In the high-stakes arena of corporate leadership, the process of replacing a chief executive officer (CEO) is often viewed as one of the most critical decisions a company’s board of directors can make. Despite the immense pressure to identify and appoint a candidate capable of propelling an organization forward, new research challenges the conventional belief that boards naturally improve their CEO hiring acumen through repeated experience. A recent study, conducted by scholars from the University of Mississippi, Texas A&M University, the University of Oklahoma, and the University of Georgia, offers compelling evidence that experience alone does not enhance board members’ ability to select successful CEOs. In some cases, prior experience in hiring CEOs may even lead to suboptimal outcomes.
CEO turnover reached unprecedented levels in 2024, with over 2,220 top executives stepping down globally, underscoring the urgency for boards to refine their replacement strategies. The research published in the Strategic Management Journal presents a comprehensive analysis of CEO appointments across S&P 1500 firms from 1999 to 2020. This extensive dataset allowed the researchers to investigate whether directors become more adept at identifying effective leaders as they accumulate experience in CEO hiring. Surprisingly, the results indicate that frequent participation in CEO selection does not correlate with better CEO performance post-hire.
The study’s findings confront the intuitive assumption that practice leads to improvement in complex decision-making domains like executive recruitment. Rich Gentry, chair and professor of management at the University of Mississippi, emphasizes that despite the high stakes involved, boards do not appear to benefit from repeated CEO hiring. “Most people improve with practice, but this doesn’t hold true when it comes to directors selecting new CEOs,” Gentry explained. Instead, the data suggest that hiring outcomes may deteriorate slightly for directors with more prior CEO replacement experience.
One potential explanation for this phenomenon is the cognitive bias known as superstitious learning. Board members may mistakenly infer that prior experience in hiring automatically conveys expertise, leading them to overestimate their judgment or to replicate past hiring patterns without suitable critical evaluation. Such overgeneralization can blind directors to the distinct challenges posed by each CEO succession, which is a rare and highly contextual event. Inn Hee Gee, assistant professor of management at the University of Oklahoma, points out the inherent complexity of each hiring decision. “If directors recognize the limitations of their past experiences and approach each succession with a fresh perspective,” she said, “they may reduce errors born of overgeneralization.”
Selecting a CEO entails navigating a dual mandate: catering to short-term market expectations while simultaneously steering the company toward sustainable long-term growth. This delicate balance was illustrated through case studies such as the transformation attempts by Kodak and Microsoft. Kodak’s leadership invested heavily in digital photography well before the economic benefits were realized, a strategy that drew severe criticism from markets focused on immediate financial returns. The eventual bankruptcy of Kodak highlights the difficulties CEOs face when strategic innovation conflicts with short-term shareholder pressures. Conversely, Microsoft’s board achieved remarkable success by appointing Satya Nadella in 2014, whose leadership advanced cloud computing adoption and drove substantial growth.
The researchers employed rigorous methodologies to assess CEO performance relative to industry benchmarks and the firm’s condition at the time of hiring. Their analysis showed that prior board experience in CEO selection had little predictive power in determining CEO success. These findings suggest that the CEO hiring process remains inherently uncertain and that reliance on anecdotal or experiential heuristics is insufficient. Steven Boivie, Carroll and Dorothy Conn Chair in New Ventures Leadership at Texas A&M University, stresses that this decision-making complexity requires boards to resist the temptation to lean heavily on past experiences without deeper contextual understanding.
Given these insights, the study advocates for a more systematic and evidence-based approach to CEO succession planning. This includes implementing structured evaluation processes that incorporate diverse perspectives, rigorous performance metrics, and contextual analysis tailored to the unique challenges of each firm. Such frameworks could guard against the cognitive pitfalls of overconfidence and reduce the likelihood of repeating past mistakes. Gentry reinforces this point by noting that “boards likely need more systematic support – beyond accumulated experience – when hiring new CEOs.”
In effect, this research challenges corporate governance conventions and calls for innovation in how boards are trained and supported. It underscores that CEO hiring is a complex social and strategic phenomenon, one that defies simple mastery by repetition. Boards must cultivate humility and adaptability, recognizing the nuances of each hiring episode rather than relying on formulaic approaches. The implications extend beyond CEO selection, raising broader questions about how organizations learn from complex decisions and how directors can develop genuine expertise over time.
The study also highlights the scarcity of CEO hiring opportunities for individual directors, most of whom face this decision only once or twice during their tenure. This infrequency limits the opportunity to build reliable, experience-based judgment, further diminishing the usefulness of relying on accumulated hiring history. As the researchers suggest, boards might benefit more from fostering collective intelligence and leveraging external expert assistance rather than depending on the isolated experiences of their members.
Ultimately, the complexity and rarity of CEO succession require boards to embrace dynamic, evidence-driven hiring strategies that transcend individual experience. By acknowledging the pitfalls of superstitious learning and focusing on robust evaluation, boards can better navigate the high-pressure process of CEO selection. This paradigm shift has the potential to improve organizational outcomes significantly and strengthen corporate governance practices in an era marked by intense executive turnover.
Subject of Research: The impact of board experience with CEO replacement on CEO performance.
Article Title: Do boards learn to hire? The effect of board experience with CEO replacement on CEO performance.
Web References:
- Strategic Management Journal Article DOI
- Russell Reynolds Global CEO Turnover Index 2024
- Chief Executives Council on CEO departures
- Forbes article on Kodak’s failure
- Quartr article on Satya Nadella’s leadership
Image Credits: Graphic by Stefanie Goodwiller / University Marketing and Communications
Keywords: Business, Corporations, Professional Development
