The first stage, Proof of Performance, can range from less than a year in duration to an upper range of two years, depending on the results being achieved. Although the Launch stage for public company CEOs is intense, private equity partners, CEOs of PE portfolio companies who have also been public company CEOs, and directors who’ve worked with both the public and PE models unanimously agreed that the expectation for fast results was even greater for the PE CEO. Instead of being afforded a honeymoon or the exploratory period of a listening tour, a PE CEO is expected to immediately begin implementing the elements of the detailed investment thesis.

PE firms act quickly if early targets are missed. Indeed, research has found that one-third of PE CEOs are forced out within the first one hundred days of PE ownership.

Opinion about the high-engagement PE model is not universally positive. Some criticize the intense involvement of PE firms for turning the CEO into more of a “COO plus.” In this view, PE firms are primarily interested in hiring executives great at execution, who will put strong emphasis on operational improvements. They aren’t looking for input— or not much— into the strategy for growth, and they curtail CEO power.

In all cases, an essential truth is that the CEO is still the one primarily in charge of running the company. The PE firm provides an idealized model of the transformation process, and the CEO brings the wisdom of experience in how to actually manage the messier, human process of execution.

In a 2019 survey of 222 CEOs of companies around the globe, 76 percent reported that there was not a leader within the company who was ready to take over their role, and 60 percent said that their company lacked a succession plan. A 2021 study by Stanford researchers found additional evidence of the lack of preparedness, revealing that 22 percent of CEO appointments from 2017 to 2021 were interim— effectively placeholders while boards searched for a permanent successor. In another 10 percent of cases in which the departure of the CEO was announced, the board didn’t even have a good interim candidate to appoint. The transition was delayed considerably while the board searched for a successor.

Inadequate succession planning comes at great expense. A study of CEO transitions at the world’s 2,500 largest public companies determined that the average cost in shareholder value of a poor succession decision— defined as needing to fire the CEO— was $1.8 billion per company. The cumulative value destruction is staggering. Researchers who evaluated the total annual cost of poor CEO transition by the S&P 1500 estimated it comes to nearly $1 trillion. Insufficient onboarding support for new CEOs alone amounted to missed opportunities of $109 billion in value creation.