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February 12, 2007


tom s.

To back up your point, if you haven't already then see the paper "Holes at the Top" by Margarethe Wiersema on how replacing corporate leaders fails to make a difference:


tom s.

Here's an extract:

The firing of CEOs when performance nosedives has become commonplace in U.S. business. And it’s not hard to understand why. At a time when companies have come to be judged by the valuation of their stock, investors now view chief executives as the primary determinant of corporate performance. When companies do well, their CEOs are showered with money, perks, and attention. When they do poorly, they’re given the blame—and the boot. The roster of recently deposed U.S. CEOs is long and growing, including —in addition to Kmart’s Antonini and Hall—such names as Coca-Cola’s Ivestor, Ford’s Nasser, Procter & Gamble’s Jager, WorldCom’s Ebbers, and Qwest’s Nacchio. And the trend is now spreading to Europe as well, with high-profile dismissals at Deutsch Telekom, ABB, Swiss Life, Fiat, Vivendi, and Bertelsmann, among others.
But does firing a CEO pay off, or do most companies end up like Kmart, with little or nothing to show for bringing in a new leader?

I’ve been studying that question over the last few years, and what I’ve found is not encouraging. Most companies perform no better—in terms of earnings or stock-price performance—after they dismiss their CEOs than they did in the years leading up to the dismissals. Worse, the organizational disruption created by a rushed firing—particularly the bypassing of a normal succession process—can leave a company with deep and lasting scars. Far from being a silver bullet, the replacement of a CEO often amounts to little more than a self-inflicted wound.

The blame for the poor results, my research indicates, lies squarely with boards of directors. Boards often lack the strategic understanding of the business necessary to give due diligence to the CEO selection process. As a result, they rely too heavily on executive search firms, which are even less informed about the business than they are. Concern over restoring investor confidence quickly—rather than doing what’s right for the company—drives the selection process. And board members’ ignorance about the factors that drive company performance undermines their ability to provide strategic oversight after the CEO is dismissed. Clearly, while boards have become accustomed to firing CEOs, they have not yet become adept at making the dismissals pay off.


Football teaches us that turnaround is almost exclusively (Redknapp as an outlier?) a function of investment in "productive resources" (players) who can improve results due to greater skill/efficiency/insert industrial analogy here.

Of course, sometimes, you pick a Bruce Rioch, so presumably changing to an Arsene Wenger has some noticeable effect? Mind you, it was only 2 places higher in the first season. In the long run however, it seems difficult to think that Rioch would have been quite the same success.

Ah, you say, but this is about failures. Trouble is, given the banding in the EPL there is literally a success/failure distinction between 3rd and 5th. (c.f. that team you like so much, Spurs.)


Wasn't Rioch the chap who bought Bergkamp?
Anyway, how about banning "corporate leader" and using "company boss"?


Come on - the change from Neil Kinnock to Tony Blair made no change to the Labour party or it's prospects for election? Or the change from Heath to Thatcher made no change to the Tories?

Leaders can change organisations. The leader of GEC changed the organisation to Marconi, they certainly had a major effect on the prospects for their company (for the worse). It is no stretch of the imagination to imagine a reverse Marconi. Football teams are not a good example of the impact of leaders - strategy and tactics of football are highly developed and the areas to make changes are very small. This is not like real life, where things are less well defined.

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