CHARACTERISTICS OF Successful Technology CEOs · CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs...

C H A R A C T E R I S T I C S O F

Successful Technology CEOsR E S E A R C H R E P O R T

C O N T E N T S

Introduction 3

Research Report

Topic One: Education 4

Topic Two: Experience 8

Topic Three: Internal vs. External Hire 19

Topic Four: Age 22

Topic Five: Tenure 25

Topic Six: Combined Chairman and CEO 29

Methodology 32

About Vell Executive Search 33

Dora Vell 34

© Copyright, 2009 by Vell & Associates Inc. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, except as permitted under sections 107 or 108 of the United States Copyright Act, without prior written permission of the publisher.

I N T R O D U C T I O N

3

This Vell research report on Characteristics of Successful CEOs investigates whether common perceptions regarding the predictors of CEO success are valid. The research uses data about public technology products companies in New England with over $100 M in revenues – and their CEOs.

Our research examines the correlation (or lack of ) between a company’s performance and the CEO’s education, experience, tenure, age, reliance on an independent Chair, and whether the CEO came in as internal promotion vs. external hire.

Not unexpectedly, technology companies differ from other companies in many significant ways. Although we work extensively with technology CEOs, some of the findings were surprising to us. For example, the predominance of founders among companies with revenues between $100 M – $1 B was unexpected.

Each topic has three sections. The “Patterns Detected” section summarizes the underlying distribution of our data set, e.g., the percent of CEOs who were founders by company size. The “So Where Were the Differences” section reports the correlation between corporate performance and the relevant characteristics, e.g., founders vs. non-founders. The “Key Take-Aways” section highlights the most striking conclusions.

We hope that you find this study both informative and insightful. If you would like to discuss any aspect of this study further, please contact us at [email protected]. Your input will help fuel investments in future research we publish.

Best Regards,

Dora Vell CEO

www.vell .com

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C H A R A C T E R I S T I C S O F S U C C E S S F U L T E C H N O L O G Y C E O s4

Topic One: Education

P AT T E R N S D E T E C T E D

CEOs are highly educated

◆ 68% have advanced degrees

◆43% of CEOs with advanced degrees have MBAs (33% of all CEOs have MBAs)

◆21% of all CEOs have PhDs

CEOs in larger companies differ from those in smaller companies as follows:

◆Larger company CEOs are more likely to have an advanced degree (88% vs. 64% for companies between $100 M and $1 B)

◆A larger portion of big company CEOs with advanced degrees have MBAs (55% vs. 24% for companies between $100 M and $1 B)

24%

16%

8%16%

36%

11%11%

22%

33%

22%

21%

15%

12%

21%

32%

All>$ 1 B$100 M – $1 B

100%

80%

60%

40%

20%

0%

PhD

Master’s Only

Master’s & MBA

Bachelor’s & MBA

Bachelor’s Only

Company Revenue

Degree Distribution by Company Size

C H A R A C T E R I S T I C S O F S U C C E S S F U L T E C H N O L O G Y C E O s

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5

21%

7%

29%

43%

45%

15%

15%

25%

35%

12%

21%

32%

AllTechnicalNon-Technical

100%

80%

60%

40%

20%

0%

Master’s / PhD, no MBA

Master’s & MBA

Bachelor’s & MBA

Bachelor’s Only

Level of Degree by Type

3-Y

ear

Gro

wth

Rat

e

> $1 B$100 M – $1 B

600%

400%

200%

0%

-200%

3-Y

ear

Gro

wth

Rat

e

CEO Performance by Company Size

Min, -20%

Median, 93%

Max, 8394%

Min, -22%

Median, 61%

Max, 342%

Company Revenue

CEOs with technical degrees predominate (59% of all CEOs in our study) and these are more likely to have advanced degrees.

CEOs with Ivy League degrees were in the minority (40%) but over-represented – not a surprise given the preponderance of Ivy Leaguers in New England.

◆They are less likely to have technical backgrounds (33% vs. 68% for non-Ivy League CEOs)

S O W H E R E W E R E T H E D I F F E R E N C E S ?

Not surprisingly, growth rates were lower at larger companies (61% vs. 93% median 3-year growth rates)

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Non-MBAMBA

500%

400%

300%

200%

100%

0%

-100%

3-Y

ear

Gro

wth

Rat

e

MBA vs. Non-MBA Performance ComparisonCompany Revenue $100 M – $1 B

Min, -5%

Median, 159%

Max, 324%

Min, -20%

Median, 89%

Max, 8394%

TechnicalMaster’s / PhD

Non-Technical

800%

600%

400%

200%

0%

-200%

3-Y

ear

Gro

wth

Rat

e

Technical vs. Non-Technical Performance ComparisonAll Companies

Min, -22%

Median, 71%

Max, 607%

Min, -3%

Median, 101%

Max, 407%

Technical Bachelor’s Only

Min, -36%

Median, 99%

Max, 8394%

MBAs outperform non-MBAs at companies under $1 B in revenue (159% vs. 89% median 3-year growth rates)

For companies over $1 B in revenue, the results were much closer, 61% for CEOs with MBAs vs. 70% for CEOs without MBAs.

