Successful Technology CEOs

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1 CHARACTERISTICS OF Successful Technology CEOs RESEARCH REPORT

2 CONTENTS 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.

3 3 INTRODUCTION 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 info@vell.com. Your input will help fuel investments in future research we publish. Best Regards, Dora Vell CEO

4 4 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs Topic One: Education PATTERNS DETECTED CEOs are highly educated Degree Distribution by Company Size % 16% 8% 16% 11% 11% 22% 33% 21% 15% 12% 21% PhD Master s Only Master s & MBA Bachelor s & MBA 2 36% $100 M $1 B >$ 1 B 22% All 32% Bachelor s Only Company Revenue 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)

5 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 5 CEOs with technical degrees predominate (59% of all CEOs in our study) and these are more likely to have advanced degrees. Level of Degree by Type % 7% 29% 43% Non-Technical 45% 15% 15% 25% Technical All 35% 12% 21% 32% Master s / PhD, no MBA Master s & MBA Bachelor s & MBA Bachelor s Only CEOs with Ivy League degrees were in the minority (4) 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) SO WHERE WERE THE DIFFERENCES? Not surprisingly, growth rates were lower at larger companies (61% vs. 93% median 3-year growth rates) CEO Performance by Company Size Max, 342% Median, 93% Median, 61% Min, $100 M $1 B Company Revenue > $1 B

6 6 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs MBAs outperform non-mbas at companies under $1 B in revenue (159% vs. 89% median 3-year growth rates) MBA vs. Non-MBA Performance Comparison Company Revenue $100 M $1 B Max, 324% Median, 159% Min, -5% MBA Median, 89% Min, -2 Non-MBA For companies over $1 B in revenue, the results were much closer, 61% for CEOs with MBAs vs. 7 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) Technical vs. Non-Technical Performance Comparison All Companies Max, 607% Median, 71% Non-Technical Median, 99% Min, -36% Technical Bachelor s Only Max, 407% Median, 101% Min, -3% Technical Master s/phd 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 800 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.

7 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 7 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) Technical vs. Non-Technical Performance Comparison Company Revenue > $1 B Max, 20 Median, 47% Non-Technical Max, 342% Median, 99% Min, -3% Technical Companies whose CEOs have Ivy-League degrees significantly outperformed companies of CEOs without (287% vs. 86%) Ivy vs. Non-Ivy Performance Comparison Company Revenue $100 M $1 B Max, 252% Median, 86% Min, -2 Non-Ivy League Median, 287% Min, 43% Ivy League

8 8 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs KEY TAKEAWAYS MBA 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 technical 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: Experience CEO / General Manager Experience PATTERNS DETECTED Only 29% of companies have a current CEO with prior CEO experience. CEO & GM Experience Distribution % 45% 31%{ 78% 28% 26% 3% 3% 29% } 34% 22% 26% $100 M $1 B >$ 1 B All Company Revenue GM Only CEO & GM CEO Only None 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 (7 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.

9 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 9 Inversely, 72% of CEOs had General Manager experience, either at current or prior companies GM Experience Distribution % 1 45% 22% 33% 11% 16% 45% }72% Both GM Current Only GM Prior Only % 44% 29% None $100 M $1 B >$ 1 B All Company Revenue 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. SO WHERE WERE THE DIFFERENCES? Prior CEO experience correlates to higher median 3-year growth rates. 125% 10 75% 5 25% -25% Company Performance by CEO Experience All Companies Median, 66% No Prior CEO Experience Max, 607% Median, 89% Min, 32% Prior CEO Experience

10 10 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs However, the advantage is more pronounced at large companies Company Performance by CEO Experience Company Revenue > $1 B Max, 342% Median, 33% No Prior CEO Experience Max, 20 Median, 13 Min, 61% Prior CEO Experience 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 7 of CEOs are founders - CEOs with prior CEO experience outperform their peers, but by a smaller edge. 125% 10 75% 5 25% -25% Company Performance by CEO Experience Company Revenue $100 M to $1 B Median, 77% Min, -2 No Prior CEO Experience Max, 607% Median, 89% Min, 32% Prior CEO Experience

11 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 11 General Manager (GM) experience initially appears to be detrimental to median 3-year growth rates Company Performance by CEO s GM Experience All Companies Median, 98% Min, -2 Prior Company Only Max, 106% Median, 39% Current Company or Both Where CEO Was GM Max, 607% Median, 11 Min, 12% No GM Experience This can be partially explained because CEOs at companies with over $1 B in revenue are overrepresented 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 Company Performance by CEO Experience Company Revenue > $1 B Max, 342% Median, 33% No Prior CEO Experience Max, 20 Median, 13 Min, 61% Prior CEO Experience

12 12 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 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 Company Performance by CEO s GM Experience Company Revenue $100 M to $1 B Median, 89% Min, -2 GM Prior Only Max, 56% Median, 43% Min, -5% GM Current or Both Where CEO Was GM Max, 607% Median, 11 Min, 12% No GM Experience 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. KEY TAKE-AWAYS 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 importance 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.

