This is an excellent article authored by Nick Toman, Bryan Kurey and Dave Lingebach
October 10, 2024
Summary.
Researchers determined that 62% of companies see their revenue growth rate decline or remain flat in the fiscal year following a Chief Revenue Officer change. The median rate of decline is nearly four percentage points, from an average 15.5% growth rate the year before the CRO switches out, to an average 11.7% growth rate the first full fiscal year after the CRO switches out. But standing pat may not always be an option. This article explains the implications of firing a CRO and what you should know before hiring a new one.
The average tenure of today’s chief revenue officer (CRO) is among the shortest in the C-suite, averaging just 25 months. For many companies, this duration doesn’t even equate to the duration of two sales cycles for their products.
It’s no coincidence that CRO tenure continues to contract. Sustained growth remains elusive for many companies. Our research finds that 43% of companies experienced at least one year of negative growth in the past three years, and fewer than 3% managed to consistently increase their growth rate each of the last three years. Firing the CRO is one of the most common actions a board of directors takes when growth is challenged. Our research shows that CRO turnover accelerated by more than 50% from 2022 to 2023 (with 70% of CROs who left their post being asked to leave). This trend doesn’t show any signs of abating: Our survey of CEOs found only 41% of them express confidence that their CRO can drive commercial success for their organization.
Naturally, it stands to reason that when growth isn’t happening, someone needs to be held accountable. But here’s our take: replacing the CRO is often a recipe for further suppressing and likely decelerating growth. It is something most executive teams would be wise to carefully and conservatively consider before acting.
What Happens After A CRO Leaves
We conducted an analysis of public and private companies in the U.S. and Canada to understand the impact CRO turnover has on company performance. To ensure it was as “like-for-like” as possible, we focused on the software-as-a-service, information technology, and commercial services industries, with annual revenue between $100 million and $5 billion. We then narrowed that list to companies with reliable financial performance data across multiple years.
Through a scouring of LinkedIn profiles, we identified 164 companies within those parameters that had a confirmed turnover in their CRO, head of sales, or other senior-most role responsible for revenue. We then matched that turnover with company performance, looking at the picture in the last full fiscal year that the CRO was in seat, and the first full fiscal year that a new CRO was in seat, effectively providing the new CRO a “fair shake” to settle into the role.
Our analysis paints a stark picture. A staggering 62% of companies see their revenue growth rate decline or remain flat in the fiscal year following a CRO change. The median rate of decline is nearly four percentage points, from an average 15.5% growth rate the year before the CRO switches out, to an average 11.7% growth rate the first full fiscal year after the CRO switches out.
There is a small glimmer of positivity hidden in these averages. If the company’s growth was flat or declining in the year before the CRO switched out, while small, the company was more likely to see a turn toward the positive (3.2% growth in the following year). But if the company was growing, just not at the rate the leadership team expected, switching out the CRO had a negative effect, leading to a more than eight percentage point decline in the growth rate in the first full fiscal year after the switch-out. Switching out the CRO to capture a few additional points of growth typically backfires.
To put it simply, new CROs create a massive wake of disruption. Growth plans and initiatives grind to a halt waiting for new leadership to design and direct them. Commercial leadership teams experience turnover, either following the former CRO or making way for the new CRO’s preferred team, further delaying initiatives. A “new playbook” gets implemented, taking significant time to mobilize the commercial organization around it.
The impacts of CRO turnover extend far beyond short-term growth metrics. Frequent changes in commercial leadership can lead to several downstream challenges:
Erosion of customer trust: Relationships built over years can be disrupted, leading to increased churn.
Strategy whiplash: Frequent changes in commercial strategy can confuse both employees and customers, leading to inefficiency and missed opportunities.
Investor skepticism: Frequent turnover in key positions can signal instability to investors, affecting valuation and access to capital.
These long-term effects can create a cycle of underperformance that becomes increasingly difficult to break.
Experience May Be a Hindrance
There are times, of course, when the CRO must go. The cause may be a poor cultural fit, sales team disengagement, or even retirement or a move on to a CEO role somewhere else. In those cases, conventional wisdom suggests hiring a seasoned leader with a lengthy resume of CRO experiences who can hit the ground running. The thinking is that external CROs bring new perspectives and industry best practices that can rejuvenate a stagnant commercial organization. Our data, however, tell a different story. Prior CROs, on average, lead their new companies to a 7.1% decline in growth rate. By contrast, newly minted CROs see only a 1.1% decline in growth rate.
The key is not necessarily to dismiss external candidates entirely, but to weigh their potential contributions against the very real costs of disruption. If intent on hiring from outside, look for someone who has worked in a variety of commercial contexts and who shows an enthusiasm for learning and adapting their approach. To put it bluntly, be careful if you’re thinking of “hiring a playbook” and instead hire a leader who excels in contextual understanding and delivering built-for-purpose GTM models.
Our analysis suggests there is often a better choice than an external hire: hiring from within the current organization, tapping a first-time CRO. CROs hired from outside the company see a 4.1% decline in growth rate, while those hired from within see a slightly lower 2.8% decline. While logic may suggest that internal promotions limit the pool of talent under consideration and could perpetuate existing problems, this view underestimates the value of institutional knowledge and the ability of internal candidates to drive change when given new authority and perspective.
Homegrown leaders understand context and are decisively not “a playbook,” which is commonly how CROs switching companies position themselves. External CROs delivering a rigid model overlook important organizational sensitivities and context, instead favoring brute, sudden change that results in further disruption.
This “hire from within” finding underscores the criticality of succession planning, executive development programs, and ensuring the successor isn’t merely a disciple of the outgoing CRO. We see the most effective organizations making succession planning far more than a “check the box” activity. Instead, they carry several common practices:
Identify high-potential internal candidates early: Look for leaders who demonstrate not just commercial acumen, but also strategic thinking, operational clarity, and the change management skills to drive evolution across large teams.
Provide stretch assignments: Give potential successors opportunities to lead major initiatives or manage critical accounts to build their skills and visibility. Consider their involvement in M&A integration, launching new products or markets, sponsoring major enablement initiatives, or deeply partnering with external consulting workstreams to gain such experiences quickly.
Create exposure to the board and key stakeholders: This helps potential successors build relationships and credibility before they step into the CRO role.
Develop a robust handover process: Ensure that critical knowledge, relationships, and ongoing initiatives are thoroughly documented and transitioned.