The companies with CEOs holding technical degrees outperformed companies with CEOs who didn’t (99% and 101% vs. 71% median 3-year growth rates)

Even though the median 3-year growth rate was close for technical CEOs whether they had a BS or higher degree, the maximum growth rate CEOs with just a BS degree was over 8000% – a company that grew from $3.6 M to $306 M in 3 years. This outlier underscores the value of identifying and taking advantage of technology trends, which often requires a technical background.

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TechnicalNon-Technical

400%

300%

200%

100%

0%

-100%

3-Y

ear

Gro

wth

Rat

e

Technical vs. Non-Technical Performance ComparisonCompany Revenue > $1 B

Min, -22%

Median, 47%

Max, 200%

Min, -3%

Median, 99%

Max, 342%

In companies over $1 B in revenue, the technical degree premium was even more striking (99% vs. 47% for companies whose CEOs had non-technical degrees)

Companies whose CEOs have Ivy-League degrees significantly outperformed companies of CEOs without (287% vs. 86%)

Ivy LeagueNon-Ivy League

400%

300%

200%

100%

0%

-100%

3-Y

ear

Gro

wth

Rat

e

Ivy vs. Non-Ivy Performance ComparisonCompany Revenue $100 M – $1 B

Min, -20%

Median, 86%

Max, 252%

Min, 43%

Median, 287%

Max, 8394%

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26%

3%

26%

45%

22%

78%

34%

3%

28%

34%

31%{ 29%}

All>$ 1 B$100 M – $1 B

100%

80%

60%

40%

20%

0%

GM Only

CEO & GM

CEO Only

None

Company Revenue

CEO & GM Experience Distribution

K E Y TA K E A W AY SMBA degrees are correlated with stronger growth, but only in companies between $100 M and $1 B. Moreover, the strongest growth of any of the smaller companies was by a non-MBA CEO. An MBA is a useful early indicator of business savvy – and perhaps drive, but as executives build their experience, results should be a larger factor in selecting candidates than whether they have an MBA or not.

Some search committee members favor CEO candidates with strong business backgrounds, which often blind them to excellent candidates with valuable technical backgrounds. Our experience is that technical degrees often correlate with high intelligence levels and also that CEO comfort with tech-nical details helps address strategic issues such as where the market is headed and where the best opportunities are to be found.

An Ivy League degree is an asset to performance. Perhaps the admissions process in these programs is a great filter for work ethic and smarts. Search committees tend to be biased either for or against Ivy League degrees. This data shows that an Ivy League degree is positively correlated to performance.

Topic Two: ExperienceCEO / General Manager Experience


Only 29% of companies have a current CEO with prior CEO experience.

◆CEOs at companies with revenue below $1 B were slightly more likely to have prior CEO experience, but still only 31% did so.

◆34% of CEOs at companies between $100 M - $1 B in revenue had neither prior CEO or any GM experience. Most of these CEOs were founders (70% of 34% or 23% of all CEOs).

◆ In companies with revenues over $1 B, 78% had GM prior experience only and 22% had CEO and GM experience.

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29%

45%

16%11%

44%

33%

22%

38%

45%

10%7%

72%}All>$ 1 B$100 M – $1 B

100%

80%

60%

40%

20%

0%

Both

GM Current Only

GM Prior Only

None

Company Revenue

GM Experience Distribution

Inversely, 72% of CEOs had General Manager experience, either at current or prior companies

◆All CEOs at companies with revenue over $1 B had GM experience.

◆However, in most cases, CEOs were experienced as GMs at other companies.

◆ In companies with revenue over $1 B, CEOs typically have to prove their talent as GM in the current company: 56% of these CEOs had been GMs at their current company.

◆ Only 11% of CEOs had GM experience at both their current and prior companies.


Prior CEO experience correlates to higher median 3-year growth rates.

