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The Life Cycle of a CEO— Claudius A. Hildebrand & Robert J. Stark

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Introduction

In fact, Dave hadn’t been the first choice for the CEO position, or even the second or third choice. Word was five others had been offered the job before him. What’s more, a couple of years earlier he’d been unceremoniously fired from his position as divisional president at a leading competitor. No one would have suggested from his educational background, either, that he was CEO material. Not only did he not have a degree from an elite school, but it also took him six years to graduate. He hated college and he’d dropped out for a time.

As Dave’s first year in the CEO seat progressed, the sneering assessments of that Florida night prevailed on the Street; the company’s stock slid 40 percent.

Nigel Travis, who led Dunkin’ to strong revenue growth in nine years at the helm, observed in his book The Challenge Culture that companies “can quickly go from success to trouble . . . because the culture does not allow for challenging the status quo.” He shared with us that finding ways to break the spell of satisfaction with success was a main focus of his leadership. That was in part because of what he’d witnessed as a senior executive at Blockbuster.

Advice on combating the status quo bias by methodically rethinking business assessments and gaining perspective from outside the firm is not new. But the problem is that far too few leaders develop a rigorous and continuous discipline of doing so. And if CEOs don’t impose that discipline on themselves, nobody else will.

The imperative to challenge yourself becomes more difficult to achieve the longer you have been doing the job successfully. Nigel Travis said, “Being a CEO for longer is tougher because you have to find ways to keep improving.” Some CEOs recalled feeling less engaged in this stage, with boredom creeping in. “When you get into years six to ten, the intellectual stimulus is less,” one shared. “You come in with lots of ideas,” another commented, “and then run out of them.” Someone else said, “Years six to ten is a period of time when the luster is off the rose and what was new and exciting is no longer new and exciting.

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 general, board engagement in the succession process is limited until the time of the decision, which is usually within a year of the transition. Then, they might rush to judgment based on just one or perhaps two interviews with candidates, people with whom they’ve often had little or no other interactions. So little hands-on knowledge of candidates fuels the numerous cognitive biases in their decision-making. One bias is the preference for simplifying narratives, or relying on stereotypes about what a CEO should look and sound like to privilege candidates who are super confident or have a powerful physical presence or can claim bold, even brash, achievements.

We confronted this bias when we were advising about a succession and recommended the board take a more serious look at a candidate. They’d dismissed Alex as not having the needed smarts and being just a solid “doubles hitter” rather than the star slugger they were looking for. But our assessments indicated he had the smarts in spades, and as a doubles hitter, he was a real standout. We brought some of his accomplishments that had been underappreciated back to the board’s attention. We also coached him to project a stronger image, including sprucing up his attire. The combination did the trick, and the board selected Alex, who went on to achieve a great deal of success in an eight-year tenure.