Amid all the confessions and revelations arising from the publication of Lord Browne’s autobiography this week, one comment from the ex-BP boss struck home. “I did not know how to leave… there always seemed to be something I wanted to follow through,” he writes. This admission that he stayed too long at the top—he was chief executive for 12 years—should re-ignite the debate surrounding CEO tenure. And it’s high time it did.

The issue was compounded yesterday when shadow chancellor George Osborne, in announcing his party’s plans for employee-run, public sector co-operatives, told the Today programme, “One would hope that in any organisation where bosses had completely lost the confidence of staff then one would look at the future of those bosses.”

While it will be a while before any failing bosses are given the heave-ho by workers, it could create an interesting dilemma for UK corporate governance. But, as Lord Browne’s experience shows, it’s not just struggling bosses who fail to recognise when it’s time to go. One of the main reasons that both ITV and Marks & Spencer have had to pay out such huge sums to attract new CEOs is that the incumbent leaders failed to have proper succession plans in place. While this wasn’t down to chief executives overstaying their welcome, the only way to focus minds on succession is to have a relatively clear timetable for the handover.

What constitutes the right length of tenure will vary by company, industry and market. No one is suggesting that we set a prescriptive one-size-fits-all term limit for CEOs. But succession planning is impossible without a clear idea of when the change might happen. By leaving too soon a CEO risks handing on to an inexperienced or ill-prepared successor, by staying too long potential successors either leave or are destroyed—along with the company’s continued success—by internal politics and in-fighting. As any observer of the Labour party over the last decade will tell you, there’s little more disheartening than an organisation in a state of perpetual battle with itself.

There’s also a more mundane reason for leaders to plan for their own departure. Put simply, it’s difficult to maintain enthusiasm for a job you’ve been doing for over a decade. While there are always exceptions, as a general rule most products follow the classic lifecycle model, in which initial growth eventually flattens out, and is ultimately followed by a slump. Reviving sales or growth requires innovation. As time goes on, finding the energy for this reinvention gets harder. CEOs have a lifecycle, too.

But while it’s easy for others to recognise the time to let someone else take on the challenge of leadership, leaders rarely see it the same way. That’s why knowing your exit point in advance makes the decision easier for everyone.

Richard Cree

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