Bucking the CEO turnover trend

In the ever-evolving corporate landscape, the stability and efficacy of leadership stand as pivotal factors for a company's success. Korn Ferry's recent exploration into CEO succession provides invaluable insights that shed light on the broader implications of CEO turnover on organizational performance and growth.

Our analysis of 87,000 chief executives uncovered an alarming pattern: An estimated 11% of newly appointed CEOs part ways within their inaugural year. This percentage swells to a substantial 34% by the close of their third year. Such frequent changes in leadership can stop an organization’s momentum, creating ripples that affect every level of the company.

Businesses can buck this trend, however, by utilizing assessments to evaluate potential leaders. In fact, findings from our research reveal the significant impact of Korn Ferry leadership assessments on CEO tenure. Compared to the broader CEO population, CEOs who were recommended by Korn Ferry after going through a rigorous proprietary assessment had a noticeably lower attrition rate, with less than 18% leaving their company by the third year. In other words, the use of leadership assessments resulted in a 47% decrease in CEO turnover.

"The assurance of strong leadership is a governance imperative for today’s boards,” says Jane Stevenson, Vice Chair of Korn Ferry’s Board & CEO Services Practice. “Our research proves that a thorough, objective selection process can make all the difference in a company’s success. Selecting a CEO that lasts, creates sustainable value for all stakeholders.”

It is worth noting that CEOs who were assessed by Korn Ferry not recommended showed a 31%  three-year attrition rate, closer to the average 34% for CEOs in general.

From our research, we also discovered certain salient qualities that define successful leaders. In particular, two characteristics of enduring leadership emerged:

1. Inclusive decision-making. Leaders who consistently thrive are those who prioritize inclusivity, valuing the perspectives of others, and encouraging collaboration.
2. Purpose-driven strategy. Effective CEOs extend their vision beyond personal ambition. They forge alliances across diverse stakeholders, focusing on overarching, organization-wide goals.

CEO succession transcends a mere handover of the leadership reins. It's fundamentally tied to strategic pivots—be it reshaping organizational culture, refining operations, or restructuring leadership alignments. "If a CEO isn't engaging in the right way with stakeholders, customers, their team and broader workforce, it will really impact their ability to be effective,  and therefore their tenure, over the short term,” says Stu Crandell, Senior Client Partner in Korn Ferry’s Board & CEO Services Practice.

The message is compelling: Fresh CEO appointments signal a pivot toward a future path. And, when executed carefully, CEO transitions can usher in revitalized strategies, fostering both  near-term performance and long-term transformation.

“Adapting for the future requires transformational leadership at the top,” says Evelyn Orr, Head of Korn Ferry’s CEO and Executive Assessment Practice in North America. “Our research has shown that CEO tenure is related to successful transformation outcomes. Korn Ferry’s CEO assessments are designed to help boards select candidates who are more likely to stay in the role longer, to see their strategic agenda through.”

Korn Ferry’s seminal research on CEO attrition offers a panoramic view of the dynamics of leadership transitions. For organizations, stakeholders, and leadership hopefuls, these insights illuminate the paths to enduring success, emphasizing the importance of thorough selection processes and the qualities that define transformative leadership.

For more information, learn more about Korn Ferry’s Board & CEO Services.