Surprise! The Ideal Tenure of a CEO Is Over a Decade.
Defying conventional wisdom, a new report touts longevity
Turns out that embattled CEO might just need a few more years on the job.
How about ten? In the Wall Street Journal, reporter Chip Cutter notes that some corporate boards think longer tenures for CEOs is a good trend.
There’s statistical evidence to back this up. Over the past decade, the tenure of S&P 500 CEOs averaged 10.2 years on the job (as of 2018), up for 7.2 years in 2009. And when those CEOs get past the decade mark, they often seem to deliver some of their best performances. According to research from executive-search firm Spencer Stuart (and published in the Harvard Business Review), CEOs had some of their “value-creating periods” in years 11 thought 15, a timeframe the report dubbed “The Golden Years.”
And that extended timeframe defies conventional wisdom. As the report notes, “When we asked CEOs about the ideal tenure for the role, many mentioned the widely touted seven-year average. When we surveyed directors, they said that CEOs generally should leave the job after 9.5 years—a point at which, many believe, performance typically plateaus. Why these expectations? No one has a compelling or evidence-based answer.”
So what’s so special about hitting the post-decade mark? As the report notes, this is the time period after CEOs have survived a “complacency trap” and projects that were championed early on have finally come to fruition. As well, the CEOs now come armed with deep institutional knowledge and boards have more trust in their CEO.
How long a corporate chief lasts, however, depends on several factors, including a CEO’s financial stake or special voting powers (which is prominent amongst tech start-ups). But as Uber’s Travis Kalanick and We Co.’s Adam Neumann found out, those advantages don’t always guarantee a leader will stay in power forever.
“If you don’t have outstanding performance, you don’t survive, period,” as Bill George, a former CEO of medical-device company Medtronic PLC, told the Wall Street Journal. “No one is irreplaceable.”
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