New CEOs Need a Headstart
Because I am off from work for the holiday, I have a little time to catch up on things I meant to read in the months before. I was particularly interested in some research on CEO transitions and its impact on the value of the enterprise conducted by FTI. A few facts jumped out at me from their study among the financial community. They found that one-third (32%) of investor decisions are impacted by the reputation of the CEO. Moreover, the reputation of the CEO was more important to investors than the reputation of the company’s products and services.
The research covers the value at risk depending on what type of CEO transition occurred. The greatest risk to the enterprise is when a CEO is forced to resign.
Because of my work on CEO tenures and how to build CEO reputation, the findings confirm my own research over the years that CEOs need to show success by that 12 month marker. FIT found that investors give new CEOs about six months to assess the challenges and opportunities facing the company, setting a vision and strategy. They give new CEOs more leeway to improve market performance and valuation — about 12 months. After the first year, all engines need to be firing.
Another particularly interesting finding was what investors look at in their first 100 days to further establish the CEOs credibility in their eyes….here is what they said was of “significant importance.” Despite the ranking for “charisma,” it is still interesting that it is still estimated to be of high importance and only 16% said it was of limited importance. FTI concludes that investors take a multi-dimensional view of new CEOs. They expect to see it all.
|During First 100 Days Of A New CEO||“Significant importance”|
|Grasp of the company’s challenges and opportunities||96%|
|Knowledge of/experience with industry dynamics||92|
|A strategic plan||88|