Why do CEOs get fired? According to a four-year study from LeadershipIQ.com, it's not why you might think. Financial performance of the company is not the reason more than 1,000 board members gave when surveyed.
Instead, the study showed that CEOs get fired for reasons tied to poor leadership skills, such as mismanaging change, tolerating low performers, and more.
From the press release:
"Mismanaging change (31%): Virtually every organization we interviewed indicated they were undergoing, or had recently undergone, a change initiative. However, half of board members said that their change initiative did not go well. Most pointed to a failure on the CEO’s part to properly motivate employees and managers, and more specifically, to adequately sell the need to change course. Another group identified the CEO’s inability to follow-through and solidify the gains as the cause of failure.
Ignoring customers (28%): Even with Sarbanes-Oxley, many board members have close ties with, or are themselves, customers of the organization. And they overwhelmingly said that if a CEO ignores or alienates customers, it not only undermines the business and revenue, but it significantly undermines board support. Board members said their test for whether the CEO was sufficiently engaged in the business was the extent to which they evidenced intimate knowledge of customers, customer needs and developing trends.
Tolerating low performers (27%): Board members shared that when CEOs allowed an obvious low performer to linger (without any improvement or discipline), it destroyed the CEO’s credibility and made it politically difficult for them to hold others accountable. Board members also complained of CEOs becoming too emotionally attached to a low performer(s) whether from loyalty, fear of being seen as too harsh, or unrealistic optimism. Significantly, Board members also suspected that, in numerous cases, CEOs covered for poor performers out of fear that they might divulge embarrassing or indicting information.
Denying reality (23%): Board members overwhelming said they could handle bad news and significant course corrections. What they couldn’t handle was a CEO who was in denial and wouldn’t recognize the bad news. Many board members felt that they were closer to the market and customers than the ousted CEO, and a significant percentage said the CEO was far too insulated from frontline realities. Board members also said they would rather have bad news and a plan to fix it, than they would no news or sugarcoated news.
Too much talk, not enough action (22%): We heard many comments about CEOs talking the talk, but being unable to walk the walk. Numerous board members complained that CEOs could talk endlessly about grand visions and new strategies, but would both neglect a tactical plan for the 'who, what, when and where,' as well as evidence of its implementation. One board member commented that their former CEO 'gives good meetings,' but little else."