Prior CEO ExperienceNo Prior CEO Experience

125%

100%

75%

50%

25%

0%

-25%

3-Y

ear

Gro

wth

Rat

e

Company Performance by CEO ExperienceAll Companies

Min, -22%

Median, 66%

Max, 8394%

Min, 32%

Median, 89%

Max, 607%

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250%

200%

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

eCompany Performance by CEO Experience

Company Revenue > $1 B

Min, -22%

Median, 33%

Max, 342%

Min, 61%

Median, 130%

Max, 200%


125%

100%

75%

50%

25%

0%

-25%

3-Y

ear

Gro

wth

Rat

e

Company Performance by CEO ExperienceCompany Revenue $100 M to $1 B

Min, -20%

Median, 77%

Max, 8394%

Min, 32%

Median, 89%

Max, 607%

However, the advantage is more pronounced at large companies.

Perhaps because they rarely bring in outside CEOs - only 1 in 5 large company CEOs had prior CEO experience - and when they do, the vetting process brings in best-in class-CEOs.

At companies between $100 M - $1 B - where 70% of CEOs are founders - CEOs with prior CEO experience outperform their peers, but by a smaller edge.

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No GM ExperiencePrior Company Only

200%

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

Company Performance by CEO’s GM ExperienceAll Companies

Min, -20%

Median, 98%

Max, 8394%

Min, 12%

Median, 110%

Max, 607%

Where CEO Was GM

Min, -22%

Median, 39%

Max, 106%

Current Company or Both

General Manager (GM) experience initially appears to be detrimental to median 3-year growth rates.

This can be partially explained because CEOs at companies with over $1 B in revenue are over-represented in the GM experience class – recall they all had GM experience - and their growth rates are slower than smaller companies.

In companies with revenues over $1 B, GM experience at the current company correlates with a significant edge for median 3-year growth rates.


250%

200%

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

Company Performance by CEO ExperienceCompany Revenue > $1 B

Min, -22%

Median, 33%

Max, 342%

Min, 61%

Median, 130%

Max, 200%

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No GM ExperienceGM Current or Both

200%

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

Company Performance by CEO’s GM ExperienceCompany Revenue $100 M to $1 B

Where CEO Was GM

Min, -5%

Median, 43%Max, 56%

Min, 12%

Median, 110%

Max, 607%

GM Prior Only

Min, -20%

Median, 89%

Max, 8394%

As you might expect in these large companies, CEOs with GM experience at a prior company have significantly lower performance than those promoted from within. Especially in larger companies, a successful track record with the company’s technology, market, competitors, and culture might be a more significant predictor of success as CEO. This emphasizes the importance of having a solid succession and development plan in larger companies.

In addition to a solid succession plan, companies could benefit greatly from a talent management program, where the talent in their specific industry is tracked and nurtured over years. Potential successors are courted over years and relationships developed with key players and up and comers in the industry so that when they are needed they can be easily approached.

In companies with revenues between $100 M and $1 B, the highest median 3-year growth rate was associated with CEOs who lacked GM experience – 73% of these being company founders.

Among the CEOs with GM experience in smaller companies the result is the inverse of that found in larger companies: experience as GM in a prior company correlates to higher median 3-year growth rates than GM experience in the current company or both.

K E Y TA K E - A W AY S

Prior CEO experience is more important to companies with revenue over $1 B.

In smaller companies, a very small percentage of CEOs have prior CEO experience.

GM experience is not a predictor of strong corporate revenue growth.

In larger companies, all CEOs have some GM experience. In this class of companies, experience as a GM in the current company is strongly correlated to higher performance, underscoring the impor-tance of familiarity with the company’s challenges and options.

In companies with revenues between $100 M - $1 B, CEOs without GM experience – most of whom are founders – are the top performers. Companies with revenues between $100 M – $1 B are more likely to look at outside candidates with prior CEO than prior GM experience.

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Strategy BackgroundNo Strategy Background

250%

200%

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

CEO Performance by Background ExperienceAll Companies

Min, -22%

Median, 82%

Max, 8394%

Min, -5%

Median, 159%

Max, 607%

Strategy Role


Only 13% of CEOs in our study had held a Strategy role. All of these were in companies with revenues between $100 M – $1 B.


Median 3-year growth rate was higher for those CEOs with Strategy backgrounds.

While the median 3-year growth rate was higher for those CEOs with Strategy backgrounds, this may be partly due to the fact that they are in smaller companies, which typically experience higher growth rates.


Both strategy and operational skills need to be present when selecting a CEO. Executives with strategy backgrounds can make a significant impact as CEOs if they are also skilled in operations, but this combination of talents is rare.

Succession planning committees thinking about future CEO candidates should be assessing ex-ecutives with strategy backgrounds for operational potential – and where merited – giving them opportunities to develop and hone their operational skills through a series of progressive and meaningful roles.

