Even the most credentialed chief executive officers (CEOs) struggle to lead their companies. Earlier this year, we saw CEOs from Boeing, Stellantis, Starbucks, Kohl’s Five Below and Hertz get knocked from their perches.

This year’s latest high-profile departure is Intel’s ousting of CEO Pat Gelsinger. Many of us grew up confidently buying desktop computers with the “Intel Inside” sticker slapped onto the central processing unit. However, over the four years Gelsinger was at the helm, a series of missteps allowed Intel’s rivals to surpass them.

Gelsinger underinvested in process leadership, and when he finally changed his tune, Intel was left behind as its top customers had already moved to the next generation of chip competitors. To be sure, Intel had begun to lose its competitive luster more than a decade prior when it made insufficient inroads into mobile. Still, Gelsinger had time to make moves but let his competitors outpace him. Not that Gelsinger was complacent; when he took over in 2001, he bet that Intel could become more competitive by manufacturing chips in the U.S. But running a company is hard, so whoever holds the CEO position needs to be good at their job.

More than 1,800 CEOs announced their departures from public companies in 2024, according to data from Challenger, Gray & Christmas. The number of exits is up 19 percent from the more than 1,500 departures during the same period last year, which was the previous year-to-date record. According to The Conference Board, more than 40 percent of CEOs were cut loose because they failed to turn their struggling companies around. But let’s be honest — it’s way more than that. Resignations and “leaving for personal reasons” are often euphemisms for being fired.

Public companies have boards of directors, whose primary job is to set CEO compensation and evaluate performance. The board regularly reviews the CEO’s strategic decisions, financial results, and leadership effectiveness. It ensures that corporate objectives are met and that the company remains competitive, sustainable, and well-managed. If the CEO fails to meet performance standards, breaches ethics, or leads the firm astray, the board may terminate their employment.

But who judges the performance of the CEOs of the approximately 99 percent of U.S. companies that are privately held? What if you are the CEO, and things are going poorly? At what point do you stop blaming the economy, your customers, your employees, or whatever else and realize that it’s you who must make changes proactively? One change you may want to consider is firing yourself and hiring a “real” CEO.

The accidental CEO

Danny owns an electrical services company boasting two locations, nearly 100 employees, and $30 million in revenue. Danny was an electrical apprentice, got his license, and was good at his craft; so, twenty-three years ago, he started a one-person shop. As his customer list grew, he hired more skilled electricians and administrative staff and purchased more equipment and vans. Danny’s company grew fairly well from Day One to the third year and then stagnated at about $2-3 million in revenue for a decade-and-a-half. He was a good leader in the sense that his employees knew what he wanted, and they were happy to abide by his instructions. Although the company stagnated, Danny had a good life.

Like many owners, Danny accidentally stumbled into the CEO role more by necessity than by design. It’s one of those unexpected consequences of building a business. As the company grows, the owner realizes there is a need to scale but doesn’t possess that skill set. At first, it’s manageable for the founder to be the CEO, but as the operations grow more complex, so do the demands. Before long, many businesses must find a way to manage the enterprise while freeing the owner to focus on what is most valuable to the company and enjoyable to the founder.

So, Danny hired his cousin’s kid, Charlotte, who had been educated in corporate leadership and apprenticed as an electrician. Danny wrote a profits interest agreement into her compensation package. Forgoing more immediate payments, she initially shrank profits by hiring a “junior” COO, investing in scheduling technology, and taking her electricians off jobs to put them through continuing education.

It’s not that Charlotte was a star, but she had a different vision from Danny’s. Danny wanted to keep doing what they had been doing, but just more of it. Charlotte wanted to streamline the work process and gain access to the types of larger, more sophisticated, higher-margin jobs that were trending in the industry.

Successful companies can fail by focusing too much on their current products and customers, making them vulnerable to disruptions that target an expanding addressable market or new customer needs. Danny was smart enough to ask himself, “Am I the right person to continue in the CEO role as the company grows in an evolving industry? Or should I step aside?”.

Signs it’s time for a business owner to step aside as CEO

When the owner serves as CEO, it can be challenging to recognize when they’ve outgrown the role or need specialized leadership. Without a board of directors providing checks and balances, self-assessment becomes critical. Some signs that it might be time to bring in a dedicated CEO include:

Stagnant or Declining Performance

If revenue or profitability consistently falls short of targets, the current strategic or operational approach isn’t working. Without improvement or fresh ideas, the company risks losing market share and long-term viability.

Lack of Time for Strategic Thinking

If tactical demands prevent the owner from focusing on innovation, growth opportunities, or long-term planning, a professional CEO could help free them up to steer the company’s broader direction.

Limited Functional Expertise

As a company grows, it becomes more complex, requiring skill sets that the owner-CEO may not possess, such as knowledge of new regulatory environments or advanced technological integrations.

Deteriorating Company Culture or Morale

If employee engagement, productivity, or retention declines and the owner-CEO struggles to reverse these trends, it might be time for new leadership. A fresh CEO can bring a different management style, new communication approaches, and a re-energized company culture.

Customer Dissatisfaction and Market Feedback

Persistent customer complaints, unmet expectations, or a growing reputation problem could signal that the current leader isn’t effectively driving quality, service, or brand image.

Difficulty Adapting to Market Changes

Owners who founded the business may find it hard to pivot away from “what worked in the past.” If competitors are introducing new products or leveraging technology more effectively and the company is slow to respond, bringing in a CEO with proven adaptability can position the business for the future.

 

A private owner-CEO should consider hiring a new chief executive when the demands of growth, market complexity, employee engagement, and long-term strategy exceed their individual capacity. Being self-aware of these limitations can protect and enhance the company’s future. Hiring professional management isn’t a cost; it’s an investment that will enhance operational efficiency, spur growth, drive profitability, and allow founders to focus on what’s best for the company.

 

This article first appeared in the Berkshire Eagle on January 3, 2025.