13 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 13 Strategy Role PATTERNS DETECTED 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. SO WHERE WERE THE DIFFERENCES? Median 3-year growth rate was higher for those CEOs with Strategy backgrounds CEO Performance by Background Experience All Companies Median, 82% No Strategy Background Max, 607% Median, 159% Min, -5% Strategy Background 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. KEY TAKE-AWAYS 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 executives 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.

14 14 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs Consulting Role PATTERNS DETECTED 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 vendors, it is not surprising that only a small subset had a consulting background. SO WHERE WERE THE DIFFERENCES? Consulting experience correlates with higher median 3-year growth CEO Performance by Background Experience All Companies Median, 76% No Consulting Background Max, 159% Median, 11 Min, 106% Consulting Background 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. KEY TAKE-AWAYS 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.

15 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 15 Engineering Role PATTERNS DETECTED 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. SO WHERE WERE THE DIFFERENCES? Median 3-year growth rate was higher for those CEOs with prior engineering functional roles CEO Performance by Background Experience Company Revenue $100 M $1 B Median, 66% No Engineering Background Max, 407% Median, 98% Min, 43% Engineering Background Again, while the median 3-year growth rate was higher for those CEOs who had held engineering 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. KEY TAKE-AWAYS 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 repositioning 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 decidedly strong indicator for performance.

16 16 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs Sales & Marketing Roles PATTERNS DETECTED Most CEOs (66%) did not come from a Sales & Marketing background. CEO Background Distribution % 7% 1 11% 11% 11% 16% 8% 11% Both Marketing Only 6 Sales Only 4 66% 67% 66% None 2 $100 M $1 B >$ 1 B All Company Revenue This was consistent across the different company sizes. Of those with sales or marketing backgrounds, roughly half were likely to have a combined sales and marketing background. 8 of the CEOs with combined sales and marketing experience were in the smaller companies. SO WHERE WERE THE DIFFERENCES? The top performers were CEOs with marketing rather than sales backgrounds Company Performance by Background Experience All Companies Max, 252% Median, 79% Sales & Marketing Max, 36 Median, 147% Min, 1 Median, 20 Min, -2 Sales Only Marketing Only Background Max, 607% Median, 87% Min, -5% Neither

17 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 17 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 executive, who focuses on field marketing as opposed to strategy and product management / marketing. KEY TAKE-AWAYS 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 marketing 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 execution 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 PATTERNS DETECTED 16% 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. SO WHERE WERE THE DIFFERENCES? In companies with revenues between $100M $1 B, CEOs without finance experience produced significantly higher 3-year growth rates Company Performance by CEO Experience Company Revenue $100 M to $1 B Median, 91% Min, -2 No Finance Background Max, 159% Median, 43% Min, -5% Finance Background

18 18 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 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. KEY TAKE-AWAYS Financial 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 PATTERNS DETECTED Only 8% of CEOs had venture capital or private equity experience and most of these were in smaller companies. SO WHERE WERE THE DIFFERENCES? 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 Company Performance by CEO Experience All Companies Median, 82% No VC / Private Equity Background Max, 36 Median, 20 Min, 66% VC / Private Equity Background KEY TAKE-AWAYS Venture Capital and Private Equity often attract the best and brightest. In our sample, the performance 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 operational capability, it can become a very potent background for a CEO.

19 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 19 Topic Three: Internal vs. External Hire PATTERNS DETECTED 39% of all CEOs were founders. However, all the founders were in companies with revenue between $100 M $1 B. CEO Distribution % 28% 52% 33% 67% 24% 37% 39% Externally Hired Internally Promoted Founder $100 M $1 B >$ 1 B All Company Revenue 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.

20 20 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs SO WHERE WERE THE DIFFERENCES? Founders turned in the best revenue growth rates, partially because they are all in smaller companies Company Performance by CEO Origination All Companies Max, 607% Median, 93% Min, 12% Founder Max, 407% Median, 58% Internally Promoted Median, 89% Min, 33% Externally Hired 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 CEO Performance by Background Experience Company Revenue >$1 B Max, 342% Median, 35% Internally Promoted Max, 20 Median, 99% Min, 33% Externally Hired

21 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 21 In companies with revenue between $100M $1B, founders outperform all other CEOs, but they have only a slight edge over external hires Company Performance by CEO Origination Company Revenue $100 M to $1 B Max, 607% Median, 93% Min, 12% Founder Max, 407% Median, 66% Min, -2 Internally Promoted Median, 89% Min, 66% Externally Hired 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. KEY TAKE-AWAYS 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.