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Consulting BackgroundNo Consulting Background

200%

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

CEO Performance by Background ExperienceAll Companies

Min, -22%

Median, 76%

Max, 8394%

Min, 106%

Median, 110%

Max, 159%

Consulting Role


Only 8% of CEOs in our study had worked previously as consultants. All of these were in companies with revenues between $100 M – $1 B. Given that the companies in our study were product ven-dors, it is not surprising that only a small subset had a consulting background.


Consulting experience correlates with higher median 3-year growth.

As with strategy backgrounds, consulting experience correlates with higher median 3-year growth rates, but these folks are in a minority (8%) and found only in companies with revenues between $100 M – $1 B.


Executives with consulting backgrounds can make a significant impact as CEOs and should be considered but only if they also understand the product side and can operate a business.

Succession planning committees thinking about future CEO candidates should give executives with consulting backgrounds opportunities to demonstrate their operational abilities.

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Engineering BackgroundNo Engineering Background

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

CEO Performance by Background ExperienceCompany Revenue $100 M – $1 B

Min, -22%

Median, 66%

Max, 8394%

Min, 43%

Median, 98%

Max, 407%

Engineering Role


29% of CEOs had held engineering roles, with almost all of these (91%) in companies with revenues between $100M – $1 B. In this smaller company set, they constitute 39% of CEOs. Only 11% of CEOs in companies with revenues over $1 B had engineering experience.


Median 3-year growth rate was higher for those CEOs with prior engineering functional roles.

Again, while the median 3-year growth rate was higher for those CEOs who had held engineer-ing functional roles, this may be partly influenced by the fact that most (91%) of these CEOs are in smaller companies, which typically experience higher growth rates. Even in the smaller companies, however, CEOs with engineering experience correlate with superior median 3-year growth rates.

Because the maximum, minimum, and median numbers are the same for all companies as for companies in the $100 M – $1 B range, we only show the latter, more relevant, chart.


We recommend that while candidates with business backgrounds need to be considered, a good grounding as an engineering executive should be considered a positive indicator of success. When paired with strong business acumen, experience in engineering can broaden a CEO’s perspectives on the potentials of the technology and help with the strategic orientation and nimble reposition-ing of the company based on changes in market and competitive conditions.

Some search committees do value the engineering functional experience as a real asset, because deep understanding of the technology fundamentals, paired with a good business mind is a decid-edly strong indicator for performance.

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NeitherSales & Marketing

400%

300%

200%

100%

0%

-100%

3-Y

ear

Gro

wth

Rat

e

Company Performance by Background ExperienceAll Companies

Min, -22%

Max, 252%

Min, -5%

Median, 87%

Max, 607%

Median, 79%

Sales Only

Min, 10%

Max, 360%

Median, 147%

Marketing Only

Min, -20%

Median, 200%

Max, 8394%

Background

66%

11%8%16%

67%

11%11%11%

66%

10%7%

17%

All>$ 1 B$100 M – $1 B

100%

80%

60%

40%

20%

0%

Both

Marketing Only

Sales Only

None

Company Revenue

CEO Background Distribution

Sales & Marketing Roles


Most CEOs (66%) did not come from a Sales & Marketing background.

This was consistent across the different company sizes. Of those with sales or marketing back-grounds, roughly half were likely to have a combined sales and marketing background. 80% of the CEOs with combined sales and marketing experience were in the smaller companies.


The top performers were CEOs with marketing rather than sales backgrounds.

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Finance BackgroundNo Finance Background

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

Min, -20%

Median, 91%

Max, 8394%

Min, -5%

Median, 43%

Max, 159%

Company Performance by CEO ExperienceCompany Revenue $100 M to $1 B

Executives with sales experience and executives with marketing experience outperformed executives with neither.

Interestingly, all companies whose CEOs had both sales & marketing backgrounds performed the worst.

When sales and marketing are combined, the tendency has been to give the role to a strong sales ex-ecutive, who focuses on field marketing as opposed to strategy and product management / marketing.


Many technology company search committees focus heavily on sales backgrounds. Marketing backgrounds tend to be considered less frequently, especially in the B2B sector. It may be that marketing positively correlates to performance only when the executive has had strategic market-ing experience. Understanding how to focus the company and targeting it to the right buyers may be more valuable than tactical sales execution. Clearly, both marketing strategy and sales execu-tion are required for the functioning of a company, but the question here is who is at the helm and what bias they bring to the thinking of its strategy.

Finance

P AT T E R N S D E T E C T E D16% of CEOs in our study had experience in finance, with the majority (83%) of these CEOs in companies with revenues between $100 M – $1 B. CEOs with finance experience constitute 11% of CEOs at companies with revenues greater than $1 B and 17% of CEOs at companies with revenues between $100 M – $1 B.


