The Wall Street Journal reports shocking news
from Disney this morning. CEO Bob Chapek, recently signed to a contract extension by the board, has stepped down effective immediately. Former CEO Bob Iger will return to take the reins. Iger, of course, presided over a long period of strong performance at the company. However, Disney has struggled along multiple dimensions since his departure. Iger's return prompted me to consider how "boomerang" CEOs have performed. We all know about the high-profile success stories, such as Steve Jobs returning to Apple long after he was dismissed. Is that strong return the norm or the exception?
Christopher Bingham, Bradley Hendricks, Travis Howell, and Kalin Kolev studied this question and published their findings in the MIT Sloan Management Review two years ago. They found that, "Boomerang CEOs indeed performed significantly worse than other types of CEOs. On average, the annual stock performance of companies led by boomerang CEOs was 10.1% lower than their first-stint counterparts. These results held true even when we compared them with other (non-boomerang) CEOs who were hired in times of crisis."
Why might boomerang CEOs struggle, on average, during their return? First, they might be trying to apply a tried-and-true formula for success, yet conditions and circumstances may have fundamentally changed since their initial departure. Second, decisions late in their initial tenure actually may have caused some of the downturn in performance after their departure. Owning up to that fact may be challenging for many leaders. Third, the team at the top may have changed significantly since their first tenure. Their earlier success may have had as much, if not more, to do with those talented team members as it did with their own capabilities. Fourth, the new skills required to thrive in the current environment may not match the leaders' strengths. Finally, perhaps the returning leader may not be as open to divergent perspestives as he or she once was. As Iger himself noted in his book,
"It’s not good to have power for too long. You don’t realize the way your voice seems to boom louder than every other voice in the room. You get used to people withholding their opinions until they hear what you have to say. People are afraid to bring ideas to you, afraid to dissent, afraid to engage. This can happen even to the most well-intentioned leaders. You have to work consciously and actively to fend off its corrosive effects.
Boards and returning leaders must, of course, also acknowledge the fact that they did not manage the succession well. In essence, the boomerang CEO has some responsibility for having failed in one of the last crucial tasks faced during his or her initial tenure: a smooth transition for the successor. Now, the boomerang CEO has to not only right the ship, but find a way to improve the succession and transition the next time he or she steps down. Again, it's interesting to read Iger's own words:
We all want to believe we’re indispensable. You have to be self-aware enough that you don’t cling to the notion that you are the only person who can do this job. At its essence, good leadership isn’t about being indispensable; it’s about helping others be prepared to step into your shoes—giving them access to your own decision-making, identifying the skills they need to develop and helping them improve, and sometimes being honest with them about why they’re not ready for the next step up.