Perry Maddox shares the shocking frequency and cost of CEO failure, exploring 4 FAIL factors at the heart of why new CEOs fail.
I started a new job last week.
I couldn’t be more excited to join All Hands and Hearts, serving as the next CEO of this wonderful volunteer-powered disaster relief community.
While my first days saw our teams flying into action from Louisiana to New York in response to Hurricane Ida, I’ve spent the last few months studying up.
Because no two leadership roles are the same.
Yes, I’ve been a global non-profit CEO before, but this is my first time as CEO with a new organization. Add in a new field (disaster relief), a new team and a new organizational culture, and you’ll see why I did some research into CEO transitions to prepare myself.
What I learned about why new CEOs fail was, well… scary.
New Leaders Fail All the Time.
Let’s cut to the chase. The facts are brutal:
- Two in 5 CEOs don’t make it through year two;
- Other studies have this CEO failure rate as high as 50 to 70%;
- Average CEO tenure decreased 20% from 1995 to 2010; and,
- 82% of new CEOs fail because they don’t build relationships with their people
That’s incredibly common failure in the top spot.
Now consider the impact of CEO failure. CEO decision-making accounts for 45% of an organization’s performance. When CEOs fail, their direct reports’ performance drops 15% and flight risk grows 20%. Imagine the broader impact on the people our work serves, our staff and teams, our missions & causes.
The cost of failure is massive, and it happens with great frequency. That’s a terrible combination, and something has to change.
To make it happen, we must first understand why new CEOs fail.
Four Reasons Why New CEOs Fail.
Four themes consistently surface to the question of why new CEOs fail.
- Forcing it. Whether it’s a need to jump into a crisis, pressure from a board, staff or funders for immediate results, or personal hubris and motivation to make a big splash, leaders who launch new initiatives too soon could be in trouble. Especially those who aren’t onboarded well, which tends to be most CEOs I meet. Beware action bias.
- Arrogance. A terrible trait in general, it’s even worse in transition. New leaders must fight the temptation to bring our ideas, approaches, and leadership style from previous roles into this one. Check your baggage. Every role and leadership context is different So must be our approach. Think adaptive, not arrogant.
- Ignorance. Consider how long it takes to get to know the culture, team, politics and power structures, language, history and context, landscape and industry, market and competition, stakeholders and communities of a new organization. So much to learn, all while running the thing. Combine this knowledge gap with the arrogant tendency to lean on what’s worked before, and we have real trouble.
- Losing Sight. Executives operate on a strategic level. That’s the gig. But at first, any good leader will instinctively want to learn how it works: the operations, systems, products and programs. Important yes, but that’s a rabbit hole. Get hands-on to learn, but don’t linger. This is a very a tough balance to judge at first. Small wonder that many new leaders get sucked down.
Now That you Know Why New CEOs Fail, Don’t Be That Leader.
This post obviously doesn’t just apply to CEOs. It applies to all new leaders.
We must all beware of these traps, and identifying risk is step one.
Now look in the mirror and ask yourself, which of these traps are most dangerous for me? Which two traps are most likely to combine into a mega-problem for me? What elements of my style are more susceptible during this transition?
Understanding how these risks could interact with your style is a great way to avoid them.
Just don’t forget your strengths, friends. The road to success is built on strengths leveraged as much as problems avoided. The risks are real, but so are your skills.
Take the time to reflect on them both, and you’ll start your first hundred days like a leader.
You know, the ones who last more than 18 months.
