Football can teach a lot of lessons about life and business. As I write this, Tottenham Hotspur has just sacked Mauricio Pochettino as manager and replaced him with Jose Mourinho. Only six months ago, Pochettino had led Spurs to its first ever Champions League final. The club had finished second in the Premiership in 2016/17 and with a brand new, world class stadium, Pochettino was building a team which had started to be major contenders for domestic and European titles. However, with a poor start this season, such goodwill wasn’t good enough to keep him in his job. After five and a half years, Pochettino was out.

Pochettino was a positive veteran in Premier League manager terms. The era of Sir Alex Ferguson or Arsene Wenger, who led their clubs for decades, seems to have gone forever. The average tenure of a Premier League is little short of two years. A run of disappointing results will inevitably be the death knell of a manager.

Such frenetic and short-term changes at the top do not result in long-term and sustained success – or even any type of success – on the pitch. As with football, so with large companies and CEOs.  The average tenure of a CEO at an S&P 500 company is 7.2 years. The similar statistic for FTSE 100 companies is even shorter: although it has risen slightly in the past twelve months, the average time a CEO stays at the helm of a FTSE 100 company is only five and a half years.

However, in a recent article from the Harvard Business Review regarding the best performing CEOs in the world, one of the key characteristics of a successful CEO is 'remarkable longevity'. Indeed, in order to set its criteria and rankings, the article’s methodology specifically excluded CEOs with less than two years’ tenure, which implicitly indicates how well performing chief executives need to have a sufficient period of time in the job to be assessed appropriately.  According to these rankings, the world’s top performing CEO is Jensen Huang, of NVIDIA, the IT firm, who has been in place since 1993. Most CEOs in the top 10 became chief executive in the very early years of the 21st century; one, Bernard Arnault, is this year celebrating thirty years at the top of LVMH.

The issue of when to back or sack a company’s CEO is one of the most difficult  judgment calls a board will have to exercise. Accelerating short-termism and a growing rise in activist investors, determined to ensure that value is unlocked as soon as possible, put enormous pressure on boards to consider parting company with a chief executive after one or two disappointing quarter results. When is it right for a company board to resist pressure, confident that its appointment is the right one and that the strategy decided is the most appropriate, despite the turbulence of short term results? Conversely, when should a board concede that it was wrong in its selection and the CEO is not compatible with its ambitions?

One of the key characteristics of successful and long-standing CEOs is their ability to pivot and respond to new challenges. It is relatively easy for a chief executive to, in effect, get lucky in the short term, but get found out when the next challenge emerges. Truly great CEOs avoid the temptation of complacency and sticking with the same approach that made them initially successful and have second and third acts which build on, rather than destroy, the value they initially created.

Perhaps most crucially, long-lasting chief executives have the time to build a culture that is positive and conducive to success. This means that their success will outlive their tenure but be a truly great legacy, reflecting the real magnitude of their leadership.

As ever, football shows the way. The most successful manager of the modern age, Sir Alex Ferguson, didn’t pass on a resilient club, meaning that his successor, David Moyes, struggled to deal with the inherited challenges. In contrast, when Bill Shankly retired from Liverpool in 1974, his successor, Bob Paisley was promoted from within, fully aware of the club’s culture and strategy set under Shankly. Paisley took Liverpool to even greater success, winning six league titles and three European cups. The chances are that Jose Mourinho, like most new CEOs, will not be in post in five years time. But to lay the foundations for long-term, sustainable and generation-spanning success, perhaps they should be.

Author

Iain Wright FCA, Director, Business and Industrial Strategy
ICAEW
Iain.wright@icaew.com