The Real Reason CEOs Fail?

Is five years enough time to turn around a business? Because that's all the time most CEOs will be given, according to Booz & Co figures on the average tenure of chief executives worldwide.

IDC's research director of consumer mobile, John Delaney, notes that this was enough time for outgoing Vodafone chief executive Arun Sarin to execute a tricky, but ultimately successful acquisition.

But it was, admits Delaney, a 'bumpy ride' that tested shareholders' patience and nearly cost Sarin his job.

The Booz & Co report also claims that CEOs are rarely sacked for poor performance, which raises many questions -- most obviously, how are they getting away with it?

If shareholders and analysts are so fixated on short-term returns, why are so many sloppy performers slipping under the radar? Or is short-termism at the heart of their poor performance?

In a bid to deliver just enough to keep shareholders off their backs, are CEOs sacrificing radical, long-term change strategies for small, immediate wins?

It takes years to turn around a company or make signficant changes: just ask John Timpson, whose 'upside down management' took years to implement across his chain of stores. The reason Timpson could do it? It's his own business and not subject to the pressures of City analysts or shareholders.

Is this the problem? Business guru Jim Champy is in no doubt: real change takes years, which means publicly listed companies are at a 'significant disadvantage' because investors don't trust management.

If true, few CEOs of major organisations are gaining experience in change management -- making for a serious skills shortage in the not-too-distant future. Maybe it's already here. Little wonder boards avoid sacking CEOs, if they know they won't find another -- or don't really trust them in the first place.

Or perhaps it's an expectation gap. Is it possible shareholders are too quick to judge (or that boards are unclear in setting targets)? Sarin's survival would indicate so. And so would the parable of 'royal rat-catcher' Rentokil Initial.

In April 2005, Doug Flynn took up the post of chief executive at Rentokil. By March 2008, he'd been sacked in a 'night of the long knives'-style coup. (He also got a £1.2m pay off, so don't feel too sorry for him.) The company's turnaround now hangs on three ex-ICI executives with a five-year plan.

But they weren't Rentokil's initial choice of saviour. That was Clive Thompson -- ousted by the board in 2004 amid accusations of short-termism.