CEO “successes” at global brands happen as often as unicorn sightings. In fact, the term may be as much of an oxymoron as “jumbo shrimp” or “military intelligence.”
Just ask Nike.
The past two CEO appointments (both external hires) have successfully steered the sports giant down a path that would be difficult for even the most technologically advanced sneakers to gain traction.
Nike has a new CEO and the internet is buzzing with optimism.
This is good news for the company, which has been in an alarming decline. Naturally, having studied and coached successors for over 16 years, I am equally optimistic.
I have overseen thousands of searches for new leaders for organizations, many of which were for CEOs who followed the founders of successful companies. In my opinion, Nike is finally heading in the right direction.
why? They went with someone who knew the company well and had a DNA match.
When I started a search company more than 16 years ago, I envisioned what a CEO transition would look like: an organ transplant. Since I live near the world's largest medical center, I had the opportunity to interview several transplant doctors about their secrets to successful surgeries. The answer is consistent, but a bit surprising. You might think the focus is on finding healthy organ donors, but the real art lies in finding tissue that is a match for the person in need of a transplant.
One doctor told me, “You can transplant a healthy heart into a healthy body, but if the tissues don't match, it's a terrible outcome for everyone.”
I think that's what happened with Nike for the past two CEOs. And hopefully that has been avoided under the new CEO.
Outgoing CEO John Donahoe's four-year tenure at Nike ended in disaster. Many speculated that the reason he didn't do well was because he moved away from Nike's core sales and marketing competencies. Donahoe bet on a direct-to-consumer digital strategy as a way to increase sales. And considering he started his business in a year of pandemics and lockdowns, it probably seemed like a good idea for a talented new CEO.
No matter how successful that strategy was during the pandemic, the company later suffered from its effects. Donahoe's plan stalled against the core competencies that built Nike's success: cutting-edge product innovation and culturally cool marketing. He also abolished the human interaction that made Nike so successful.
Interestingly, Donahoe's predecessor lasted just one year. He also had great talent, but it didn't work out.
So why is it so difficult to find a CEO who can lead Nike into a future where Phil Knight isn't running it? Founders often don't take their hands off the wheel. Too often we see brands held hostage to their founders and their vision. But that's not the case with Nike. What went wrong for the past two CEOs was simply a failure of organizational fit. And this suggests that Nike was unable to reflect on itself as a company and instead looked to the outside world for savior.
One of the few lessons we remember from Socrates is “Know thyself.” I think this may be a lesson that all companies and boards should learn before appointing new external leaders. And I think Nike's two failed CEOs in the past were victims of boards that overlooked this lesson. However, the new CEO appears to have a better chance as he appears to be the kind of person the organization “knows” about Nike.
Elliott Hill has been appointed as the new CEO. But unlike his two predecessors, Hill has long been familiar with Nike's DNA. You could say he's part of it too. His tenure with the company began in 1988 and he rose from intern to senior team leader before retiring in 2020.
After hiring two highly capable CEOs, Nike realized that if the tissues don't match, just as a perfectly healthy organ won't thrive in a transplant patient. It seems that they adopted it without considering whether it was appropriate or not. . Hill, on the other hand, knows Nike inside and out. He knows what brought them here. He is a tissue match equal to the family. I believe this means Nike is much more likely to pull out of the nose dive, and Wall Street already seems to agree.
So should companies only hire graduates to succeed their CEOs?Some experts think so. Harvard University recently published a study that quantified the high probability of failure and the cost to the company when a new CEO is hired externally. Their research found that fewer than 3% of these CEOs are likely to outperform their predecessors. Matthew Bidwell, a researcher at the Wharton Business School, says that while outsiders often appear to have more experience and education than insiders, they are paid more and perform better. It was found that the turnover rate was also high.
With Elliott Hill's long history and deep alignment with Nike's culture, there is reason to believe the company has finally found a leader who can return to its iconic path. The jury is out on whether Hill can restore the brand's footing, but one thing is certain: Nike is betting on real competition, not just talent, this time around. That's what it means.