In companies with revenues between $100M – $1 B, CEOs without finance experience produced significantly higher 3-year growth rates.

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VC / Private Equity Background

No VC / Private Equity Background

400%

300%

200%

100%

0%

-100%

3-Y

ear

Gro

wth

Rat

e

Company Performance by CEO ExperienceAll Companies

Min, -22%

Median, 82%

Max, 8394%

Min, 66%

Median, 200%

Max, 360%

CEOs without finance experience produced significantly higher median 3-year growth rates than CEOs with finance backgrounds in companies with revenues between $100 M – $1 B. However, the highest performing CEO had a finance background, so there are exceptions to the rule.

K E Y TA K E - A W AY SFinancial acumen, including a clear understanding of performance measurements, is a vital requirement for an executive, especially in this era of higher regulation. Financial executives tend to be well prepared for the top role because they have access to the boardroom at very early stages in their careers.

Perhaps the correlation between prior finance roles and lower corporate growth rates is because financial executives tend to be selected in turnaround or financial re-engineering situations that have measures of success other than revenue growth.

Venture Capital or Private Equity

P AT T E R N S D E T E C T E DOnly 8% of CEOs had venture capital or private equity experience and most of these were in smaller companies.

S O W H E R E W E R E T H E D I F F E R E N C E S ?As with strategy backgrounds, VC and investment experience correlates with higher median 3-year growth rates, but these executives are in a minority (8%) and found mainly in companies with revenues between $100 M – $1 B.

K E Y TA K E - A W AY SVenture Capital and Private Equity often attract the best and brightest. In our sample, the perfor-mance by CEOs with experience in VC or private equity firms was superior to their peers. As with consulting or strategy backgrounds, when VC or private equity experience is paired with opera-tional capability, it can become a very potent background for a CEO.

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39%

37%

24%

67%

33%

52%

28%

21%

All>$ 1 B$100 M – $1 B

100%

80%

60%

40%

20%

0%

Externally Hired

Internally Promoted

Founder

Company Revenue

CEO Distribution

Topic Three: Internal vs. External Hire


39% of all CEOs were founders. However, all the founders were in companies with revenue between $100 M – $1 B.

◆Founders constitute 52% of CEOs in companies between $100M – $1B.

◆14% of these founder-CEOs were co-founders who were promoted into the CEO slot.

◆37% of all CEOs were internally promoted, including 67% of CEOs at companies with revenue > $1 B.

◆24% of CEOs were recruited externally.

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Externally HiredFounder

200%

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

Company Performance by CEO OriginationAll Companies

Min, 12%

Median, 93%

Max, 607%

Min, 33%

Median, 89%

Max, 8394%

Internally Promoted

Min, -22%

Median, 58%

Max, 407%


Founders turned in the best revenue growth rates, partially because they are all in smaller companies.

Founders and externally hired CEOs both had an edge over internally promoted CEOs in terms of 3-year median growth rates.

The performance difference between external hires and internally promoted executives is significantly greater (3x greater) for companies with revenues > $1 B than for companies with revenues between $100 M – $1 B.

Externally HiredInternally Promoted

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

CEO Performance by Background ExperienceCompany Revenue >$1 B

Min, -22%

Median, 35%

Max, 342%

Min, 33%

Median, 99%

Max, 200%

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In companies with revenue between $100M – $1B, founders outperform all other CEOs, but they have only a slight edge over external hires.

Founders who can scale in management skills as the company grows are able to apply their in-depth knowledge and passion to drive higher growth rates.


Entrepreneurial founders are passionate and intimately knowledgeable about the products and markets they serve. There are many founders that have the ability to scale their skills as the company grows and deliver superior performance in companies up to $1 B in revenue.

It was surprising that external hires outperformed internal hires even in larger companies, where you’d expect greater bench strength.

In spite of this, 75% of CEOs in the larger companies were internal promotions.

There may be a bias to bet on the ones you know intimately when internal and external candidates are each a close fit for the CEO role. Conversely the bar for external candidates may be slightly higher.

Companies with a strong succession planning process give internal candidates opportunities to develop their skills and vie for the CEO slot. But these companies go with outside candidates when the external candidates are clearly a better fit than anyone in the internal pool. Even when they select an external CEO, the internal talent pool is typically strengthened as a result.

Externally HiredFounder

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

e

Company Performance by CEO OriginationCompany Revenue $100 M to $1 B

Min, 12%

Median, 93%

Max, 607%

Min, 66%

Median, 89%

Max, 8394%

Internally Promoted

Min, -20%

Median, 66%

Max, 407%

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3%16%

53%

29%

11%

67%

22%

3%17%

48%

31%

All>$ 1 B$100 M – $1 B

100%

80%

60%

40%

20%

0%

60–69

50–59

40–49

30–39

Company Revenue

CEO Age Distribution

Topic Four: Age


Smaller companies have a higher percentage of CEOs older than 60.

