We found that CEO tenure affects performance through its impact on two groups of stakeholders—employees and customers—and has different effects on each. The longer a CEO serves, the more the firm-employee dynamic improves. But an extended term strengthens customer ties only for a time, after which the relationship weakens and the company’s performance diminishes, no matter how united and committed the workforce is.

But as CEOs accumulate knowledge and become entrenched, they rely more on their internal networks for information, growing less attuned to market conditions. And, because they have more invested in the firm, they favor avoiding losses over pursuing gains. Their attachment to the status quo makes them less responsive to vacillating consumer preferences.

These findings have several implications for organizations. Boards should be watchful for changes in the firm-customer relationship. They should be aware that long-tenured CEOs may be skilled at employee relations but less adept at responding to the marketplace; these leaders may be great motivators but weak strategists, unifying workers around a failing course of action, for example. Finally, boards should structure incentive plans to draw heavily on consumer and market metrics in the late stages of their top executives’ terms. This will motivate CEOs to maintain strong customer relationships and to continue gathering vital market information firsthand  (http://hbr.org/2013/03/long-ceo-tenure-can-hurt-performance/ar/1)

A weak board will often after a period of seemingly successful management, effectively abdicate power to a CEO whose drive, charisma and ruthlessness have contributed to the earlier success. Lulled into a false sense of security by rising share prices and earnings, the board becomes reluctant to challenge the CEO’s judgement and falls into the habit of rubber-stamping his decisions. It stops scrutinizing detailed performance indicators, may allow executive compensation to spin out of control, and be content to accept management figures and explanation without serious question. Bruggisser, the CEO of Swissair, is a case in point. Here, a board of distinguished businessmen failed to challenge the flawed strategies that led to Swissair’s collapse. At the same time, as his power base expands, the dominant CEO begins to behave as though the company is his own creation, believing his own PR and no longer distinguishing between personal ambitions and those of the company. Senior management becomes packed with like-minded executives who owe their position to the CEO, and who are unlikely to challenge him. This compounds the lack of scrutiny and debate. The problem is exacerbated if the CEO role is combined with that of Chairman, removing another check and balance (http://www.imd.org/research/challenges/TC053-08.cfm)

…most evidence shows that CEOs stay too long, and can end up destroying value in a company. (http://www.ceoforum.com.au/article-detail.cfm?cid=6174&t=/Claudio-Fern%E1ndezAr%E1oz-Egon-Zehnder-International/The-timeserving-trap)

….after about 5 years, many execs start doing what they like to do and not what the organization needs them to do (http://www.transitionceo.com/news.php?id=41)

CEOs who also chair their boards naturally invite their cronies to serve on the board. Eventually you have a CEO surrounded with puppets who are only interested in preserving their board pay and privileges. They are not likely to welcome disruption or innovation, because that might mean more work.( http://www.lindabernardi.com/2011/10/03/when-should-a-ceo-leave)

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