Although the consumer industries have been seeing glimmers of optimism come back to the industry recently, there is no escaping the fact that it has been tough for everyone over the last few years. Something that I think is directly connected to this climate is the trend for returning CEOs. From fashion to FMCG, Chief Executives are coming back to businesses they formerly helmed. This could be down to any number of things – a desire for continuity, the fact that a returning CEO’s strategy will be easier to predict, or even the association of a particular figure with good times in a company’s history! Despite this pattern emerging, the individual cases are often very different. So are there any lessons we can learn?
The most recent instance of a CEO coming back in this way took place this week, with Julian Geiger returning to Aéropostale. The fashion retailer has not had a strong few years since Geiger originally left his position in 2010, and will be hoping that his reappointment can energise the company again. After all, the fact that he oversaw a stellar period for the business means that he is associated with good times, which might well count for something when a company needs positive reinforcement. And investors seemed to agree, too, with shares rising on the news.
Another company that required a similar boost last year was Procter & Gamble. The board responded by moving on Bob McDonald and recalling former boss AG Lafley. P&G was in need of reorganisation, and the fact that the board knew how Lafley operated will have played a key part in their decision. Subsequently, he has proceeded to make several bold restructuring moves, with plans now in place to sell off around half the company’s portfolio of brands. Time will tell whether these decisions are going to pay off in the stock market, but it seems as though P&G’s leadership is more settled with Lafley in the CEO’s chair.
It is interesting that so many of the companies that have recalled CEOs are those that are on a downward trajectory. One would think the fact that a CEO has been a part of a legacy of underperformance might reduce a board’s desire to see them back in the top spot. However, this is rarely the case. When it comes to department store J.C. Penney, the hire of Ron Johnson from Apple didn’t work. As such, the board turned to Mike Ullman in 2013 to get the business back on the right track. I think that it is possible that spending time away from a company might make a returning CEO a better leader. And going by the strong team Ullman has managed to build around him since rejoining, it looks like his business is set up well for the future.
There are many different scenarios in which a CEO comes back to helm a business. The case of Dell is a little different, but can provide lessons for many firms. Founder Michael Dell came back in to lead the business in 2007, and has since taken the company private, alongside PE house Silver Lake Partners. He has done this in order to implement his own long-term vision for the company, which may have caused shareholder unease. Dell’s situation, where the founder can afford to take the business private, is an exception, but businesses should not forget that a returning CEO can hold a great deal of power within a company. Their strategies for renewal and success should tie in with the board’s wherever possible, or conflict will be just around the corner!
Can you think of any other CEOs who have returned to a former employer, either to implement a turnaround or for another reason? Let me know at moira@thembsgroup.co.uk, and have a fantastic weekend.