Return of Titans: The Curious Case of Boomerang Executives
“Goodbye..? Oh no, please. Can’t we go back to page one and do it all over again?” – Winnie The Pooh
No goodbye is permanent – especially in the corporate world, witnessing the sweeping trend of boomerang employees. But just returning is not enough. To shoot the perfect boomerang, certain key forces need to be at an even keel.
Howard Schultz rehired to Starbucks in second term as CEO engineers more than a 300% increase in the stock price.
The legendary Steve Jobs returns to Apple and, in his second tenure as CEO, drives the share price up by a whopping 9,900%-plus vis-à-vis the S&P 500 that rose a little above 45%.
Charles Schwab, founder of Charles Schwab and member of its Board of Directors, in his second tenure as CEO leads the stock price up by more than 100%.
And the list goes on, the latest additions being Vicky Tsai of beauty brand Tatcha and Franceso Clark of skincare products Clark’s Botanicals.
What is the common thread running through all these names? All these are either CEOs or founders who were brought back or came back to resuscitate their organizations – in other words, leaders who ushered in transformation.
Interestingly, there are as many examples of boomerang executives, such as CEOs, not being able to deliver along expectations. So, while Michael Dell of Dell Corporation and Jerry Yang of Yahoo did all that they could, their efforts fell short of market expectations.
Boomerang executives are not new. In fact, now the list is expanding to include CTOs, CFOs and other senior people at director level and above who are choosing to return to the organizations they left.
Why would a company need to bring back a former executive?
The requirement for effective and proven leadership, especially in a time of crisis, is among the most plausible reasons why an enterprise may choose to rehire a former executive, even though there may be more plum options to hire a new professional.
The crisis could present itself in various forms: the need to revive a brand among declining numbers, resuscitate a stock, rebuild a brand post-acquisition, tackle growing workforce issues, create an inspiring vision and deliver along it, so on and so forth.
The key prerequisite that lures the board or management to consider a former hire is the awareness of company culture and vision, besides a whole lot of individual traits such as expertise, insight and experience. When handling a crisis, the last thing a board would want to invest in is spending time in building awareness.
Now, why do executives choose to leave and then return?
Several factors were making things difficult: the pandemic, of course, followed by challenges of recruiting amid the war for talent, growing unionization in some cases (Amazon or Starbucks), erratic performance of stocks reflected in yo-yoing indices, rising inflation, coupled with the possibility of a recession, all of which require taking tough decisions to save revenue and cut costs.
According to a report released by the management consulting firm Challenger, Gray & Christmas in May 2022, CEO exits were the highest YTD. It mentioned that over 500 CEOs quit their jobs in 2022.
Some of the prominent exits of 2022 are Ben Silbermann, co-founder, CEO and president of Pinterest; Dan Springer, CEO of e-signature app DocuSign; Aziz Hasan, CEO of crowdfunding site Kickstarter; Dave Clark, CEO of Amazon’s large consumer business; Gary Kelly, long-time CEO of Southwest Airlines; and Julie Wainwright, founder and CEO of luxury goods retailer RealReal.
And while the exits may be alarming, what is striking is that these executives have clarified that they are taking a break only to recuperate and return when the market bounces back (or their non-compete expires). This is where the twist lies. If they return, where will they go – will it be a new company, or will be back to their previous business? Who or what will determine that?
Quite naturally, many may want to return to their previous organization drawn by familiarity with the culture and politics; the scope to re-invest and rebuild relationships; the freedom to assess and settle down gradually, work in an area of interest where the challenges are more foreseeable; exit and re-entry facilitating growth, which may have earlier plateaued; and most important, the scope to apply the insight gained or acquired over the period of absence – in other words, the scope to rebuild and revive, and add value.
But is it easy? Are boomerang executives always successful? What are the challenges?
A rather bumpy road ahead
A research paper on e-library SSRN, Boomerang CEOs: What Happens when the CEO Comes Back?, shows that boomerang CEOs tend to drag organizations down. The success cases are only far and few. Whether we agree with this or not, considering that the study is just one aspect of the research on a way broader topic, it definitely lists certain key challenges that cannot be ignored. Success depends a lot on the dynamics of the industry as well as whether the CEO is a founder member on the board or not. In executive search, we see this even at CXO minus two.
First of all, it is a tightrope to walk. What will work is tricky to understand. Rehiring an executive may prove to be less disruptive, since former executives are usually aware of the firm’s culture and practices. Moreover, they have firm-specific working experience as well as firm-specific leadership experience, which helps in eliminating the time taken to learn afresh.
However, a line of thought suggests that the application of firm-specific working experience is contingent on the presence of certain specific market and external conditions. Since usually market conditions (consumer preferences, level of competition, supplier dynamics, etc.) have changed or evolved from the previous tenure at the same organization, having firm-specific experience may not hold much relevance. This has never been truer post-2020.
The reason for this is that some theorists believe former CEOs (and other executives) often come with a cognitive bias reflected in a fixated understanding of how the environment will pan out or what steps and measures to take. As a result, they are usually resistant to adopting new strategies as contemporary situations may demand. For instance, if they have experience in an industry which emphasizes more on cost advantage but is now shifting to other types of advantages, they may comprehend the situation. However, they will not be comfortable implementing a different strategy, as it could conflict with their previous strategies or question personal capabilities.
Two notable examples are Paul Alliare of Xerox and A.G. Lafley of P&G. Both, despite their best intentions and efforts, saw the respective stock prices decline significantly during their second tenure as CEOs. This is mainly attributed to their lack of comprehension of changing dynamics.
