The Life Cycle of a CEO

The Life Cycle of a CEO Plot Summary

Introduction

As we watch successful CEOs transform struggling organizations or lead established companies to new heights, we often marvel at their seemingly innate leadership abilities. The popular narrative portrays these executives as possessing extraordinary qualities from the start—charismatic visionaries who immediately grasp the intricacies of their role and drive performance through sheer force of will. But this idealized portrayal obscures a crucial truth: the journey of a CEO evolves through distinct stages, each presenting unique challenges that require different skills and approaches. The CEO Life Cycle framework, developed through rigorous analysis of performance data from over 2,000 CEOs and extensive interviews with executives across industries, reveals that success in the corner office isn't about possessing a static set of traits. Rather, it depends on a leader's ability to recognize the shifting demands of each stage and adapt accordingly. This evolutionary perspective challenges conventional wisdom about leadership tenure, revealing why certain CEOs falter after initial success while others sustain performance over many years. By understanding the predictable patterns of leadership evolution—from the intense learning curve of the Launch stage through the momentum-building of Reinvention and beyond—both current and aspiring CEOs can navigate their journey with greater awareness and intention, ultimately bending the performance curve in their favor.

Chapter 1: Launch: First Impressions and Early Challenges

The Launch stage encompasses a CEO's first twelve months—a critical period characterized by intense scrutiny and steep learning. During this phase, executives experience what might be called "the hourglass effect," where every aspect of the company's internal and external affairs must flow through them. The pressure is immense as all eyes focus on the new leader, from board members to front-line employees, investors to customers, creating a fishbowl-like environment where every decision and statement is analyzed. This initial stage often brings a surprising discovery: despite extensive preparation, the CEO role differs fundamentally from any previous position. Even seasoned executives with substantial operational experience find themselves unprepared for certain aspects of the job, particularly the significant time demands of external stakeholders. Many CEOs report shock at discovering that up to 50 percent of their time must be devoted to external matters—board relationships, investor communications, regulatory concerns, and public appearances—rather than directly running the company. This external focus represents a dramatic shift for leaders accustomed to concentrating primarily on internal operations. Another hallmark of the Launch stage is what research identifies as the "honeymoon effect"—a period when markets, boards, and employees demonstrate heightened optimism about new leadership. Data shows that companies on average outperform the S&P 500 by 10 percent during a CEO's first year, driven partly by this enthusiasm and partly by quick wins addressing lingering issues. This tailwind creates opportunity but also risk, as elevated expectations can lead to disappointment if not carefully managed. Successful CEOs balance decisive action with thoughtful listening during this period, avoiding the twin traps of appearing hesitant or overconfident. The loneliness inherent in the CEO position becomes apparent during Launch, as former peers may become more deferential and information flow changes dramatically. Leaders must quickly establish trusted relationships with board members and build their executive teams, making difficult personnel decisions that set the tone for their tenure. The most effective CEOs practice "both/and" thinking during this stage—addressing short-term demands while laying groundwork for longer-term initiatives, demonstrating confidence while admitting areas for learning, and communicating a compelling vision while remaining adaptable to new information. Exemplifying successful navigation of the Launch stage, Carol Tomé took over as UPS CEO in June 2020 amid the pandemic. She balanced immediate operational improvements that doubled analyst expectations with setting longer-term strategic shifts, including moving away from lower-margin deliveries to large online retailers. She also demonstrated skilled both/and thinking by assertively implementing change while openly acknowledging areas where she needed to learn, traveling throughout the company to understand employee experiences firsthand. This approach helped drive a remarkable 104 percent increase in UPS's share price during her first year.

