The headline in the Christian Science Monitor says it all: "CEOs under fire to perform – or else." The article talks about pressures on CEOs from the board, investors and the threat of a takeover. Here's a summary quote.

"CEO turnover set a record in 2006 and could reach another one this year as investors demand higher returns."

There's a perception that CEOs are not staying as long as they used to.  Is that true? 

According to the firm Weber Shandwick, the average tenure for North American CEOs was 8 years, 6 months in 2006. European and Asian CEOs have significantly shorter time in office. The studies on CEO tenure have a wide range of estimates, from 4 years to 10 years, depending on how the calculations were done and what specific group was being analyzed.

These are interesting statistical questions, but they're more important for bar bets than for strategy. Can we find out anything about CEO tenure that might have a bearing on long term competitive advantage and profitability?

Great performance and long tenure seem to go together. This is something of a chicken-egg question. Are CEOs effective because they stay around long enough? Or do they stay a long time because they perform?

It's probably a bit of both. CEOs that produce results quickly are more likely to stay. But it takes time to make significant change in any organization. Remember that Jack Welch had only four major initiatives in twenty years as CEO of GE.

How about CEOs promoted from inside, compared with those brought in from outside the company?  "Insiders" are those who have worked at the company for three or more years before becoming CEO. The research, mostly by Booz Allen Hamilton, tells us two things.

Outsider CEOs do better in the short term and worse in the long term than insiders. This makes sense because outsiders are more likely to be brought in to troubled companies where rapid change is both necessary and possible.

Insider CEOs tend to stay longer. Their tenure is almost double the outsiders.

Insider CEOs should have an advantage. They know the culture and values. They know the people and resources. So they're a better choice unless you think your company is broken. Even then you might consider an insider.

What's really interesting to me is to step back and consider companies that have had a string of effective insider CEOs, like GE. In the century plus that there has been a GE, every CEO but Thomas Edison has come from inside. The average tenure for those who've completed their run as of today is just shy of 15 years.

To make that happen, GE has paid attention to leadership development, bench strength and succession. That may be the most important thing we can learn from looking at CEO tenure.

If you want to build long term competitive advantage and profitability, your best bet is a string of excellent CEOs. The best way to get them is to grow them yourself with obsessive attention to leadership development.

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Wally Bock has helped people learn to be great bosses for more than a quarter century. His latest book, Performance Talk: The One-on-One Part of Leadership, makes learning key leadership principles almost effortless by teaching through a story and providing lists of resources for further growth.

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