Tom Sullivan | December 15, 2021
The average CEO works for 24 years from the time she or he begins a career to taking over as chief executive, according to a 10-year study of 17,000 C-suite executives conducted by The CEO Genome.
Some CEOs climb through functional leadership roles, such as COO or CFO, while others “sprint” or “leapfrog” their way into the corner office. But which C-suite positions do the most CEOs actually emerge from? And have any of those demonstrated more success at the top than others?
To answer those questions, Health Evolution examined multiple research pieces that illustrate notable changes over time in how individuals progress into becoming a CEO, what data shows about the effectiveness of each prior role in shaping success as a CEO, and new ways health care leaders will be evaluated in the future.
The C-suite roles that lead to CEO
Spencer Stuart found that over the past 20 years, 85 percent of S&P 500 CEOs come from four roles: CFO, COO, Divisional CEO and what the firm refers to as leapfrog leaders, or people promoted from a level of management below the C-suite.
Spanning more than 1,300 CEO transitions, Spencer Stuart’s CEO Life Cycle research determined that the “steppingstone” path has changed since the early 2000s. At that point, a solid 76 percent of new CEOs were promoted from COO, which has since declined to 38 percent in 2020.
In 2020, 36 percent of new CEOs were promoted from a divisional CEO role, a 25 percent increase from 2000. Also in 2020, 9 percent of promoted CEOs had previously served as a CFO, which is almost twice as many as in 2000.
McKinsey outlines the case for functional leaders — which it lists as CFO, chief marketing officer, chief strategy officer, chief technology officer or general counsel — stepping into the CEO role as being strongest when that individual’s background and skill set can be applied to a significant organizational challenge. However unusual appointing a CTO to the CEO role might appear, McKinsey suggested that for an organization in need a major digital transformation, bringing on a technologist might make smart business sense. Likewise, companies in acquisition or growth mode might opt for a CFO to replace an outgoing CEO.
Then there are what Harvard Business Review contributors described as CEO sprinters, those who reach the top position more quickly than 24 years. How do they make it happen? Ninety seven percent of sprinters did so by undertaking a so-called “catapult experience” and close to 50 percent had at least two catapult experiences. The HBR authors note that catapult events often equate to solving pressing and difficult problems, such as turning around an underperforming business unit or a failing product or managing a bankruptcy.
“We discovered a striking finding: Sprinters don’t accelerate to the top by acquiring the perfect pedigree,” wrote the HBR authors, who also lead the aforementioned CEO Genome. “They do it by making bold moves over the course of their career that catapult them to the top.”
What specific roles suggest about success as a CEO
Regardless of the route taken to become CEO, “little is solidly understood about what CEOs really do to excel,” according to a different McKinsey report. “Even asking other CEOs how to approach the job doesn’t help, because suggestions vary greatly once they go beyond high-level advice such as ‘set the strategy,’ ‘shape the culture,’ and ‘get the right team.’ Perhaps that’s not surprising — industry contexts differ, as do leadership preferences.”
So which career pathway is the most promising for a CEO that hopes to succeed?
Spencer Stuart found that, when measured by shareholder return, leapfrog leaders constituted the largest percentage of top performers at 41.2 percent. Divisional CEOs ranked second at 27.4 percent; COOs followed at 24.6 percent while 7.9 percent of CFOs who became CEOs ranked in the top performance quartile.
CFOs lead the middle quartile at 60.5 percent, followed by divisional CEOs at 52.4 percent, COOs at 48.8 percent and leapfrog leaders at 33 percent.
In the bottom quartile, divisional CEOs comprised the smallest number at 20.1 percent, leapfrog CEOs were next at 25.8 percent while COOs are 26.5 percent and CFOs 31.6 percent.
While Spencer Stuart noted that divisional CEOs are “the safest bet to avoid underperformance,” it also explained that “these odds are not destiny. What distinguished aspiring CEOs was their self-awareness and devotion to unlocking their full potential — not just to become CEO but also to thrive once in the position. Understanding the odds of success and how to beat them will reshape the dialogue between boards, CEOs and CEO aspirants.”
How CEOs will be evaluated in the future
In its 2021 Healthcare CEO Future Pulse, KPMG predicts “a wind of change coming to the sector,” based on its global survey of 200 health care CEOs. Participating CEOs anticipate that because the way they will be measured is evolving, leaders in the industry will encounter new priorities that require new skillsets.
In addition to the widely reported basics of leadership, communication, culture, strategy, and workforce development, KPMG said CEOs with four skillsets will be critical: leaders expert in clinical excellence, technology visionaries, community leaders and well-rounded individuals.
Executives participating in the survey ranked the top key performance indicators against which CEOs will be judged as customer experience (36 percent), quality (26 percent), workforce satisfaction (18 percent), financial performance (17 percent) and ESG, or environmental, social, governance work (4 percent).
“If there is one common thread in the results, it is that health care executives expect and welcome reform — with 80 percent of CEOs believing that health care needs disruption and change, with 79 percent expecting that all aspects of care delivery models will be transformed within the next 3 years — which is a high ambition on a short runway for any sector,” KPMG wrote in the report.