Tenure versus talent

Kiwi chief executives hang around longer than their American counterparts. A New Zealand-based study conducted by executive recruitment firm SEQEL Partners puts the average New Zealand CEO’s tenure at 6.4 years. The CEOs of American Fortune 500 companies, however, last in the job just 4.6 years, according to a 2013 survey by Harvard Business Review.

But there is apparently no magical number for CEO tenure, despite international reports which recommend five-year terms.
The SEQEL study examined leadership based on turnover and total shareholder return in the years from 2000 to 2013 among New Zealand’s top 150 NZX companies by revenue and market capitalisation.

The study’s authors, Don Jaine and Mark Ashcroft, say long-term tenure may hurt a company when enthusiasm is replaced by established routines. But New Zealand companies that measurably outperformed the market have long-serving chief executives including Mainfreight’s Don Braid (pictured), Ryman Healthcare’s Simon Challies and Mark Waller at EBOS. And these three top-performing CEOs were each internally promoted.

“On the flipside, our poorest performing companies comprise a mix of both long-serving and fast-turnover CEOs,” says Jaine. “There doesn’t seem to be any strong correlation between CEO tenure and organisational success.”
Multinationals such as banks, petroleum and other infrastructure companies turn over their New Zealand CEOs faster and promote them internally from offshore. These offshore-sourced appointments skew the average tenure downwards.

The SEQEL study has implications for business and board practices according to Jaine. “We think leadership attributes are more important than tenure. Market-leading CEOs have common capabilities including inspired leadership, passion, persuasion, service, innovation, persistence and outstanding commercial acuity. Boards should seek to appoint leaders with these qualities and consider succession after five to seven years in order to strike the balance between dependability and vitality.”

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