Chapter 2: Calibration: Testing Leadership and Market Expectations

The Calibration stage typically begins in a CEO's second year, marked by what might be called the "sophomore slump"—a period when the initial enthusiasm gives way to more rigorous assessment by boards, markets, and other stakeholders. Our research shows that 73 percent of CEOs who outperformed in their first year experience a decline in the second, surrendering an average of 21 percent of their total shareholder return. This occurs not necessarily because performance has deteriorated, but because perception is recalibrating to reality as the honeymoon period ends. During this phase, CEOs face heightened scrutiny from analysts and investors who begin questioning strategic decisions more intensively. What makes this stage particularly challenging is that many key performance metrics—revenue growth, profitability margins, return on invested capital—may remain stable or even improve, yet share prices often decline. This disconnect between operational results and market perception creates significant tension for leaders who must manage expectations while continuing to execute their strategies. The experience of Jim Craigie at Church & Dwight exemplifies this phenomenon: despite achieving 24 percent profit growth and successful acquisitions in his second year, the company's share price stalled while competitors' rose. Communication becomes paramount in the Calibration stage. Leaders must demonstrate transparency about challenges while maintaining confidence in their strategic direction. Hubert Joly, who led Best Buy's remarkable turnaround, weathered a 33 percent one-day drop in share price during his sophomore year after missing holiday sales targets. His response—acknowledging difficulties while providing detailed explanations of progress—eventually restored market confidence. This ability to communicate effectively during turbulent periods distinguishes high-performing CEOs, who approach tough questions as opportunities to demonstrate their grasp of issues rather than as attacks to defend against. The Calibration stage frequently brings unexpected crises that test a CEO's resilience and decision-making under pressure. As Enbridge CEO Greg Ebel observed, "Somewhere in the first twelve to eighteen months you are going to run into a buzzsaw. You won't know what it is." These challenges require leaders to deploy informed intuition—blending analytical data with experiential wisdom to make decisions despite incomplete information. George Paz demonstrated this skill at Express Scripts when deciding whether to raise a bid for competitor Caremark, gathering his team to rigorously evaluate the value proposition rather than pursuing the acquisition at any cost. Board relationships take on heightened importance during Calibration, as directors' confidence in the CEO is tested by market reactions and emerging challenges. Maintaining open communication with the board about both successes and setbacks helps build the support necessary to weather difficult periods. Steve Cooper, who led TrueBlue through the financial crisis during his second year as CEO, credited regular one-on-one outreach to board members—visiting each director on their turf twice yearly—as crucial to maintaining their backing during turbulent times. This period ultimately serves as a crucible that, as David Novak of Yum! Brands noted, forces the CEO "to mature and learn from data and experience. The U is where you really prove yourself."

Chapter 3: Reinvention: Transforming for Long-Term Success

The Reinvention stage, typically beginning around year three, marks a pivotal period when CEOs have weathered initial challenges and gained deeper credibility both inside and outside the organization. With early wins behind them and greater confidence from stakeholders, leaders can leverage this momentum to implement more ambitious initiatives. This is when the best CEOs shift from making incremental improvements to driving transformational change—whether through strategic acquisitions, new product development, or fundamental business model innovations. Our analysis reveals a striking performance divergence beginning in this period. High-performing CEOs show steadily increasing revenue growth (9-11 percent annually) while lower performers see growth stagnate at 4-6 percent. Top performers invest more aggressively in capital expenditures, increasing CapEx from 12 percent to 17 percent of sales by year five, while underperformers actually reduce investment from 9 percent to 6 percent. Similar patterns emerge with R&D spending and strategic M&A activity, with high performers making bolder moves in year four after establishing a solid foundation in earlier years. Larry Merlo exemplified this pattern at CVS Health, using his first two years to fix operational issues like the troubled Caremark integration before pivoting to transformational vision. By year three, with operational fundamentals strengthened and credibility established, he began implementing a bold strategy to transform CVS from a retail pharmacy into a comprehensive healthcare provider. His decision to eliminate tobacco sales—sacrificing $2 billion in annual revenue—represented the kind of values-based strategic choice that becomes possible in the Reinvention stage. This move, along with the subsequent $69 billion acquisition of health insurer Aetna, fundamentally redefined the company's business model. The Reinvention stage often requires personal transformation alongside organizational change. CEOs must evolve their leadership approach as challenges shift from operational firefighting to long-term strategic positioning. Hubert Joly described his evolution at Best Buy from directive decision-maker in the early turnaround to "gardener" focused on creating an environment where others could flourish. Shantanu Narayen at Adobe similarly evolved from "road builder" (directly implementing solutions) to "flag planter" (articulating vision and empowering teams). This leadership maturation is necessary as companies move from fixing problems to pursuing opportunities. What distinguishes successful leaders in this phase is their promotion-focused mindset—an orientation toward growth, innovation, and seizing opportunities rather than merely preventing losses. This contrasts with prevention-focused leaders who prioritize stability and risk minimization. Roger Ferguson demonstrated this forward-looking approach at TIAA, persisting through two years of board resistance to implement a diversification strategy that prepared the company for an extended period of low interest rates. Despite facing skepticism and setbacks, his persistence in advocating for transformational change ultimately positioned TIAA for sustained growth. As Ferguson noted, this stage requires tremendous energy from the CEO: "The energy around the need to change had to come from me."

