The hiring and firing of a company’s chief executive is the board’s most essential task—and yet struggling companies are still reaching back into history to find their next leader.
The appeal of returnee leaders is clear: They can take over and begin steering a wayward company immediately. For them, there is no learning curve, and they typically know the industry and the firm’s dynamics intimately. Furthermore, their presence can help bring calm to investors, and can help provide temporary stability as the board searches for the next innovative leader.
But board experts tell Fortune that choosing a boomerang CEO is risky precisely because it upends the point of succession planning: looking ahead to find the right leader for a future era. It may also send the wrong signal to the investors about a company’s internal culture and the board’s effectiveness—while worrying some top employees.
Another downside to appointing a former CEO? Senior leaders who saw themselves on the road to the corner office may be discouraged and leave, Branthover notes. “Whatever leader you’re bringing in, it’s giving everybody a message,” she says.
Despite the lackluster track record of boomerang CEOs, there are situations in today’s business environment in which a company can bring in a former leader without indicting its own succession strategy, say board whisperers.
The most recent spate of boomerang CEOs illustrates how many factors—other than a board’s lack of preparedness—can play into the decision to invite an old CEO back.