The predominance of older CEOs in companies with revenues between $100 M – $1 B is partially attributable to over half of these CEOs being founders.

FounderNon-Founder

100%

80%

60%

40%

20%

0%

60–69

50–59

40–49

30–39

Non-Founder vs. Founder Age DistributionCompany Revenue $100 M to $1 B

7%13%

33%

47%

21%

64%

14%

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Interestingly, there was no apparent correlation between age and overall tenure at a company.

Nor is there an apparent correlation between age and tenure as CEO of that company.

0 5 10 15 20 25 30 35 40

Ag

eCorrelation between Age and Tenure at Company

All Companies

Tenure at Company

70

65

60

55

50

45

40

35

0 5 10 15 20 25 30

Ag

e

Correlation between Age and Tenure as CEOFounders vs. Non-Founders

Tenure as CEO

70

65

60

55

50

45

40

35

Founders

Non-Founders

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60–6950–5938–49

200%

150%

100%

50%

0%

-50%

3-Y

ear

Gro

wth

Rat

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Company Performance by CEO Age GroupCompany Revenue >$1 B

Min, -22%

Median, 66%

Max, 342%

Min, -3%

Median, 29%

Max, 61%

Median, 106%

Age Group

60–6950–59

300%

200%

100%

0%

-100%

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Company Performance by CEO Age GroupCompany Revenue $100 M to $1 B

Min, -20%

Median, 85%

Max, 407%

Min, 12%

Median, 56%

Max, 252%

Median, 156%

38–49

Age Group

Min, 76%

Max, 8394%


CEOs between 38-49 years old do correlate with higher median 3-year growth rates.

In part, this is because companies with revenue between $100 M –$1 B are over-represented in the youngest age group. However, the performance edge of younger CEOs is consistent when looking at CEOs from the smaller companies by themselves.

The edge of younger CEOs is consistent, though more muted, in companies with revenues > $1 B.

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Interestingly, the only CEO of a company with > $1 B in revenue who was under 50 outperformed the majority of CEOs.


Youth can be a real asset to emerging companies, especially those under $1 B. In technology com-panies, executives familiar with emerging technology tend to be younger.

Ages 50-59 seem to be ideal for optimal company growth for companies > $1 B.

13%

39%

13%

24%

22%

33%

11%11%

22%

10%

41%

14%10%

24%

11%

All>$ 1 B$100 M – $1 B

100%

80%

60%

40%

20%

0%

>20

16–20

11–15

6–10

4–5

Company Revenue

Distribution of CEOs by Tenure at Company

Topic Five: Tenure


Of the CEOs who have been in their position at least 3 years – the focus of our research – over 87% have been at their companies more than 5 years.

The pattern of tenure at their current company for the CEOs in our study is fairly consistent across company size. The exception is that in larger companies the mix of CEOs who have been there less than 10 years is tilted more towards those who have been there less time – between 4 – 6 years.

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Company Performance Comparison by CEO Tenure GroupAll Companies

Years in Current Company as CEO3.1–6<3

Min, -22%

Median, 99%

Max, 407%

Min, -17%

Median, 43%

Max, 110%

Min, -5%

Median, 59%

Max, 8394%

>6

21%

44%

13%10%10%

44%

33%

22%

14%

48%

10%

14%

14%

All>$ 1 B$100 M – $1 B

100%

80%

60%

40%

20%

0%

>20

16–20

11–15

6–10

4–5

Company Revenue

Distribution of CEOs by Tenure as CEO

Of the CEOs who have been in their position at least 3 years – the focus of our research – over 79% of CEOs have been CEO at their companies more than 5 years.

The pattern of tenure as CEO at their current company is dramatically different by company size. CEOs at larger companies are much more likely to be replaced after 5 – 10 years. Longer tenure at companies with revenues between $100 M – $1 B reflect that over 50% of these CEOs were founders.

Our comparisons in this research are primarily among the 38 public technology companies in New England with at least 3 years of reported results for the current CEO. It is important to observe that including the 13 companies who had replaced their CEOs in the last 3 years (with an average tenure as CEO of .85 years), the average tenure overall as CEO was 5.4 years.

S O W H E R E W E R E T H E D I F F E R E N C E S ?Not surprisingly, the median 3-year growth rate was smallest for companies that replaced their CEO in the last 3 years.

