As for former CFOs, analysis shows that, although they often get off to a very strong start, their performance tends to lag beginning in their third year. For the full course of their tenure, they accounted for the smallest share of top performers, at just 8 percent. They also accounted for the highest percentage of bottom-quintile performers. In examining their performance according to measures in addition to TSR, including revenue growth, return on invested capital, and profitability, we found that their strong early performance is largely due to their experience with finding efficiencies. This often leads them to continue to focus heavily on driving growth in profitability by taking cost out of the business and shoring up the company’s balance sheet. The market generally rewards them in the first two to three years for those achievements. But over time, the emphasis on holding down costs versus driving revenue growth through product, marketing, and sales innovation, and revenue performance, which few CFOs have experience in, impedes growth.

Investors and analysts may also communicate directly with CEOs, providing well-founded criticisms and good arguments for change needed, or at least challenging a CEO’s current views. Nigel Travis highlighted that “I’ve always loved dealing with investors and analysts because it gives you that outside-in perspective. Who else could I talk to who’d studied and gone into Starbucks, into McDonald’s?” his two leading competitors. “It really enhances your understanding of the competition and broadens your external perspective enormously.” He shared that before leaving any investor or analyst meeting, he’d say, “I’ve listened to all your questions. Now, I’m going to ask you one: Tell me what were doing wrong. What would you do differently?” Being receptive to and actively soliciting such critique was only one way he combated status quo bias at Dunkin’.

In the past, primary emphasis was placed on financial and operations acumen— still, obviously, important— but today the vanguard of innovators in the sector increasingly appreciate a CEO’s people leadership skills for achieving the above-market returns investors expect.

When it comes to investing in leadership development, PE firms have thus far focused on providing executives of portfolio companies a richness of opportunity for networking and peer-to-peer exchanges with other leaders in their portfolio companies and their vast network of advisers. They’ve worked to create rich ecosystems to facilitate these kinds of opportunities. “We spend a lot of time nurturing our talent network,” Courtney della Cava shared. These networks provide entrée to hundreds of other C-suite leaders, board directors, and company stakeholders who can provide input, from customers to suppliers and regulators. “We actively cultivate communities among our various executive cohorts,” she explained. This may be done, for example, by hosting regular gatherings where leaders can confer about issues and build relationships. The firm may also take the lead in making introductions across the ecosystem. A CEO of a mid-cap health-care company might, for example, be introduced to her counterpart at a fast-growth tech company who has invaluable expertise in cybersecurity or AI implementation.

Among many colleagues who specialize in helping pre-CEOs prepare and new CEOs outperform in the role, Janine Ames, Brett Clark-Bolt, Darleen DeRosa, Chris DeRose, Nick Falk, Cassandra Frangos, Adam Kling, Filomena Leonardi, David Metcalf, Michael Milad, Kathy Schnure, Levi Segal, Christopher Uhrinek, and Muthiah Venkateswaran have been generous with their time and wisdom.