For CEOs, experience isn’t everything. In fact, research shows that rookie CEOs often outperform seasoned veterans.
Research from Spencer Stuart, an executive search and leadership consulting company, finds that there’s “no premium for prior CEO experience.” Their research, which examined 855 S&P 500 CEOs over the past two decades, found that rookie CEOs last three years longer than seasoned CEOs and experience less volatility in their performance.
And that’s even true when it’s the same CEO. When Spencer Stuart researchers compared first-time leaders with their subsequent ventures at different companies, they found that 70 percent performed better the first time.
Additionally, 97 percent of first-time CEOs outperformed the market, while only 38 percent of those CEOs outperformed the market in subsequent roles.
What is it about the rookie CEO mindset that makes them so successful?
One example comes from Upstart, a company that was saved by a tough decision made by rookie CEO Dave Girouard. Soon after Upstart received its first round of funding, Girouard felt worried. Upstart was billed as a crowdsourcing loan service—a “Kickstarter for people,” its founders quipped. But despite being funded, the company had only six months of money left, leaving its cofounders to ponder whether the potential of their idea was capped. Were they raising money to simply go broke?
Girouard met with his cofounders and told them that it was time for a radical change. “And within hours of that coffee with my co-founders, we were taking action and making it happen,” Girouard told First Round.
These days, Upstart is a publicly traded company with an IPO valued at $1.8 billion. Upstart found success with an entirely new premise: AI-powered loans by partnering with banks. Without this bold move by the rookie CEO, the company might have gone kaput.
Rookie CEOs take more risks
Upstart’s calculated-but-risky move is salient for even the most seasoned executive. And the story of the phenom rookie CEO is not a lone star in the sky—rookie CEOs tend to do extremely well, perhaps because they’re willing to be so bold.
As illustrated in Girouard’s story, rookie CEOs take big risks. But taking risks doesn’t have to mean changing everything. Mark Tritton, the rookie CEO of Bed Bath & Beyond, made big changes, without losing the core ideals of the company, and found success.
Upon stepping into the role in November 2019, Tritton parted ways with six senior executives, slowly hiring his own team. Then, he sold off 2.1 million square feet of real estate, altered the company’s famous coupon strategy, and made deals with same-day delivery services amid a global pandemic.
To be sure, all of Tritton’s moves were risky—and they came during an especially risky time—but the moves worked. By October 2020, after four years of quarterly losses, the company posted a 6 percent year-over-year comps increase.
Rookie CEOs look to make an impact quickly
Like Tritton, CEOs should mull what moves that could quickly make an impact. Fortune favors the bold, as Michael Birshan, senior partner at McKinsey & Company, writes in a post on LinkedIn.
“The data suggests the path,” Birshan writes. “On average, CEOs taking leadership of underperforming companies do better when they make more big moves. Those who pulled four or more strategic levers during their first two years achieved an average performance boost of 3.6 percent relative to peers, while their less bold counterparts eked out only a 0.4 percent increase.”
But making an impact will mean different things to different organizations.
A CEO should adopt an outsider’s perspective while evaluating the business, he writes, even if the CEO has been promoted from within. This will allow them to be objective while making impactful decisions. After all, statistics are generalities—success may not come in the form of the big, impactful move at every company.
Rookie CEOs don’t use the standard playbook
CEOs interviewed by the Spencer Stuart research team found danger in relying on a standard playbook for success in leadership. As one CEO told the researchers, “It’s a fresh game with a fresh team, maybe a new sport altogether. Instead of a law-like set of actions, you are better off with a set of guiding principles.”
CEOs should always use principles, such as listening, learning, and staying knowledgeable about the organization they’re leading. But they should be sure they aren’t buying into an out-of-date playbook.
Rookie CEOs don’t over-rely on any playbook. This often allows for agility, creativity, and a willingness to make mistakes, often the hallmark of success. As inventor Thomas Edison once said, “I have not failed. I have found 10,000 ways that don’t work.”
How can seasoned CEOs perform like rookies again?
There’s one simple rule for every executive to perform like a rookie CEO: Always keep learning, even from rookies.
Henry Ford put it simply: “Anyone who stops learning is old, whether at twenty or eighty. Anyone who keeps learning stays young. The greatest thing in life is to keep your mind young.”
The best executives always keep learning, whether it’s from books, examining their own path, or listening to the perspectives of peers.
Learning from peers is one of the best ways for CEOs to stay mentally young and thrive like a rookie. CEOs who regularly meet with peers for leadership development can see, first hand, that there’s no single playbook for success. The best executives often find that the path toward success includes consistency and calculation with a penchant for the risk of a rookie CEO.
Author: Vistage Staff