22 22 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs Topic Four: Age PATTERNS DETECTED Smaller companies have a higher percentage of CEOs older than 60. CEO Age Distribution % 48% 22% 67% 29% 53% % 3% $100 M $1 B 11% >$ 1 B All 16% 3% Company Revenue 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. Non-Founder vs. Founder Age Distribution Company Revenue $100 M to $1 B 10 14% % 47% 33% % Non-Founder 13% 7% Founder 30 39

23 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 23 Interestingly, there was no apparent correlation between age and overall tenure at a company. 70 Correlation between Age and Tenure at Company All Companies Age Tenure at Company Nor is there an apparent correlation between age and tenure as CEO of that company. 70 Correlation between Age and Tenure as CEO Founders vs. Non-Founders Age Founders Non-Founders Tenure as CEO

24 24 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs SO WHERE WERE THE DIFFERENCES? CEOs between years old do correlate with higher median 3-year growth rates Company Performance by CEO Age Group Company Revenue $100 M to $1 B Median, 156% Min, 76% Max, 407% Median, 85% Min, -2 Max, 252% Median, 56% Min, 12% Age Group 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 Company Performance by CEO Age Group Company Revenue >$1 B Median, 106% Max, 342% Median, 66% Age Group Max, 61% Median, 29% Min, -3% 60 69

25 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 25 Interestingly, the only CEO of a company with > $1 B in revenue who was under 50 outperformed the majority of CEOs. KEY TAKE-AWAYS Youth can be a real asset to emerging companies, especially those under $1 B. In technology companies, executives familiar with emerging technology tend to be younger. Ages seem to be ideal for optimal company growth for companies > $1 B. Topic Five: Tenure PATTERNS DETECTED 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. Distribution of CEOs by Tenure at Company 10 24% 22% 24% > % 11% 11% 11% 13% % 33% 39% $100 M $1 B >$ 1 B 22% All 13% 4 5 Company Revenue 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.

26 26 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 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. Distribution of CEOs by Tenure as CEO % 14% 1 48% 14% $100 M $1 B 22% 33% 44% >$ 1 B All % 44% 21% > Company Revenue 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 5 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. SO WHERE WERE THE DIFFERENCES? Not surprisingly, the median 3-year growth rate was smallest for companies that replaced their CEO in the last 3 years Company Performance Comparison by CEO Tenure Group All Companies Max, 11 Median, 43% Min, -17% Max, 407% Median, 99% < Years in Current Company as CEO Median, 59% Min, -5% >6

27 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 27 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 Company Performance Comparison by CEO Tenure Group Company Revenue $100 M to $1 B Max, 11 Median, 43% Min, -17% Max, 407% Median, 89% Min, -2 Median, 77% Min, -5% < >6 Years in Current Company as CEO 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 Company Performance Comparison by CEO Tenure Group Company Revenue >$1 B Max, 343% Median, 106% Max, 61% Median, 21% Min, -3% >6 Years in Current Company as CEO

28 28 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 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. Contrast Company Performance Before and After CEO Replacement vs. Companies with Long Term CEOs - All Companies 15 Max, 237% Max, Median, 85% 5-5 Median, 43% Min, -17% Prior to Recent CEOs Median, 43% Min, -6% Post Recent CEOs Normalized 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. KEY TAKE-AWAYS 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.

29 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 29 Topic Six: Combined Chairman and CEO PATTERNS DETECTED Fewer than 5 of companies had independent Chairmen, and companies with revenue between $100 M $1 B are slightly more prone to allowing one person to hold the combined roles. CEO Only vs. CEO & Chairman Distribution % 44% 53% CEO & Chairman 6 CEO % 56% 47% $100 M $1 B >$ 1 B All Company Revenue SO WHERE WERE THE DIFFERENCES? Companies with independent chairmen outperformed companies that combined roles CEO Only vs. CEO & Chairman Performance Comparison All Companies Median, 99% Max, 324% Median, 63% Min, -2 CEO Only CEO & Chairman CEO s Scope of Responsibility

30 30 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs The performance edge was more marked in larger companies CEO Only vs. CEO & Chairman Performance Comparison Company Revenue >$1 B Max, 324% Median, 99% Max, 106% Median, 47% Min, 1 CEO Only CEO & Chairman CEO s Scope of Responsibility There is a smaller edge for companies with revenue between $100 M $1 B CEO Only vs. CEO & Chairman Performance Comparison Company Revenue $100 M to $1 B Median, 98% Min, -5% Max, 324% Median, 74% Min, -2 CEO Only CEO & Chairman CEO s Scope of Responsibility

31 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 31 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 successfully transitioned from start-up to mid-sized company. Formalizing a separate Chair role tends to happen as companies mature. KEY TAKE-AWAYS 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 cooperative 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.

32 32 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 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.

33 CHARACTERISTICS OF SUCCESSFUL TECHNOLOGY CEOs 33 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. WHY OUR CLIENTS CHOOSE US 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 Recruiters Our 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 competency framework to ensure we surface all requirements. Behavioral Interviewing of Candidates We dig beneath candidates practiced responses to standard questions with behavioral interviewing. This approach ensures potential issues are surfaced before any offers are extended. Tight Coordination We 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 Timeframe Whether 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 Checking Our extensive network of senior executives enables us to check blind references to reduce the risk of post-hire surprises. Speedy Negotiations We 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. TO LEARN MORE For more information on Vell Executive Search please visit, info@vell.com, or call

34 34 Dora Vell CEO 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 previously served on the boards of Goodwill, Mary Centre for developmentally handicapped 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. dora@vell.com Phone: office mobile

35 35 We hope that you found this study both informative and insightful. If you would like to discuss any aspect of this study further, please contact us at 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.

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