Clock Ticks on CEO Performance

October 25, 2001 (PLANSPONSOR.com) - Today's CEOs have only five earnings quarters on average to prove themselves, according to a study released by communications consulting firm Burson-Marsteller.

Building CEO Capital, a study of influential business stakeholders reveals that the top two reasons for CEO failure are:

· the inability to execute well, and
· a lack of strategic vision.

In addition, the study revealed that 48% of a company’s reputation is attributed to a CEO’s reputation, a rise of 20% on the findings in the 1997 survey. Further, the trend is not confined to the US. The companion survey in the UK confirms the US findings with 49% attributed to the CEO.

Rep to Protect

In terms of the influence of CEO reputation:

· an overwhelming 95% of the sample said it affects their decision to invest in a company,
· slightly less said that it impacts their belief in a company under media fire,
· some 93% say it has bearing on whether they would recommend a company as a good alliance/merger partner,
· slightly less say it is influential in maintaining confidence in a company when its share price is lagging, and
· some 88% are more likely to recommend a company as a good place to work if the CEO is favorably regarded.

Tick Tock

The study also found that new CEOs are given, on average:

· eight months to develop a strategic vision,
· just over a year and a half to increase share price, and
· only 21 months to turn a company around.

Overall, the study cites five traits as critical for building a CEO’s reputation:

· being believable,
· demanding high ethical standards,
· communicating a clear vision inside the company,
· maintaining a high quality top management team, and
· motivating and inspiring employees.

Surprisingly, increasing shareholder wealth was not among the top five drivers.

Methodology

In addition, the study of 1,155 US chief executives, senior managers, financial analysts, institutional investors, business media and government officials.

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