The article “Experience matters? The impact of prior CEO experience on firm performance” by Monika Hamori and Burak Koyuncu was chosen for the analysis. It investigates whether appointing CEOs with prior experience leads to poorer financial performances as compared to situations where the newly appointed CEO did not have the experience in this position. Overall the article is well-structured and formatted, the information is presented in a manner that is easily accessible, and the most important parts of the study are highlighted with italics. In addition, the authors manage to engage readers with attention-capturing sentences, such as the one used as the title of the article: “Experience matters? The impact of prior CEO experience on firm performance”. The key findings and statements of the study are conveniently placed on the sides of the page, which provides readers with context and captivates their attention.
The success of any company is majorly associated with the people that work there, especially in higher executive and managerial positions. Therefore, the companies pay a lot of attention to selecting and hiring candidates for the position of Chief Executive Officer. The statistics provided in the article show that between 1997 and 2002 the rate of the CEOs that had had prior CEO experience was lower than 5 percent, while between 2007 and 2009, the number grew to be nearly 20 percent (Hamori & Koyuncu, 2015). Such a tendency represents the way companies approach their hiring process. Most of them are reluctant to take risks in assigning the position to an inexperienced candidate. However, the study finds that the actual financial performance of the companies that hire experienced CEOs is actually poorer than that of those that hire inexperienced ones.
The article is based on the study, which develops six main hypotheses, each investigating the role that experience plays in the firm’s post-succession financial performance. Each hypothesis is based on the premise that CEOs without prior experience have higher post-succession rates as compared to the ones that made a transfer from a different company. Further, the article explains the reasons and factors that contribute to such underperformance. The key financial parameters that are used to evaluate companies’ financial performance include industry-adjusted return on assets (ROA) and industry-adjusted return on sales (ROS) (Hamori & Koyuncu, 2015). As the study uses the findings and some methodologies of previous research, the span of the financial performance indicators is selected to be three years, as in studies used for reference.
The study used in the article ensures its credibility and validity by identifying the control variables, which may influence the results of the study. The authors listed the variables and included factors such as functional background, organization size, industry type, and pre-succession form performance. In addition, the study focused on different types of succession, such as a direct and indirect move from a prior position. As a result, the study confirmed all of its hypotheses and proved that the previous experience at the CEO position had a negative effect on the company’s financial performance over three years. This is one of the key takeaways of the study, which is the first one that investigated the subject. The article enriched my understanding of the CEO position and broadened my perspective on the importance of experience in high managerial positions. The findings of the study correlated with my personal opinion that experience can often act as a burden to one’s creativity and open-mindedness, which is crucial for the dynamic business environment.
Reference
Hamori, M., & Koyuncu, B. (2015). Experience matters? The impact of prior CEO experience on firm performance. Human Resource Management, 54(1), 23-44.