The former CEO returned with a bunch of them, but Jobs had only one

Author | Hanxing

Cover source | "The Godfather" poster

In 2022, a wave of CEO returns quietly emerged.

On November 20, 2022, Liu Qiangdong, who has stepped down as CEO for more than 7 months, suddenly returned and sent a salary reduction gift to JD.com's management "brothers". On the same day, Disney, which is about to turn 100, fired its current CEO and brought back Bob Iger, who had been at the helm of the company for 15 years, to save its growing loss-making streaming business.

When business difficulties are encountered, some companies begin to feel nostalgic and go back to the former CEO who led them forward. Wall Street refers to such CEOs as "boomerang CEOs."

However, boomerang throws are easy to catch and difficult to catch. The drama of the return of the king is staged from time to time, but more CEOs are unable to return to the sky, and can only sigh at their former merits.

The "fire captain" returned to the front line

Liu Qiangdong, who just stepped down as CEO of JD.com Group in April 2022, came out again not long ago.

According to a late LatePost report, on November 20, Liu Qiangdong participated in the JD.com operation and management training meeting through a video call. In the three-hour meeting, Mr. Liu argued that the company's operations were gradually deviating from the core strategy of "low prices" and criticized retail executives by name. He also announced at the executive meeting that by the end of 2022, 10% of executives at the vice president level and above will be eliminated last.

The day after the meeting, Liu Qiangdong issued an all-staff letter, announcing that from January 1, 2023, all senior managers above the deputy director and above and the corresponding P/T series will have their cash compensation reduced by 10%~20%, and the higher the position, the more it will fall.

Liu Qiangdong, who began to delegate power in 2018, officially announced his resignation as CEO in April 2022, after 18 years. When the outside world thought that this time was really "letting go", Liu Qiangdong, who had been behind the scenes for less than 8 months, "returned" strongly, and as soon as he came out of the mountain, he drastically reduced costs and increased efficiency for JD.com.

However, just two days before Liu Qiangdong's return, Jingdong Group released a good three-quarter report: revenue growth picked up, net profit attributable to the parent turned a year-on-year turnaround, and new businesses including JD.com, Jingxi, overseas business and technological innovation began to make profits.

Compared with firefighting, Liu Qiangdong's return is more about clarifying the company's core strategy and preventing problems before they occur.

Bob Eagle, former CEO of Disney, who reappeared on the same day as Liu Qiangdong, is a "firefighter" in the true sense.

On November 20, Disney announced the departure of current CEO Bob Chapek, and Iger will return to the role of Disney CEO. The former only sat in the CEO position for 33 months, while the latter was hailed as Disney's "prospective founder", serving as CEO for 15 years from 2005 to 2020.

According to Disney's financial report for the fourth quarter of fiscal 2022, the operating loss of the streaming business, which is regarded as the second growth curve, widened to US$1.47 billion from US$630 million in the same period last year. As of November 20, Disney's stock price fell more than 40% during the year.

New growth points have been unable to make profits, investor confidence continues to decline, and Disney, which is about to celebrate its 100th birthday, has to invite back the former "Prince Charming" to try to reverse the decline.

Since 2022, the global economic growth has slowed down, chills have risen, and more and more former CEOs have returned to the "rescue".

In April last year, in the face of shrinking trading volume and declining revenue in the Chinese market, Howard Schultz, the "father of Starbucks", served as interim CEO with a salary of $1 and went out to fight fires for the third time. His goal is to make Starbucks "China's number one Western consumer brand."

In September, Shi Yuzhu, founder and former CEO of Giant Network, who had not updated Weibo for seven months, posted an article announcing that he had returned to the front line of game research and development, and "it has been a long time since he caught the specific business of Giant Network." Prior to this, the revenue scale of Giant Network had shrunk for three consecutive years (2018-2021), and the 2022 half-year report showed that the company's net profit attributable to the parent fell by 13% year-on-year to 499 million yuan.

On October 28, Momo's parent company, Zhiwen Group, issued a management change notice, and the current CEO Wang Li resigned due to health reasons, and the position was taken over by Tang Yan, who resigned as CEO two years ago. In the two years since Tang Yan left, Momo's revenue and net profit have both declined, and the number of monthly active users has decreased by about 4 million year-on-year in 2021.

Or return to the CEO, or return to the front line, how can former CEOs save the company?

The long-standing CEO "comeback culture"

The successful cases represented by Jobs and others are an important reason why many companies are keen to ask the CEO of Boomerang to return to "fighting fires".

In 1985, Apple co-founder and former CEO Steve Jobs was expelled from Apple management because of his bossy management style. But in the 12 years since he left, Apple's market share has shrunk from its peak of 16 percent to 4 percent. Between 1995 and 1997, sales of Apple computers fell by 30 percent. In the first three quarters of 1997, Apple accumulated losses of more than $1 billion, and the company was on the verge of bankruptcy.

In August 1997, at Macworld in Boston, Jobs once again stood on Apple's main stage. Wearing his signature jeans paired with a black vest and collarless white shirt, he declared that "I, like so many others, are working together to help Apple get healthy."

