Boomerang CEOs: What Happens When the CEO Comes Back?

In the spring of 1985, the board of Apple Computer made the fateful decision to force out cofounder Steve Jobs. Apple struggled over the next decade, losing much of its market share and dominance in the personal computer industry. As it neared collapse in 1996, Jobs returned to retake the reins of the company he had created. Through a series of brilliant changes and innovations, Jobs helped refocus and rebuild Apple, which ultimately became one of the largest and most powerful companies in the world.

Jobs is certainly a unique case — yet, surprisingly, many other large and high-profile companies have turned to former CEOs, often called boomerang CEOs, in times of need. Dell, Enron, Google, Twitter, Snapchat, Best Buy, Starbucks, Yahoo, DuPont, Procter & Gamble, J.C. Penney, Reddit, Bloomberg, Urban Outfitters, and Charles Schwab, among others, all had former CEOs return to lead their organizations. But while boomerang CEOs appear to be prevalent, little was known until now about the implications of this practice.

To better understand the consequences of bringing back a former CEO, we collected and analyzed data on the performance of 167 boomerang CEOs of companies listed on the S&P Composite 1500 index from 1992 to 2017. We then compared their tenures with those of more than 6,000 other (non-boomerang) CEOs over the same period. This comparative investigation revealed some nonobvious insights and critical implications for leaders of large and small organizations.

The Possible Upside

Companies sometimes turn to former CEOs in times of crisis — which usually means that their successors have gotten into trouble and either resigned or been fired abruptly. One of the best arguments for bringing back former CEOs is that they are a known quantity, an attribute often important to employees and investors looking for reassurance that a company can get back on track.

Companies also elect to bring back boomerang CEOs when they want a leader who can hit the ground running. Most new chief executives must go through an initial learning period, becoming familiar with all the operational nuances of the new company. Even for an experienced executive, it takes time to gain the knowledge and skills that are specific to the CEO position in a particular company. For ex-chiefs intimately familiar with the business, however, much of this learning period may be reduced or even eliminated.