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Company Performance Comparison by CEO Tenure GroupCompany Revenue $100 M to $1 B

Min, -5%

Median, 77%

Max, 8394%

Min, -17%

Median, 43%

Max, 110%

Min, -20%

Median, 89%

Max, 407%

150%

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-50%

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Years in Current Company as CEO

>63.1–6<3

◆While some CEOs were replaced due to death or age-related retirement, most CEO replacements could be tied to company struggles to reach growth targets.

◆It was also surprising to see that the median 3-year growth rate for CEOs who have been in the saddle for 3 – 6 years was significantly higher than that for longer-tenured CEOs.

The difference in median 3-year growth rate was much less for companies with revenues between $100 M – $1 B.

The difference in median 3-year growth rate was markedly greater for CEOs who have been in the saddle for 3 – 6 years in companies with revenues over $1 B.

3.1–6

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Min, -3%

Median, 21%

Max, 61%

Min, -22%

Median, 106%

Max, 343%

Company Performance Comparison by CEO Tenure GroupCompany Revenue >$1 B

Years in Current Company as CEO

>6

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C H A R A C T E R I S T I C S O F S U C C E S S F U L T E C H N O L O G Y C E O s28

In the chart below, we compare the 3 year growth rate for the companies that recently changed CEOs for the 3 years before the change, with the growth rate since the new CEO – normalized to a 3 year growth rate – in order to compare it with the last 3 years of growth for the companies with long term CEOs.

Comparing companies with recently changed CEOs against companies that had CEOs in place for at least 3 years is tricky, since there is no 3-year track record for the same period.

The story shown here is that:

◆most of the companies who changed CEOs in the last 3 years were growth challenged (the com pany growth slowed before the transition)

◆things have improved slightly after the CEO change

◆but growth remains slower than at companies with CEOs who have been in place at least 3 years.

The implication is that when CEO transitions result from growth shortfalls, it can take a period of time to show significant improvement.


Although there is much talk recently about the average tenure of CEOs declining, this trend is not as strong among technology companies. Only 25% of these companies changed CEOs in the last 3 years – and in 4% of all companies, the CEO transition was due to a death of the founder.

However, it is the case that CEOs who have been in place between 3 – 6 years outperform their peers with longer tenure as CEO, especially in the larger companies.

Min, -22%

Median, 85%

Max, 8394%

Min, -17%

Median, 43%

Max, 110%

Min, -6%

Median, 43%

Max, 237%

Long Term CEOsPost Recent CEOs –Normalized

Prior to Recent CEOs

Contrast Company Performance Before and After CEO Replacementvs. Companies with Long Term CEOs - All Companies

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Topic Six: Combined Chairman and CEO


Fewer than 50% of companies had independent Chairmen, and companies with revenue be-tween $100 M – $1 B are slightly more prone to allowing one person to hold the combined roles.


Companies with independent chairmen outperformed companies that combined roles.

47%

53%

56%

44%

45%

55%

All>$ 1 B$100 M – $1 B

100%

80%

60%

40%

20%

0%

CEO &Chairman

CEO

Company Revenue

CEO Only vs. CEO & Chairman Distribution

CEO Only vs. CEO & Chairman Performance ComparisonAll Companies

Min, -20%

Median, 63%

Max, 324%

Min, -22%

Median, 99%

Max, 8394%

CEO Only

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CEO’s Scope of ResponsibilityCEO & Chairman

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The performance edge was more marked in larger companies.

There is a smaller edge for companies with revenue between $100 M – $1 B.

CEO Only vs. CEO & Chairman Performance ComparisonCompany Revenue >$1 B

CEO Only

150%

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Min, -22%

Median, 99%

Max, 324%

Min, 10%

Median, 47%

Max, 106%

CEO Only vs. CEO & Chairman Performance ComparisonCompany Revenue $100 M to $1 B

Min, -20%

Median, 74%

Max, 324%

Min, -5%

Median, 98%

Max, 8394%

CEO Only

150%

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The smaller edge for companies with revenue between $100 M – $1 B may be due to the fact that there has not been an impetus to recruit an independent Chair when a strong founder has success-fully transitioned from start-up to mid-sized company. Formalizing a separate Chair role tends to happen as companies mature.


Companies with independent chairs do nominally outperform their peers based on median 3-year growth rates. However, the labels can mask actual division of responsibilities.

In some companies, a CEO transitioning to a Chair-only role may influence selection of a coopera-tive replacement CEO who lets the Chair still call the shots. In other companies, a strong CEO forced to accept an “independent” Chair may influence the selection to retain as much free reign as possible.

This is a controversial area and one that merits more investigation.

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Methodology for Vell Research on Characteristics of Successful Technology CEOs

Vell Executive Search selected public technology companies in New England with revenues over $100 M. Financial and technical data were collected from Hoovers, ZoomInfo, and archived press releases.

