What Influences Whether Bringing Back a Former CEO Revitalizes a Company?

Once again, we see a well-known company bring back its former CEO. This is something companies do during challenging times that occur after a former CEO with an impressivetrack record of success is no longer at the helm. The intent is that the former CEO will bring back what is needed to revitalize the company’s current less than stellar performance.

A recent example is the retail chain Dollar General, which brought back its former CEO Todd Vasos, who retired from his position at the company’s helm less than a year before. In the year since Vasos left the helm, the company faced performance struggles.  But, can this kind of change at the top revitalize Dollar General?

This was discussed in the article titled “CEO’s Return Is No Guarantee of Success”, which appeared in the October 16, 2023 Wall Street Journal’s “Heard on the Street” section. The article is subtitled “There is a long history of legendary chiefs coming back, but Dollar General might get shortchanged”. In explaining why the CEO’s return might not necessarily fix Dollar General, the article says, “The problems could even be down to structural or cyclical factors outside executives’ control. In Dollar General’s case, its model of selling to low-income shoppers that served it so well in previous downturns has performed poorly as inflation and curtailed government payments pinch that demographic group.”

In my view, as someone who has researched business success and failure for 25+ years, the Wall Street Journal article’s concern about Dollar General benefitting from a retuning CEO is consistent with the patterns I see. That said, I’ll point out that this blog post is intended to discuss situations where returning CEOs do well and why. It is beyond the scope of this blog post to assess to what degree that kind of success potential might be present at Dollar General, or if it is there at all.

Essentially, companies can do well by bringing back their former leader if that former CEO is better suited to understand and build on the company’s strengths than the current CEO is.  For example, Apple founder Steve Jobs, who returned as CEO, had a stronger background in technology than the CEO he replaced, whose prior experience was primarily in consumer packaged goods (PepsiCo). Thus, Jobs had greater potential to steer a technology company like Apple into successful new products than a CEO from PepsiCo could.

Companies can face challenges when an entrepreneurial CEO leaves. So, it may be beneficial when a founding CEO returns after being replaced by a seasoned executive hired to bring in professional management. That seasoned executive may bring an excellent background in management and organizational structure to the CEO role. But, if that CEO fails to understand what really drives the business, and tries to take the company in a direction not well suited to its strengths, the company can easily derail. A former CEO’s return can help fix such a situation, although the company will ultimately need some professional management in order to grow huge.

So, when a company’s new CEO takes the business too far away from its strengths, bringing back the former CEO may have a reasonably good chance of success. A former CEO’s return can work well even when replacing a current CEO who spent years with the company. This works well if the chief executive the former CEO replaces has been making drastic changes in the company’s direction, especially if those changes are very ill fitting. Essentially, bringing back a former CEO who has a good understanding of what drove the company’s success can work well when the current CEO is running the company in ways that don’t build on strengths. In this situation, the former CEO may be well equipped to take the company back to basics, where it can build on its strengths and be more successful.

Nonetheless, companies do have to evolve as market conditions shift. If major external changes create circumstances very different from what the former CEO knows how to handle, a return at the helm may not solve the company’s challenges. To succeed in this situation, the company may have to evolve in ways that the former CEO is no better suited to handle than the current CEO is. And, it is this kind of situation that Dollar General has to be cautious about, particularly since the company faces market changes that impact its core target demographic.

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