The CEO Experience Trap
New research suggests that hiring a CEO with previous experience in the role is not always a wise choice. Authors Monika Hamori of IE Business School in Madrid and Burak Koyuncu of Rouen Business School in Mont-Saint-Aignan, France, collected data on 501 CEOs of S&P 500 corporations. About 20% had at least one prior CEO job. Their findings? "Our research found that these prior CEOs performed worse than their peers without such experience." In fact, they found that being a prior CEO was negatively and significantly associated with three-year-average post-succession return on assets. Why does this happen? "We suspect that the job-specific experience these CEOs gained in their prior CEO job or jobs interferes with their performance in the new position," Hamori and Koyuncu write. "Their job-specific experience may slow down learning because some knowledge and techniques need to be "unlearned." Hamori and Koyuncu suggest specific ways that CEOs can avoid the "experience trap," including taking an interim position or an appointment to the company's board. They cite the experience of Dan Akerson, an experienced CEO who was a General Motors board member before being appointed GM's CEO, as an example of how to make such a transition work.