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.

When it comes to TSR over their full tenure, marathoners were hands down the strongest performers, accounting for eighty-eight out of the top one hundred. But when it comes to CAGR, the sprinters were the winners with forty-five out of the top one hundred. The mid-distance group trailed on both of these measures. These findings reinforce the observation that during the years of the Complacency Trap, years six through nine, CEOs’ performance may be less than stellar, dragging down the overall performance numbers for CEOs who stay on through those years.

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.

Much less focus, however, has been put on the problem of more gradual deterioration, or stagnation, of performance. Our Life Cycle research reveals that this is a particularly common development beginning approximately after the first five years of a CEO’s tenure. Company performance was lower on many fronts in years six to ten for two out of three CEOs than in their first five years. The rate of revenue increase slowed in these later years. Both EBITDA and ROIC slackened relative to earlier years, companies often became less efficient, and growth in operating income stalled.

Improving the performance of companies that are performing fairly well is now the predominant objective, and PE firms have learned that a CEO’s people leadership abilities are the vital complement to strength in finance and operations for this new frontier of performance improvement.