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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.
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