A Massive Gap in CEO Readiness: What role can the board play?

Author:Kenney, Caren

It's rare to go a few days without reading about the latest chief executive officer debacle--where the leader at the helm is suddenly sidelined by an unexpected illness, unethical decision or personal indiscretion that is trending on social media within minutes of it being leaked or exposed. Plus, CEO exits from underperforming companies have risen to a level unseen in 15 years, according to the Conference Board, a business research association.

The statistics are sobering: 64% of CEOs don't make it to their fourth anniversary, and 40% don't even make it to 18 months.

None of this should come as a surprise, when you consider the intense 24/7 pace and pressure-cooker environment in which CEOs now operate, characterized by a highly uncertain and complex global environment; intense scrutiny from shareholders, consumers and the media; and nonstop travel across multiple countries, continents and time zones. All of this exacts a significant toll on a CEO's health, performance and family life.

Boards can often add to this pressure, expecting new CEOs to deliver short-term results and swift transformational change, despite a McKinsey report that 70% of transformational change initiatives fail. When leadership at the highest level falters, it can result in the loss of billions of dollars of market cap, the downsizing of thousands of jobs, and loss of critical talent and employee engagement. Forbes reported that, among the world's top companies, a single unplanned CEO departure costs $1.8 billion more in shareholder value alone than a planned CEO departure.

Where is the gap?

It is often assumed that if executives survived the struggle to the top of an organization, then they must be resilient enough for the role--but this often proves to be a terribly costly assumption.

"An array of challenges--from increasing impatience on Wall Street and in boardrooms to a corporate landscape rapidly transformed by new technologies and rival upstarts--have made the top job tougher and more precarious than just a few years ago," notes a recent Wall Street Journal article.

While these leaders arrived at their roles demonstrating a strong track record of success and with significant training and coaching in business skills and competencies, nothing prepares them for the mental, emotional and physical strain, in addition to the emotional isolation that comes with the chief executive role. Leading in today's environment requires a new and expanded set of competencies in...

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