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Why CEO Tenure Varies: Are You at Risk

Although the length of CEO tenure varies (based on many different circumstances), it seems that there may actually be a way to predict how long a leader will stay in the C-suite.  Booz & Co. has compiled information from public company CEOs in order to determine what factors contribute to a long CEO tenure and …

Although the length of CEO tenure varies (based on many different circumstances), it seems that there may actually be a way to predict how long a leader will stay in the C-suite.  Booz & Co. has compiled information from public company CEOs in order to determine what factors contribute to a long CEO tenure and what factors might force a CEO’s tenure to be shorter-lived.

The study divided companies into four types: holding companies, strategic management companies, active management companies, and operationally involved companies.  These categories go from the least involved CEO (holding company) to the most involved/hands-on CEO (operationally involved company).  The study also examined CEOs who were internal and external hires.

Holding company CEOs had the longest tenure, with 6.3 years for inside hires (the study did not include outside hires in holding companies). For both internal and external hires, the next longest tenure was CEOs of strategic management companies (with 5.5 years for internal hires and 4.5 years for external hires), followed by active management (with 5 years for internal hires and 4 years for external hires), and finally operationally involved companies (with 5 years for internal hires and 3.3 years for external hires).

So, the conclusion is that being an internal higher for any of these company types should mean a longer tenure than any external hire.  And, the more hands-on the CEO, the shorter the tenure.  The longest tenure goes to internal hires of holding companies and the shortest tenure (by far) goes to external hires in operationally involved companies. They do point out, however, that operationally involved CEOs are more likely to be the chairman of the board and that CEO/board power struggles may account for the brevity of tenure.

 

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