The surprising reasons new CEOs fail—and what to do about it

CEOs have a high rate of failure when they step into a new role. Some estimates indicate outright failure of CEOs in the first 18 months of their tenure at 38% to 50%.  Other sources suggest figures as high as 50-70%.  

The subsequent cost to an organisation is eye-wateringly high. The right type of coaching and mentoring helps minimise failure and accelerates success. However, CEOs fail for different reasons, based on their level of maturity and the size and complexity of their organisation.  

Therefore, to ensure success, the coaching intervention needs to be aligned to the specific developmental needs of the CEO. This process of aligning a coach or mentor to the CEO’s unique context requires careful diagnostics by experienced professionals, and an executive coach or mentor who themselves have breathed the thin air of being a CEO and can take a highly adaptive and highly nuanced approach to support the development needs of the CEO. 

Why do new CEOs fail?  

Entry into the CEO role can look different depending on the organisation size, whether they are an internal or external appointment, the sector, the type of company and many other variables.  Research shows that internal CEOs improve long-term performance and engage in less strategic change, while hiring an outside CEO leads to more strategic change that results in lower long-term performance [2]. Many CEOs reach this north star due to their potential and their performance within their functional area of the organisation. 

However, once a new CEO commences in the role, regardless of whether they have been an internal or external hire, oftentimes they face a steep learning curve as they confront issues like:

• Navigating Board relationships and behaviours 

• Building Executive Team cohesion and effectiveness 

• Understanding nuances of the company, territory, country 

• Understanding regulatory and governance requirements 

• Managing broader stakeholder relationships such as internal teams, external stakeholders and shareholders. 

• Macro issues such as global trade regulations, understanding distribution channels etc. 

• Identifying and implementing organisation-wide cost reduction programs. 

• Assessing, adopting or adjusting and embracing the company culture 

Experienced CEOs liken it to a pressure cooker environment, and whilst many believe they can learn on the job, this can lead to a wake of collateral damage without the right support. 

Research from the University of Southern Carolina, indicates that the primary cause of external failures appears be an inability to develop trusting relationships, particularly with members of the Executive Leadership Team (ELT).  Other sources  assert that a whopping 82% of new CEOs fail because they don’t build relationships with their people.   

Another critical relationship is that of the CEO, Board and Chair. Australian Institute of Company Directors, highlights that when the partnership between a board and CEO – and in particular, between chair and CEO – is dysfunctional, it is only a matter of time before it affects the organisation’s overall performance. 

In times of high pressure, even the best leaders can revert to negative behaviours and fail to listen to all stakeholders. Stress can result in significant changes to behaviour patterns, which at the time may not be realised by the leader but can leave a lasting impact on their executive team, and the wider organisation. CEOs need to be able to maintain a sense of calm and order as they lead their organisations through challenges. 

A CEO’s primary responsibility — company decision making—accounts for 45 percent of a company’s performance [1]. The flow on effect of poor decisions made by an underperforming or unprepared CEO, can be eternally damaging to a company’s reputation and amplify poor business performance.  

Executive Coach Mentor, Scott Levy, indicates that feeling isolated is a reoccurring theme often cited by CEOs during Executive Coaching sessions. CEOs are often faced with weighty decisions that have lasting impacts, particularly on their people. Being the person responsible for these decisions can take its toll. 

“You’re under a magnifying glass, you’re being scrutinised from all angles by everybody. And everything you say and everything you do is elevated accordingly.”

– Scott Levy, Executive Coach Mentor  

What type of support is available?  

Executive Coaching and Executive Mentoring both have key roles to play in supporting a CEO as they navigate their role. But often there is confusion around exactly what the difference is between the two.  

Executive Coaching is outcome focused with defined goals both operationally and strategically. Coaches provide insight to develop the vital skills and mindset for overall leadership effectiveness in the current business context.  

Executive Mentoring is less focused around goal achievement and instead provides the C-suite executive with a confidential environment to explore their role impact with a trusted advisor.  By providing new perspective and insight, mentors enable the executive leader to meet and exceed their professional context-specific objectives.  

A third, and more specialised support for CEOs, is the Executive Coach Mentor, which combines aspects of both.   

Executive Coach Mentors offer the unique combination of extensive corporate experience in C-level roles, combined with qualifications in behavioural science, executive coaching and in some cases organisational psychology. They can both advise on critical issues the CEO may be faced with, and provide tools and strategies to support behavioural development. They provide a new perspective and can continually challenge the CEO to question and reflect upon their perspectives and assumptions.  

