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.

The study analyzed the fortunes of nearly four hundred CEOs appointed to the helm of S&P 500 companies within the decade of 2004 to 2014. A set of the fifteen most effective early moves was identified. And out of those, the highest performers relied most on these five: operational improvements, launching new products, improving customer relationships, increasing employee engagement, and culture change.

Those in the top quintile of performance increased company efficiency at a much faster clip in their first two years than lower performers. In fact, they cut costs at twice the pace as those in the lower performance groups. This allowed them to achieve, on average, gains of 10 percent in operating income in their first year and 20 percent in year two. Top performers also engaged, on average, in fewer acquisitions in these years, and those they did were typically smaller scale.

Our data shows that sprinters’ success results from a focus in their approach to business improvements that is strikingly different from successful marathoners’ approach. From the start, sprinters rely more on efficiency gains and increases in profitability to create value. This results in superior improvements in EBITDA margins from an average of 20 percent to 25 percent.

When it comes to organic revenue growth, however, sprinters invest less in it, and in fact they achieve lower rates of revenue growth, which on average decreases from 9 percent in their first year to 4 percent by year five. By comparison, marathoners, from the start, focus more on revenue growth, boosting it from an average of 10 percent in their first year to 15 percent by year five. They also maintain stronger revenue growth throughout their tenure, with it barely dipping below 10 percent in any of their other ten-plus years.

For acquisition, he shared, “We would look at almost anything that came up within the industry for sale, and we had four factors that drove our decisions. One, we would only buy number one or two share brands in their category. We did not believe we could take a dying brand and turn it around. Two, we wanted to buy businesses that had higher gross margin than out company average, so would help our gross margin. Three, we looked for asset-light companies. We didn’t want to buy a company with lots of factories or ones for which we’d have to build new factories. We preferred to bring operations into our own facilities. And four, we went for products that had some sort of advantage versus the competition that we could leverage with our marketing, sales, and operations muscle to make better.” That formula guided the well-measured acquisition of numerous leading brands during his tenure, including Spinbrush, OxiClean, Orajel, Batiste, and Vitafusion. These were businesses that his own business leaders had the expertise to run, and he folded them into Church & Dwight’s existing operations. Focusing on employees with R&D expertise, they kept, on average, only 10 percent of employees, many of whom joined the team at headquarters. “We doubled the size of the company,” he reported, without adding substantially to the number of employees.