Bob Iger Returns to Disney: How Do Boomerang CEOs Work Out?

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.

The Classic Traps Encountered by New Leaders

Michael Watkins wrote one of the best books on leadership transitions - The First 90 Days.  He's a friend and former colleague from HBS, and he now teaches at IMD in Lausanne, Switzerland. Through his research, Michael identified some of the classic traps experienced by new leaders in their early months in charge. Here are a couple of the traps that seem to me the most worrisome for new leaders:

Not engaging in social learning

Watkins argues that new leaders sometimes isolate themselves during the early months in charge.  They spend an inordinate amount of time reading reports, analyzing data, and meeting with a close circle of direct reports.  Unfortunately, they do so at the expense of engaging with a broader range of voices throughout the organization.  They forget that there is much more to learn from people than from data.  Watkins explains that you build a reputation very quickly of either being approachable or not.  It's hard to modify those first impressions if you isolate yourself at the start.  

Staying too long with the existing team

Sometimes, new leaders stick with the incumbent team because they want to give those people the benefit of the doubt, despite concerns from the board and others about their performance.  In other cases, they convince themselves that they must keep those people because of their institutional knowledge.  Certainly, wholesales changes simply for the sake of bringing in your own people can be hasty and even distastrous.  However, leaders should beware of failing to make changes when a broad swatch of the organization witnesses serious under-performance within the top team.  Failing to make needed changes will cause people to lose faith quickly in a new leader. 

Getting captured by the wrong people

Certain people will work hard to influence and persuade the new leader.  They will do so because they want to preserve or enhance their own power.  They may try to protect their priorities in the face of potential change.  Or, they may push agenda items that they could not persuade the previous leader to endorse.  New leaders have to be very careful about being "captured" by the wrong people.  Leaders may not only get bad advice. People throughout the organization are paying attention.  If they think that the leader is surrounding himself or herself with the wrong people, it will again diminish faith and trust in the new leader.  

New Leaders and the Whole Vision Thing

Barbara DeBuono, CEO of Orbis, sat down recently with Adam Bryant of the New York Times for his Corner Office interview series.   Orbis is a global health organization that helps to treat and prevent blindness.  DeBuono offered some terrific leadership advice:

Let’s start with leadership.  Be very careful that you don’t cut yourself off from everyone, either by hanging out in your office by yourself or hanging out in your office or your suite with three or four key people.  I’ve seen that happen a lot — where people are in their bunker with three or four people, and they block everything else out.  You lose all touch with your external customers and your internal customers, and nobody has a sense of your vision; nobody has a sense of who you are.  I think that’s a huge mistake.  

The other thing is to be articulate early on about what you want to do and who you are, but don’t be afraid to actually say, “It’s not all baked.”  I think a lot of people go into a job as a leader or C.E.O. and say: “I have to have the whole vision thing. I have to have the whole mission thing down, with all the strategic objectives, all the programs to support that, all the pillars — and if I don’t, they won’t take me seriously.” I would say, “Don’t be afraid that you haven’t figured all of that stuff out, because really you should be spending your first six months to a year just learning the organization.” 

How can you articulate a fully baked vision and mission and strategic objectives when you have to learn the business you’re in?  Just learn the business, learn the people in your business, learn what they hope and feel, learn what they think the business is.  Do they understand the business that you’re in?  I’ve always been struck by how often people don’t. 

DeBuono offers two critical pieces of advice there.  First, I can't tell you how many new leaders fall into the trap of spending far too much of their time talking to just a few other senior folks in the organization. They isolate themselves from the troops, because they feel that they have to have a bunch of stuff figured out first before interacting with the front-line employees. That's a mistake. Being visible early on is key. However, DeBuono also suggests that being visible doesn't require having a fully-baked vision ready to be rolled out on Day 1. New leaders can use that early face time to learn, to soak in as much knowledge as they can about the organization. Moreover, that face time offers powerful symbolic value. It shows a level of transparency and engagement that will be respected and valued by the front-line employees.