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Why Rookie CEOs Outperform

01 15 2021

When companies are in need of a CEO and are vetting candidates, one assumes that the candidate with more experience is the obvious choice. Usually, having more experience is a good thing. But often, experience comes at a price, and it’s not just in a CEOs salary or bonus structure. According to Spencer Stuart, an executive leadership and recruiting firm, more seasoned CEOs tend to focus on what they did in previous roles and essentially use the same ‘playbook’ they used at their previous employers.

Spencer Stuart’s 2019 study, The CEO Life Cycle, concluded that experience doesn’t necessarily equate to increased profits:

“In a study of 855 S&P 500 CEOs appointed over a 20-year period, the researchers found that those with experience in the role consistently underperformed their novice counterparts over the medium to long term. First-timers led their companies to higher market-adjusted total shareholder returns, with less volatility in the stock price. Among CEOs who headed two successive companies, 70% performed better the first time—and for more than 60%, their second companies failed to keep pace with the overall stock market.” – The CEO Lifecycle, Spencer Stewart, Harvard Business Review, November- December 2019.

Like their experienced counterparts, rookie CEOs must always focus on the company’s bottom line and budget efficiently in all areas to show profitability. However, they have more to prove than a seasoned CEO and know it is easier for their corporate board to cut ties with them if they fail to perform:

“Corporate boards under more pressure than ever before. Activist shareholders have become adept at exerting outsize influence and keeping directors on their toes. Index funds, which can’t sell shares when they are unhappy with a company’s leadership or governance, increasingly use their influence to hold boards accountable for CEO performance.”- The CEO Lifecycle, Spencer Stewart, Harvard Business Review, November- December 2019.

The study also found that a rookie CEO’s mindset tends to be more adaptable, flexible, and open to ideas and solutions for solving internal problems from outside of their ecosystem. They are also more likely to consult others in a similar professional role as their own and hire a contracted consultant or an out-sourced service provider like a professional employer organization (PEO). 

A PEO provides HR outsourcing services, such as benefits administration, payroll processing, HR consulting, retirement plans, and tax processing. PEOs are a good option for investment management, financial services, portfolio companies, and venture capital companies who need to focus 100% of their time on their core competencies. 

Aspen HR is a PEO that provides industry-specific expertise to investment management and financial services companies and their CEOs. Our key services include:

Payroll and tax processing- payroll data is automatically integrated with Aspen’s cloud software to quickly review timesheets, process payroll, remit tax payments and correspond with federal and state employment agencies.

HR consulting- Aspen HR assists with everything from claims processing assistance, ACA filings, FMLA, HIPAA, job postings, background checks, employee handbooks, HR posters, forms & templates, to performance reviews and terminations.

Benefits administration- procurement, design, and administration of group and voluntary benefits for medical, dental, vision, group life/AD&D, long term and short term disability. Additional benefits, such as flexible spending plans and pre-tax commuter benefits are solutions we recommend to help attract and retain key talent.

Retirement plans- Aspen HR designs and implements retirement plans that enable CEOs to hire and retain the best employees for their company.

Contact us at Aspen HR to find out how we can boost profitability at your company through our services.