For Most CEOs, the Algorithm for Real Success in a Rapidly Changing World Remains Elusive. But a BCG Research Project Has Now Identified Five Empirical Success Factors Critical to CEO Leadership Outcomes
BOSTON—CEOs in the 21st century operate in an unprecedentedly dynamic context and find it more challenging than ever to succeed in their role. Some help might be at hand at last, thanks to research from The Boston Consulting Group (BCG). A new report from BCG identifies five components that consistently characterize successful CEO tenures. By cultivating these success factors and combining them flexibly into a strategic “algorithm,” CEOs can now shift the odds in their favor. The report, titled An Algorithm for a Successful 21st-Century CEO, is being released today.
The BCG study set out to evaluate CEO success along multiple dimensions. It assessed the tenures of more than 450 CEOs in the US and Canada from the “starting classes” of 2009 through 2011. It involved the use of AI and included in-depth interviews with 14 prominent CEOs and board directors. Of the CEOs who were fully assessed, just 18% eventually ranked in the top tier, as “more successful.” The research team then proceeded to isolate and analyze the distinctive characteristics of that select group and eventually identified a set of five success factors.
The Components of Success
“Success” is a matter of definition, of course. Gerry Hansell, a BCG senior partner and a coauthor of the report, explains, “In our study, the criteria for success were grouped under three broad headings: Great Company, Great Stock, and Great Legacy. Great Company relates to improved competitive position and business economics. And Great Stock relates to delivering strong total shareholder return. Great Legacy is more subjective and relates to the company’s future prospects. To meet all of these criteria is no easy task, but CEOs who draw on our five success factors consistently and harmoniously will certainly improve their chances.”
The five success factors are:
These five components gain extra potency when closely integrated with one another. Once refined and combined, they can serve CEOs as a kind of algorithm for setting direction and making strategic decisions, and they could make a successful tenure easier to achieve.
The study produced several unexpected findings. For example, according to Katharina Rick, a BCG partner and a coauthor of the report, “it turns out that a CEO’s success is almost entirely unrelated to the starting context. CEOs who inherit an ailing company are just as likely to succeed as CEOs who inherit a thriving company.” Another important finding was that CEO tenures today no longer fit the old paradigm and tempo. As Roselinde Torres, a BCG senior partner and coauthor, puts it: “A pre-millennial tenure could typically be analyzed as a traditional drama—opening act, middle act, final act. That model really doesn’t work well in the 21st century. Today’s CEOs have to pattern their strategic moves very differently, and their tenure looks like a series of overlapping cycles rather than a series of discrete ‘acts.’”
Themes and Variations
The report discusses each of the five success factors in detail. Various common threads emerge: the way that CEOs balance tenacity and flexibility, for instance, and their prowess at sensing and responding to signals—detecting megatrends, engaging with activist stakeholders, keeping the organization focused and motivated, and choosing the right pace and sequence when making strategic moves.
Scattered throughout the report is an array of quotations, providing firsthand perspectives on all aspects of the five success factors. The quotations record the experiences or reflections of the various veteran CEOs and board directors who were interviewed for the research project.
The true measure of success for CEOs is not just a set of short-term results: it is about keeping up the momentum throughout their tenure, and even about what happens to the company after their departure. “The improvements that a CEO makes have to be sustainable,” says BCG’s own CEO, Rich Lesser, another of the report’s coauthors. “The complacency trap is real, and CEOs need to sustain a reinvention mindset throughout their tenures and build a diverse, high-aspiration, and adaptive leadership team. We’ve found that the more successful CEOs are very concerned about their legacy—but not out of vanity. The legacy they want is a thriving and self-revitalizing company long after their time as CEO is done.”
A Leadership Algorithm for Improving the Outlook
Don’t expect a magic formula. That’s not how an algorithm works. Algorithms involve constant monitoring, iterative learning, and the adjusting of priorities to match changing conditions. In BCG’s study sample, the more successful CEOs were able to accurately read signals from the evolving context and to course-correct promptly and flexibly. By cultivating and constantly fine-tuning the algorithm’s five components, CEOs can at least increase the likelihood of a truly successful tenure.
A copy of the report can be downloaded here.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or firstname.lastname@example.org.
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