The risks of boomerang CEOs

Bob Iger's comeback as CEO of Disney is the latest example of chief executives boomeranging as rehires to take the helm at the same organizations they previously led. While hardly a common practice, there have been enough boomerang CEOs to draw findings and trend lines. 

Here are six considerations, findings and insights on the rationale, outcomes and caveats of boomerang CEOs.

1. Big companies have made big rehires. Mr. Iger was CEO of Disney for 15 years before stepping down in 2020, only to be rehired in 2022 with the ouster of his successor, Bob Chapek. Apple, Starbucks, Twitter, Bloomberg, Google, Dell, Snapchat, Best Buy, Yahoo, Reddit, Urban Outfitters and Charles Schwab have all had former CEOs return to lead their organizations at some point. 

2. Better the devil you know than the devil you don't. The adage is apt for how boards may think when naming a former CEO as their new one. "There is a sense that being the CEO is a job like no other," according to Wharton professor Matthew Bidwell, PhD. "You are dealing with a wide array of issues and are also the public face of the company, and it's hard to know whether someone can do it until someone has done it. Your prior CEO is one of those few people." 

3. Depending on the amount of time the CEO was away, boomerang chiefs may face different business conditions from those in which they once succeeded. Business professors point to Henry Ford as the prime example of this juxtaposition. Mr. Ford was an ideal leader when efficiency was a competitive differentiator for cars. When the market matured, appealing to consumer preferences grew in priority, and Mr. Ford found himself adrift. Companies often succeed because they perfectly fit their current environment, Sydney Finkelstein, PhD, professor of management at Tuck School of Business at Dartmouth College, points out. This can be a risk for boomerang CEOs. 

4. Boomerangs often return when the tide is high. Defaulting to the familiar and proven can suggest a weak vision from the board, poor succession planning and/or circumstances that allow for little risk. "The fact that a company is rehiring a CEO is a sign of real weakness," Dr. Finkelstein told The New Yorker in 2015. "So it's often just a much tougher job the second time around." 

5. "Boomerangs might come back to bite rather than benefit the organization." That's how the authors of a 2019 study based on the performance of 167 boomerang CEOs from S&P 1500 companies from 1992 to 2017 summed up their research, finding boomerang CEOs performed significantly worse than other types of CEOs. They identified core problems with CEO rehires, including the tendency to look back versus forward and an unwillingness to make the changes necessary to succeed. (Another finding from the study? Boomerang founders can be even more problematic than boomerang CEOs.) 

6. The tales of successful boomerang CEOs draw great attention. The authors above set out to do research on returning CEOs because stories of high-profile comebacks so often become legend. Take Howard Schultz for example. He returned to Starbucks as CEO after an eight-year hiatus and led a sea change to help customers and employees fall back in love with Starbucks with the tripling of its share price. These instances are more of an exception to the rule. Some boomerang CEOs may be able to bend to new circumstances and challenges, but many more may not.

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