Chapter 4: Complacency Trap: Preventing Stagnation and Decline

The Complacency Trap, typically occurring between years six and ten, represents a dangerous period when even successful CEOs risk losing momentum. Our research shows that two-thirds of CEOs experience lower performance during these years compared to their first five, with many giving up previously hard-won gains. Like sailors entering the Doldrums—a region near the equator notorious for calm winds that can stall ships—CEOs may find themselves in deceptively tranquil waters where progress slows without obvious crisis to spur action. The primary danger in this stage is the status quo bias—a psychological tendency to prefer existing conditions even when change would produce better outcomes. After years of successful leadership, CEOs may develop excessive confidence in their strategies and operational approaches, becoming less receptive to signals suggesting the need for adjustment. This complacency is often reinforced by boards that become increasingly deferential to long-serving CEOs. Our data reveals that boards' willingness to remove underperforming CEOs drops dramatically after year six, with forced departures declining from 40 percent after three consecutive years of underperformance in year five to just 27 percent in year seven and continuing to fall thereafter. External success indicators can mask underlying problems during this period. A. G. Lafley's tenure at Procter & Gamble illustrates this danger. During his first five years, Lafley successfully repositioned P&G by focusing on core brands and making strategic acquisitions like Gillette. However, while these moves drove impressive growth, the company gradually lost its innovation edge, and Lafley did not sufficiently divest underperforming brands. When market conditions changed during the Great Recession, these weaknesses became more apparent. After stepping down in 2010, Lafley was brought back in 2013 specifically to address the issues that had developed during his later years, selling off a hundred brands in a "shrink to grow" strategy. Combating the Complacency Trap requires CEOs to institutionalize mechanisms for challenging their own thinking and continuously scanning for emerging threats and opportunities. Nigel Travis, who led Dunkin' Brands for nine years, implemented several such practices, including an annual exercise called "define your demise" where executives envisioned potential disruptions to their business model. He also regularly solicited critical feedback from investors and analysts, asking them directly: "Tell me what we're doing wrong. What would you do differently?" Piyush Gupta of DBS Bank similarly pushed against complacency by leading a digital transformation that required him to develop entirely new expertise in financial technology. The most effective CEOs maintain confident humility—combining strong conviction in their strategic direction with openness to challenging their own assumptions. Dave Cote scheduled regular "X days" with no meetings to contemplate new ideas for Honeywell and designated twelve "growth days" yearly for his team to interrogate opportunities and assess operations. Reed Hastings at Netflix instituted formal debates where employees prepared arguments both for and against potential changes, leading to important strategic shifts like investing in children's content. These practices demonstrate that avoiding the Complacency Trap isn't about frenetic activity but rather about maintaining vigilance and intellectual honesty when success might otherwise breed inertia.