Furthermore, a lot depends on how dynamic the industry is. As the dynamics of the industry change, the surrounding environment (suppliers, buyers, new entrants, technologies, etc.) changes faster. This makes it difficult to create and implement strategies, as the patterns employed to capture trends earlier may not be relevant any longer.
Theorists believe that the more dynamic an industry, the greater the chances of rendering accumulated experience (for former executives) irrelevant.
Another aspect is that dynamic industries require adaptation to and adoption of different skill sets and capabilities in terms of management. However, it is also known that it takes time for managerial acumen to evolve, and for an individual fixated on a style, adapting could be a bigger concern. Therefore, boomerang executives could be more relevant in relatively stable industries where the dynamics don’t change frequently.
It gets even more complicated with boomerang founders, yet another category in boomerang executives. It is not uncommon for firms to turn to their founder CEOs to take charge when in tough times. Apple, Twitter, Snapchat, Google are all examples of this trend. Quite a few of them did give good results, such as Charles Schwab for his eponymous firm.
However, it is also found that founders are both less able to and less willing to adapt. Founders often come with the entrepreneurial skill required but are at times found lacking on the administrative or managerial skills. Due to these reasons, in some firms, founders get replaced by professional CEOs once the company starts gaining scale.
It particularly gets problematic when the former founder executive is returning to a larger firm, and that too if it is in a crisis. The capabilities required may be different from building a venture from start. Two glaring examples are Steve Ells of Chipotle and Jerry Yang of Yahoo. In both cases, the requirement during their second stint was way different from the expertise the individuals commanded, resulting in disastrous consequences.
Having said this, it is again not without reason that boomerang executives are considered. And rightly so, for the expertise that they have, for the understanding of their role that translates into much faster ramping up of the organization, and at times fresh perspective arising from insight and experience.
So, what is the way forward?
As always, there are two options: one, to internally develop resources to take up leadership positions, or even when considering rehiring a former executive, taking care of certain basic metrics.
If developing internally, an organization must take the steps required to first assess the potential, assess current performance, and take measures to inculcate the required leadership skills through training or other skill development programs employing the latest techniques and methodologies, such as immersive simulation, etc.
But, if you are willing to gamble, as some may say, by planning to re-hire a former executive, it is best that you make the best bet.
Since the objective is to bring back a person who is already aware of the company’s culture and approach, and understands what the being in the role carries – thereby building a case for smooth transition – the most essential step is to plan well.
- Begin with assessing the circumstances of why the former executive left in the first place. Was it voluntary, or was the person asked to? What drove to these decisions?
- Outline clearly the company’s objectives or mission in the existing circumstances, so that you have clarity on what you are seeking.
- Measure the degree of risk of exit (considering the individual’s potential to leave if under pressure or facing opposition) if you choose to rehire. Try to understand the person’s intention for return.
- Assess suitability by seeing what the person can bring in the light of the current conditions and requirements, the individual’s ability to follow a flexible approach, and willingness to adapt to changes.
- Detail out how your organization will work in terms of coaching the individual to scale up.
- It is important to mention here that age is a key criterion for some companies, although it is debatable how far it is applied judiciously. It is often assumed that a relatively younger former executive will be more flexible to adapt, while those on the higher side of age are usually more resistant to changes. Making a decision based on assumption is rather an unwise step. A better way out is to assess individual personalities based on a whole range of parameters that are available and by employing the latest assessment tools and techniques.
The other way out –a rather judicious thing to do – is to hire the right partner specializing in executive search.
These firms are usually highly methodical in their approach and bring rich insights and expertise to ensure success of the overall rehiring effort. They provide incisive guidance to help you rightly address the challenge facing your company.
This includes employing the latest, proprietary tools, techniques and frameworks to first assess the situation; and assess the potential of the unknown candidate against the potential rehire. Looking for red flags in communication that leads to “this is the way we’ve always done it” is critical as these are the 8 most expensive words in business.
Many of the premier executive search firms offer executive coaching – the most crucial step to ensure that if you rehire, it is successful. These in-depth sessions are designed to ensure the individual makes the strongest comeback, and help the person in evolving their approach to meet the current requirements. In short, given the incisive training entailed, the right executive coaching is imperative for bringing about the transformation needed to work along the changed/changing dynamics in the company and industry at large.
This is especially relevant to gender-based parity or equality along the lines of race with regard to boomerang executives. Firms specializing in retained executive search, or with the latest executive coaching techniques, have a deep understanding of how discrimination along gender or other factors outlined above can create a feeling of self-doubt. They are therefore designed to facilitate empowerment by instilling the much-required confidence, and thereby ensure that every individual performs to their true potential.
In the current challenging business environment, companies are under constant pressure to deliver along the lines of expectations. It gets typically complicated when the need is to revive a setup.
This often leads organizations, more than ever, to mull bringing back leaders who have earlier led it to success, hoping the magic will work again. Former leaders, on their part, may be more than willing to return – the common ground for both requirements being political familiarity.
However, this is where the challenge lies – what if the very familiarity does not exist any longer? With the market environment evolving rapidly, visions and strategies that worked earlier may no longer be relevant.
But then again, the bigger the challenge, the greater the rewards, provided it is addressed effectively. The case of boomerang executives needs to be understood in this context. There is no clear answer if you structure your question on whether or not it has been successful in the past. There are instances of both.
A rather better question will be how to steer through the requirement if you are considering rehiring a former executive. The steps you take, the search partners you seek in this effort, will decide how you can avoid stumbling and bring back an executive who will restore the uptrend.