Current:Home > InvestFor companies, rehiring a founder can be enticing, but the results are usually worse-DB Wealth Institute B2 Reviews & Ratings
For companies, rehiring a founder can be enticing, but the results are usually worse
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For a brief moment in a turbulent weekend in Silicon Valley, it seemed that tech CEO Sam Altman might become the latest ousted executive to return to the organization he helped to found — in this case, OpenAI, the artificial intelligence company who forced the entire tech industry to reorient when it released ChatGPT last year.
After his sudden firing Friday by OpenAI's board of directors, hundreds of OpenAI employees threatened to quit if Altman was not brought back. Investors campaigned to reinstate him. And Altman himself hinted at a possible return Sunday, less than 48 hours after the company's board announced his departure, when he posted a photo of himself wearing an OpenAI visitor badge to the social media site X. ("The first and last time I ever wear one of these," he wrote.)
Ousted CEOs who return to their companies, usually after an absence of several years — also known as "boomerang CEOs" — are a small but prominent genre of company leader. Often, companies turn to former executives in times of crisis or transition, like Bob Iger of Disney or Howard Schultz of Starbucks.
An outsize share of returning CEOs could also be called boomerang founders, or those who are coming back to the company they helped to found.
Among them are Jack Dorsey of Twitter, who was canned by Twitter's board in 2008 before returning in 2015, and Michael Dell, who stepped down from his namesake computing company in 2004 before its board asked him to return three years later.
Perhaps no founder has found more fame or success in returning than Steve Jobs, who co-founded Apple in 1976 and departed nine years later. After his return in 1997, Jobs steered the struggling Apple to the cultural powerhouse it remains today on the backs of products like the iPod and iPhone.
But research suggests that boomerang CEOs, including those who were founders, perform worse than first-time chief executives.
"Boomerang founders might be a sentimental story of re-unification between the company and its old founder CEO but the reality points that such returning CEOs make things worse," Kalin Kolev, a business professor at Marquette University, wrote in an email to NPR.
Kolev and a team of researchers studied the boomerang CEO effect, comparing the performance of 167 such CEOs to thousands of other top executives at S&P 1500 firms over a 25-year period.
They found boomerang CEOs performed "significantly worse," said co-author Chris Bingham, a professor at the University of North Carolina Kenan-Flagler Business School.
On average, the annual stock performance of their companies was more than 10% lower than their first-time CEO counterparts, the researchers found.
"Between the time in which they leave and return, changes inevitably occur in consumer preferences, competitors, suppliers, demographic shifts, or the broader economy," Bingham wrote in an email to NPR. That dynamic is especially true of fast-changing industries, like tech, he added.
And founders face particular challenges as returning CEOs, Kolev said.
"Founders are usually entrepreneurs who possess skills necessary to run a new venture," he said. "However, they often lack the administrative skills to run a larger and more complex firm."
In Altman's case, a potential return to OpenAI after only several days' absence would set him apart from most boomerang CEOs. And there's no indication he was a poor manager overwhelmed by the size or changes at the company.
"He has been out for [a] few days and nothing significant has changed with the company and the surrounding context/environment," Kolev said. "Him coming back might have a calming effect given the strong support he has among employees."
However, Bingham cautions that "the organization's internal chaos over the last few days is likely to have a lasting impact if Altman does in fact return."
Whether or not he will come back is unclear. On Sunday night, OpenAI told employees that Altman would not be returning. Then, hours later, Microsoft CEO Satya Nadella announced that Altman had been hired to co-lead a new artificial intelligence research team at Microsoft. But on Monday afternoon, The Verge reported that Altman was still attempting a comeback at OpenAI.
Fernando Alfonso contributed reporting.
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