Chapter 5: Legacy: Creating Lasting Impact and Succession

The Legacy stage, typically beginning around year ten, presents a distinctive dual challenge: CEOs must continue driving performance while simultaneously preparing for an inevitable transition of leadership. Our data contradicts the conventional wisdom that CEO effectiveness necessarily diminishes after a decade in the role. In fact, among the CEOs in our study who served more than ten years, 58 percent outperformed the S&P 500 during this period—a higher percentage than in any other stage. Their performance also showed greater stability, with fewer dramatic swings in results. This final stage can be immensely rewarding as CEOs see their long-term vision materialize and earlier initiatives yield sustained results. Dave Cote's fifteen-year tenure at Honeywell exemplifies this pattern: while he achieved impressive performance throughout his first decade, transforming a struggling conglomerate into a high-performing industrial leader, his final five years produced even stronger returns as earlier operational improvements fully matured. Similarly, Michael Schumacher's most dominant Formula One racing victories came in years ten through fifteen of his career, demonstrating that mastery can continue developing well beyond conventional timelines. The psychological challenge of this stage lies in maintaining full engagement while acknowledging that departure is approaching. For many long-serving CEOs, their identity becomes deeply intertwined with their role, making the prospect of stepping down emotionally difficult. Keith Barr, former CEO of InterContinental Hotels Group, described this challenge: "Leaving was really hard. Anyone who says that the CEO job does not become part of your personality is not giving you the full picture." The most successful CEOs adopt what psychologist Erik Erikson termed a "generativity mindset"—focusing on creating value for future generations rather than preserving personal status or control. Succession planning becomes a crucial component of legacy-building in this stage. Randy Hogan demonstrated this forward-looking approach at Pentair when he orchestrated the company's split into two separate entities and groomed leaders to take over each business. Though he had initially aimed to double the company's size, he recognized that separate companies would create more value and stepped aside at the appropriate moment. Lew Hay showed similar generativity when stepping down as NextEra Energy CEO at just fifty-six—earlier than he might have preferred—to ensure his chosen successor wouldn't be recruited elsewhere. Hay reflected that his "ultimate success is not in the last twenty-five years but in the next five years," emphasizing that a CEO's true legacy extends beyond their tenure. The most effective transitions occur when CEOs have integrated succession planning into leadership development throughout their tenure, rather than treating it as a discrete event. Ajay Banga at Mastercard exemplified this approach, working with his board from his first year as CEO to identify and develop forty-two potential leaders from throughout the organization. This continuous process allowed his successor, Michael Miebach, to move through a series of progressively challenging roles over a decade, preparing him thoroughly for the CEO position. Such thoughtful preparation not only ensures organizational continuity but also allows departing CEOs to move into new challenges with confidence, knowing they've left behind a sustainable legacy of leadership.

Chapter 6: Private Equity CEOs: A Different Leadership Sprint

The private equity CEO experience represents a distinctly different journey from that of public company leaders, characterized by compressed timelines and more intensively involved ownership. Unlike the five-stage life cycle of public company CEOs, PE-backed chief executives navigate three primary phases: Proof of Performance, Pivoting to Growth, and Executing the Exit. These phases align with the PE firm's investment thesis—the detailed roadmap for value creation developed during due diligence—with an anticipated exit timeline typically ranging from three to seven years. The governance model for PE portfolio companies creates a fundamentally different leadership dynamic. While public company CEOs experience the "hourglass effect" where all company affairs flow through them, PE CEOs operate in a leadership triad where the PE firm deal lead and board directors have full access to information and remain closely involved in operations. This higher engagement is reflected in meeting frequency; while public boards might convene quarterly, PE CEOs report biweekly calls with their PE sponsors and monthly financial reviews. As Brandt McKee, who has experience on both sides, observed: "In a private setting you actually have greater pressure because you are updating on a more regular basis." During the initial Proof of Performance stage, PE CEOs face extraordinary pressure to deliver rapid results against specific benchmarks outlined in the investment thesis. Research indicates that one-third of PE CEOs are replaced within their first 100 days, and 58 percent within two years—a much higher turnover rate than for public companies. This intensity reflects PE firms' imperative to deliver returns significantly above public markets to justify their fees to limited partners. However, this pressure is paired with substantial resources and expertise; PE firms increasingly provide specialized operational support teams with deep industry knowledge to help implement improvements. The Hilton Hotels buyout illustrates both the challenges and opportunities of PE leadership. When Blackstone acquired Hilton for $26 billion in 2007, they recruited Chris Nassetta as CEO. Nassetta appreciated Blackstone's "real sense of urgency, and the gritty, scrappy, entrepreneurial aspects" of PE ownership. This partnership was tested almost immediately when the 2008 financial crisis devastated the hospitality industry, forcing Blackstone to write down Hilton's value by 49 percent. However, the combination of Nassetta's leadership and Blackstone's deal-making expertise allowed them to restructure debt and implement a successful turnaround. When Hilton went public in 2013, the deal generated a $14 billion windfall for Blackstone—described as "the most profitable private equity deal in history." For executives considering PE CEO roles, the trade-offs are significant. They gain freedom from quarterly earnings pressure and access to specialized expertise but surrender considerable autonomy in decision-making. As one portfolio company CEO noted: "The PE partner doesn't run the company, and they don't want to. But they do have strong opinions about the moves to make." The ideal PE CEO embraces collaborative partnership while maintaining operational leadership. Prakash Melwani of Blackstone characterized this relationship succinctly: "We're focused on long-term value creation in a hurry."