Companies where CEOs had been on board for less than 3 years were excluded from most analyses. The key exception was comparing performance of companies where the CEO has been on board for at least 3 years (38 companies) vs. companies that recently replaced the CEO (13 companies).

Companies where the CEOs educational background was not available were excluded from the educational analysis, leaving 34 companies for that analysis.

We intend to expand the analysis and would value hearing about your questions / concerns that may not have addressed in this phase of the research.

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About Vell Executive Search

Vell Executive Search is a boutique executive search firm where board, CEO, and C-level assignments are handled by experienced senior recruiters from the world’s largest firms – but able to focus more time and attention on a fewer searches in a smaller company setting.

Vell has two areas of focus: ◆ Finding board, CEO, and C-level searches for technology companies ◆ Finding CIOs and their key direct reports for public and large private companies

Clients range from VC-funded to F1000 companies throughout New England and Canada.

W H Y O U R C L I E N T S C H O O S E U S

Clients judge us by the caliber of candidate we help them recruit. Clients appreciate the speed and tight communication they experience during our searches.

Here’s how we do things differently to exceed our clients’ expectations.

Dedicated, Experienced RecruitersOur senior recruiters are veterans of the leading search firms, but at Vell Executive Search, they earn more working on fewer searches. They have more time and attention to focus on your search.

In-depth Meetings with Hiring Executives We can spend an entire day on-site interviewing the executive team and relevant board members. We uncover and resolve conflicts, get a fix on the culture, and walk the team through a core com-petency framework to ensure we surface all requirements.

Behavioral Interviewing of CandidatesWe dig beneath candidates’ practiced responses to standard questions with behavioral interview-ing. This approach ensures potential issues are surfaced before any offers are extended.

Tight CoordinationWe meticulously track progress and status with candidates – making it easy to share status weekly with you. And we respond to questions within 4 hours – 7 x 24.

Accommodate Your TimeframeWhether you need to complete a hire by a deadline or you prefer to take a longer time to find the ideal candidate, we have the flexibility to accommodate your schedule.

Deeper Reference CheckingOur extensive network of senior executives enables us to check blind references to reduce the risk of post-hire surprises.

Speedy NegotiationsWe’ve developed a methodology that ensures compensation issues are surfaced and resolved early. This minimizes the risk of losing other terrific candidates while heading for a dead-end with the initial choice.

T O L E A R N M O R EFor more information on Vell Executive Search please visit www.vell.com, email [email protected], or call 781-416-4003.

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34

Dora Vell is CEO of Vell Executive Search, a boutique executive search firm in Boston. Ms. Vell has successfully completed numerous board member and C-level executive searches – including CEOs, COOs, CIOs, and Vice Presidents – at both public and VC-funded companies.

Ms. Vell was a partner in the Heidrick & Struggles technology practice for seven years. Prior to her career as a search professional, Dora Vell successfully managed both a 100-person development project and a $150 million sales organization at IBM. Her sales and P&L experience at IBM has proven useful in sales and marketing searches as well as with GM, CEO, and COO searches.

As the holder of seven worldwide patents, Dora has an unusually technical background for a search executive, but one that helps her better understand the needs of technology clients and technical executive roles as well as probe candidates for the depth of their technical experience and expertise.

Ms. Vell has published and been quoted in numerous articles including the Wall Street Journal, Global CEO magazine, Mass High Tech, the OPUS for the World Economic Forum, Boston Business Journal, Globe and Mail, CIO.com and IEEE. She has been a featured speaker on leadership at numerous conferences.

Ms. Vell currently serves on the advisory board of Zoominfo and is a member of the board of Entrepreneur’s Organization. She is also a member of the Boston Club and the NACD, having completed the director professionalism course. She previ-ously served on the boards of Goodwill, Mary Centre for developmentally handi-capped adults, garage.ca and RBC Capital Partners Telecommunications Practice.

Ms. Vell received an MBA from the University of Toronto, a Master in Computer Science from the University of Waterloo and a Bachelor in Computer Science from Carleton.

Email: [email protected] Phone: 781.416.4088 office 617.416.9088 mobile

Dora VellCEO

www.vell .com

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If you would like to discuss any aspect of this study

further, please contact us at [email protected]. Your

input will help fuel investments in future research

we publish. Additional printed versions of this

report may be available upon request. Electronic

copies can be downloaded from www.vell.com.

We hope that you found this study both informative and insightful.

www.vell .com

Vell Executive Search1050 Winter Street, Suite 1000 Waltham, MA 02451Phone: 781-416-4003 Fax: 781-207-0553

[email protected]

www.vell.com

$125.00

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