Two key areas where Executive Coach Mentors can provide the most impact: 

1. Practical knowledge of leading in a CEO role:  Their depth of experience allows them to relate to the challenges faced by CEOs, as they have been there themselves. They understand the nuances of relationship management, the high stakes environment, the impact on loved ones at home in the balancing act of work and life. They are the trusted advisor to the CEO, guiding and supporting and providing a ‘black box’ for confidential conversations. 

“If I had my time again, I would spend more time developing relationships with the Board Members, rather than just running the business”  

– Ian Morrice, Executive Coach Mentor 

2. Understanding and developing self-management: Executive Coach Mentors support leaders to anticipate obstacles and challenges early, become more self-aware of their impacts on others and learn new strategies for coping with pressure and managing stakeholders. 

“The transition that occurs when first moving into a CEO role is highly complex, so having the trusted advisor beside you in your first 100 days, can make a huge difference”

– Susan Ferrier, SMG C-Level Executive Coach Mentor  

 

Finding the right solution 

The positive outcomes that can be gained from a successful executive coaching engagement are immense. According to Forbes “When leadership abilities are honed, the outcomes are multifaceted: improved strategic decision-making, amplified team dynamics and a consequent elevation in overall organisational efficacy.” 

This is further supported by coaching outcomes identified in client impact reports from Stephenson Mansell Group clients, which include: 

• • Increased levels of confidence in managing their role 

• • Increased ability to cope and manage effectively in times of stress 

• • Stronger employee engagement as a result of better leadership 

• • Longevity in CEO role  

• • Agility and capability to lead through challenging circumstances like global market shifts, mergers and acquisitions. 

Finding the right match is critical in setting the coaching pair up for success. The coachee needs to be open to being coached and putting in the work required to reap the rewards.  

To assist CEOs and executive leaders preparing for transition to C-Suite roles, we have developed a model to identify the type of executive coaching and or mentoring CEOs should consider at the various stages of their professional career. 

Authors

Virginia Mansell, is a clinical and organisational Psychologist and Founding Partner Stephenson Mansell Group. She has coached and mentored CEOs and in the financial services industry for more than three decades and is currently on the Board of a US based FinTech company, Coaching.com. Her book, “The Focused Executive” provides sage insight on effective leadership, supporting leaders to transition from operational management to strategic, visionary leaders.  This work has evolved into a comprehensive blended learning solution, integrating digital learning with personalised executive coaching.  Virginia introduced a range of leadership programs to SMG, including ‘Advanced Leader as Coach’, ‘Women’s leadership Program’, and ‘Leadership at the Peak’.

Mehul Joshi is an award winning former BBC broadcast journalist, Senior Partner and Head of the Leadership Practice at SMG. Mehul is a sought-after ‘C-level’ executive coach, leadership consultant and high-performance team facilitator. Bringing thought-leadership to all his client engagements, Mehul is a prolific business writer. His articles and opinion pieces on leadership have appeared in publications such as The Sydney Morning Herald, Australian Financial Review, Company Director, and Yahoo Finance.

Contributors

Susan Ferrier is an accomplished c-suite executive and board director with more than 17 years at the CEO-1 level and over 40 years of international experience working in global roles in multi-jurisdictional contexts.  With significant expertise and experience in coaching and mentoring senior executives, Susan’s career has been exemplified through her support to individuals to help them drive collaborative ethical cultures. Susan was the Group Executive for People & Culture at National Australia Bank (NAB) for four years where she was accountable for culture and risk culture for the enterprise (40,000 people over 11 geographies) and led the Human Resources function. For the previous eight years, Susan held several roles at KPMG including the Global Head of People, the Global Head of Inclusion & Diversity and the National Managing Partner for People for the Australian firm.

Scott Levy is an accomplished global Chief Executive, Non-executive Director and Coach/Mentor with a career defined by a passion for leadership, strategic thinking, and an unwavering commitment to commercial excellence. With a keen entrepreneurial spirit and an intense customer focus, he has and has an exceptional track record in growing successful businesses in the Asia-Pacific region across diverse industries. Scott’s approach to leadership is characterized by a holistic perspective, an emphasis on entrepreneurship, and a focus on customer-centric strategies. He is known for his ability to tackle complex challenges with innovative solutions, taking a macro view of the business landscape. His strategic thinking and lateral problem-solving skills have consistently delivered tangible results.