEOs may also perceive the need to reassess and adjust strategy or other plans.

73^% of CEOs who enjoyed a honeymoon period achieved lower results in their second year, relinquishing 21^% of TSR¹ on average

Somewhere in the first 12 to 18 months, you are going to run into a buzz saw. You won’t know what it is.

Greg Ebel, CEO of Enbridge

Reinvention

Starting around year three, a CEO’s early moves begin to generate stronger results, and the most successful CEOs leverage the confidence they’ve gained to launch large-scale initiatives. This period is an important inflection point where we see a significant divergence between high and low performers.

25^% of CEOs are out of office by their third year

50^% have departed by the sixth year

This whole middle period was one of incredible growth where I had to learn how to communicate more broadly, run a different kind of company, describe to everyone what the vision was.

Roger Ferguson, Former CEO of TIAA

Complacency

A gradual deterioration or stagnation of company performance is common around five years into a CEO’s tenure. The critical lesson? CEOs must maintain the drive to push for change and growth and remain vigilant about threats and opportunities.

2/3 of CEOs saw lower performance in years 6–10 than in years 1–5

Some lost the gains of the first 5 years altogether

I worried about complacency because in the company we got to the point where people were thinking we didn’t need to worry: ‘Of course we’re going to deliver great results.’ I’d say, ‘No, you have to keep finding new ways of doing things.’

Jim Craigie, Former CEO of Church & Dwight

Legacy

While just 26% of CEOs are still serving for more than a decade, nearly 60% who do beat the S&P 500 in these years — a larger percentage than at any other stage. CEOs must balance the dual mandate to keep pushing to drive performance while also preparing to hand over the reins, an often psychologically challenging responsibility.

Year 10 can mark the start of a period of stronger, more stable performance

Only a fraction of CEOs stay in the job longer than 15 years

I get there faster in most cases now than I did before because I know the industry dramatically better. ... That cumulative experience, along with an agile mindset, leads you to be able to make faster judgments.

Mark Hoplamazian, CEO of Hyatt