The CEO Three Year Itch
In my last post, I wrote about a recent McKinsey Quarterly report on new CEOs which had valuable information. The one thing I left out and saved for a follow up post was this finding which showed up in the last few sentences. The authors reported that “On average, an inflection point arrives during year three of a CEO’s tenure. At that point, a CEO whose company is underperforming is roughly twice as likely to depart as the CEO of an outperforming one—by far the highest level at any time in a chief executive’s tenure.” I guess you might call it the 3 Year Itch.
This finding matches with some research I had done years ago on CEO tenures. By 18 to 24 months, you either have the board and employees’ support or not. It then takes a year or so for any action to happen on that level of success and then the CEO departs. It often appears sudden but is not.
This is incredibly relevant information because as we advise CEOs in their first 100 days, the three year marker is critical to point out. We always mention the significance of the 1 year anniversary because that is when the media does their roundups on how well the CEO has done and whether they delivered on their promise. The three year itch comes up fast, afraid to say.