When a team of researchers from executive search giant Spencer Stuart set out to assess the world’s best performing CEOs, they assembled a boat load of data on 747 S&P 500 chief executive officers, including shareholder return for each CEO’s company and an abundant amount of demographic and other intriguing information on them.
One of the most interesting stories to emerge from their study related to the longevity of each CEO in their respective position and their performance over this duration of time.
The data is hugely important for an S&P 500 company’s board of directors, suggesting when the performance of an executive was (positively or negatively) an aberration and even when boards should intervene to replace a CEO.
The Spencer Stuart researchers have broken this down into five general time frames for a CEO’s tenure.
The first such time frame, which they’ve labeled “The Honeymoon,” during which they found many CEOs typically achieve above-average results in part because many have given considerable thought to the most immediate and obvious organizational and performance reforms they would implement.
But this is often followed by what they label “The Sophomore Slump” when this exuberance dies off and a company’s enduring challenges snowball.
However, for the successful CEO, this is followed by what they label “The Recovery,” a multi-year time period during which top-performing CEOs begin to witness progress from the reforms they implemented in their first two years.
But the ebb and flow of business is such that this is followed by another cyclical cycle, labeled “The Complacency Trap” during which obvious reforms have been implemented and some success has been achieved and a sense of urgency tends to dissipate.
The story of a successful CEO typically has a happy ending, labeled “The Golden Years” during which systematic management processes have reached a pinnacle of performance and the company begins to benefit disproportionately from a CEOs experience and learning curve.
“Many of the long-termed CEOs we interviewed were motivated by the idea of building a legacy” during this period, the Spencer Stuart researchers write.