As Detroit Mayor-elect Mike Duggan prepares to take office on Jan. 1, 2014, a new study suggests he will be successful. The report shows that CEOs who switch directly from one top job to another will underperform, and the new company or organization will suffer when compared to executives that move into the position with no previous job-specific experience.
Duggan was previously CEO of the Detroit Medical Center, and he led a successful turnaround of the organization before stepping down last year to launch his campaign.
“Our research suggests that the job-specific experience these CEOs gained in their prior CEO job interferes with their performance in their new job,” says Burak Koyuncu of NEOMA Business School in Reims, France and lead researcher of the study. “Their job-specific experience may slow down learning because some knowledge and techniques need to be ‘unlearned’ before learning in the new context can take place.”
The report considered the career histories of the CEOs of S&P 500 corporations since 2005, and tracked their performance for three years. Researchers found that when a CEO transitioned from one business to another, assets at the new company were 48 percent lower over a three-year period. In contrast, CEOs who spent time working in a different position showed no significant difference in performance than CEOs without prior experience.
“Prior CEOs may be too embedded in the norms, culture, and routines of one organization and thus may underperform in another because they have developed fixed assumptions about how tasks should be done,” Koyuncu says.
Koyuncu recommends that companies hiring a new CEO with prior experience should place the executive in an interim position for at least a year before they take on the full CEO role.
“In general, companies that hire CEOs with prior CEO experience need to provide ample support to their transition and integration — the greater the opportunity for acculturation, the greater the chance the company can avoid falling into the CEO experience trap,” Koyuncu says.
Monika Hamori of IE Business School in Madrid, Spain also worked on the paper, “Experience matters? The Impact of Prior CEO Experience on Firm Performance,” which will be published in the upcoming Human Resource Management journal.