Chapter 7: Succession Planning: Building Leadership Continuity

Despite being widely considered a board's most important responsibility, CEO succession planning remains a persistently neglected process at many companies. A 2019 survey revealed that 76 percent of CEOs reported no ready successor within their organization, while a Stanford study found that 32 percent of CEO transitions between 2017 and 2021 involved interim appointments or delays—clear signs of inadequate preparation. This lack of planning comes at enormous cost, with the average price of a poor succession decision estimated at $1.8 billion in shareholder value per company. The succession process is fraught with psychological and organizational challenges that impede effective planning. Sitting CEOs often struggle with the prospect of departure, finding it difficult to contemplate life beyond a role that has become central to their identity. As Keith Barr, former InterContinental Hotels Group CEO, acknowledged: "Being CEO does become part of your personality." This reluctance can lead to procrastination or even active resistance to succession discussions. Meanwhile, boards frequently hesitate to raise the topic for fear of appearing to push out the current CEO, and many directors lack experience with succession planning, having participated in few CEO transitions during their careers. The traditional approach to succession planning—initiating the process a year or two before an anticipated transition—proves inadequate for identifying and developing the best candidates. This compressed timeline often leads boards to make hasty judgments based on limited interaction with prospects, falling prey to simplifying narratives and unconscious biases. Without sufficient time to thoroughly evaluate candidates, boards may eliminate promising prospects prematurely or fail to consider leaders from deeper within the organization who could bring valuable fresh perspectives. The most effective succession approach treats the process as an integral part of ongoing leadership development rather than a discrete event. Ajay Banga and the Mastercard board exemplified this model, beginning succession planning during Banga's first year as CEO and continuing throughout his decade-long tenure. They initially identified forty-two potential leaders from various levels of the organization, then provided them with training, coaching, board exposure, and stretch assignments. This wide-net approach not only prepared a strong slate of CEO candidates but also developed leadership talent throughout the company and improved retention of high-potential executives. A continuous succession process yields multiple benefits beyond ensuring a smooth transition. It eliminates the awkwardness of raising succession timing, as regular talent discussions become normalized. It provides the CEO with a full bench of talent that can be deployed to address emerging priorities. Most importantly, it allows candidates to develop crucial capabilities over many years through varied experiences rather than trying to rapidly acquire skills as a transition approaches. When unexpected departures occur, as they inevitably will, companies with robust ongoing succession processes already have viable candidates prepared to step in rather than scrambling to identify interim leaders. The ultimate test of a CEO's leadership may be how well they prepare their organization to thrive without them. As Dave Cote reflected on his Honeywell succession, he was determined not to leave his successor "anything like the mess he'd inherited." This generative mindset—focusing on enabling future success rather than prolonging personal tenure—distinguishes truly remarkable leaders. As former Sazerac CEO Mark Brown powerfully articulated, "My ultimate success is not in the last twenty-five years but in the next five years. What you really want to happen is that people will be saying, 'Wow, the company is doing much better now than under you.'"

Summary

The CEO Life Cycle framework reveals a profound truth: leadership success depends not on fixed traits but on continual evolution through predictable yet challenging stages. By understanding the unique demands of each phase—from the intense scrutiny of Launch to the treacherous calm of the Complacency Trap—leaders can anticipate common pitfalls and intentionally develop the capabilities needed for each transition. This adaptive approach helps explain why some CEOs flourish where others falter, even with similar starting qualifications. The insights from this research extend beyond the corner office, offering valuable lessons for leaders at all levels. The both/and thinking required during Launch, the informed intuition essential in Calibration, the personal reinvention necessary during transformational periods, and the vigilance against complacency—these are universal leadership challenges. By recognizing these patterns and embracing the imperative of continuous growth, leaders can not only navigate their current responsibilities more effectively but also better prepare for future advancement. In a business environment characterized by accelerating change and mounting complexity, this evolutionary perspective on leadership provides a crucial framework for sustainable success.

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Claudius A Hildebrand

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