At this conference, Jobs not only announced his return, but also announced a reconciliation and cooperation agreement with his old rival Microsoft. Apple agreed to make IE the default browser for Macs, and Microsoft invested $150 million in Apple in exchange for a non-voting stake.

On the day, Apple's stock price jumped 33%, closing at $26.31, and the market value increased by $830 million in one day. A year after Jobs' return, the all-in-one iMac came out, and Apple turned a profit.

Another firefighting CEO who is talked about is Howard Schultz, known as the "father of Starbucks".

During his first tenure as CEO (1986-2000), Schultz led Starbucks from a roadside stall selling coffee beans to a globally recognized coffee chain.

During the financial crisis in 2008, Schultz, who had retired for 8 years, once again became the CEO of Starbucks. After taking office, Schultz implemented a series of measures to reduce costs and increase efficiency, such as streamlining the number of stores, maximizing the benefits of a single store, and refusing to blindly expand. When he stepped down as CEO for the second time in 2017, Starbucks had 28,000 stores worldwide and an all-time market share of 51%.

There are also successful cases of Boomerang CEO "fire fighting" in China.

In 2000, Liu Chuanzhi stepped down as CEO of Lenovo Group and handed over the baton to Yang Yuanqing and Guo Wei. In 2005, Liu Chuanzhi stepped down as chairman of the board. In 2009, a series of financial problems following the acquisition of IBM's personal computer business exploded, and Lenovo suffered its first fiscal loss since going public, with a maximum quarterly loss of nearly $100 million.

In the face of operational difficulties, Liu Chuanzhi re-appointed as chairman of Lenovo Group, and helped Lenovo turn around within one year through organizational structure adjustment, establishment of executive reward mechanism and other measures.

But not all Boomerang CEOs can help the company out of its predicament and restore it to its former glory.

Twitter co-founder Dorsey stepped down as CEO in 2008, and the board brought Dorsey back as CEO in an effort to revive investor confidence and improve slowing user growth.

But until the end of his second CEO term in 2021, Dorsey did not achieve the goal of returning to user growth. The problem of "zombie fans" that has plagued the platform for many years has not only not been solved, but has become the "talking point" for Musk's acquisition of Twitter. During his second tenure as CEO, Twitter shares rose by only half the Nasdaq Composite.

Similar failures are not uncommon. In February 2021, Gome founder Huang Guangyu officially returned and shouted the slogan of "18 months to restore the original market position of the company".

However, in the first half of 2022, Gome suffered a net loss of nearly 3 billion yuan, and its operating cash flow was only more than 55 million yuan. By the end of November, Gome's share price was down more than 94% from the high when Huang Guangyu returned. (For details, see Snow Leopard Finance Agency's "1% Company| The Tragic Song of Guomei")

Someone put out the fire, someone added fuel to the fire, and it is not easy for the former CEO to return to turn around.

Success is less, failure is more

The strong return of former CEOs has often been accompanied by drastic reforms.

Jobs brought in the money Apple needed most at the time by reconciling with his old rival Microsoft. Schultz stopped the blind expansion of stores, implemented refined operations, and cut unnecessary expenses. Liu Chuanzhi developed a new executive incentive mechanism to improve operational efficiency. Liu Qiangdong proposed to reduce the salary of executives and eliminate the last place in the context of cost reduction and efficiency increase.

Various measures to improve the operating conditions of enterprises cannot be separated from one word of money.

CEOs who put out fires successfully, in the period after they return to power, will have two of the most significant changes in public companies: rising stock prices and improved financial data. These two data are not only important indicators to measure the success of the return of CEOs, but also the reasons for the CEO of listed companies before restarting.

However, the beautiful story of the return of the king and the end of the building is not easy to tell, and there are very few former CEOs who can become Jobs, Schultz, and Liu Chuanzhi.

On the one hand, it is not easy to send positive signals and curry favor with investors by recalling a prestigious former CEO.

In a paper published in 2020, MIT Sloan School of Management mentioned that according to statistics, the annual stock price performance of listed companies led by the CEO of Boomergang in the US stock market is on average 10.1% lower than their first term.

On the other hand, the timing of the return of former CEOs is usually a difficult time for business operations, and it is even more difficult to improve financial data.

According to an annual survey by Spencer Stuart, one of the world's top five executive search firms, 13 public companies in the S&P 500 have used former CEOs since 2010, and 8 of them have returned CEOs worse than their first term.

The survey report shows that although the restart of the former CEO of a listed company will bring strategic optimization and reform, the recall of the former CEO means the departure of the current CEO, and frequent changes in the company's strategy do not necessarily bring positive feedback.

Successful business managers have always been scarce resources, and a former CEO who is familiar with the company's business, can get started quickly, and has a certain prestige is often the best candidate when the company is changing. But their past glorious achievements are not only the embodiment of personal ability, but also inseparable from the influence of industry development dividends and market environment.

At that time, companies wanted to get out of the trough, and the aura of former CEOs alone was probably not enough.