The order of Australia recipient has 23 years of prior experience to draw on at CSL having served as the company’s CEO and managing director until 2013, when he left to become an advisor to private equity giant Kohlberg Kravis Roberts.
"To many, a boomerang CEO appointment is indicative of a failure in succession planning.”
It is little wonder then Dr McNamee’s services at CSL are still in demand: he transformed it from a small government enterprise into a publicly listed company worth more than $A30 billion – earning himself a reputation as one of Australia’s best CEOs in the process.
‘Boomerang executives’ like McNamee are rare but not unheard of: just last month Gert-Jan De Graaff was appointed CEO of Brisbane Airport Corporation, where he held senior executive roles between 2007 and 2012.
Further afield in Europe, ex-Formula One champion Niki Lauda has emerged as the successful bidder to buy the assets of Austrian carrier Niki, which he founded in 2003.
And of course there is the celebrated case of Steve Jobs at Apple. As a young upstart Jobs was fired in 1985 only to return in 1997 and turn the company’s fortunes in spectacular fashion.
Other recent high-profile cases of boomerang CEOs include those at Twitter, Tinder, Pandora and Starbucks.
Between 2004 and 2013, 4 per cent of all CEO appointments among S&P 500 companies were boomerang CEOs and recent media reports suggest their numbers are on the rise in the United States.
There is also evidence boomerang employees are no longer considered taboo and rigid policies against hiring them are starting to be dismantled.
This could mean more opportunities on the horizon for proven talents like Mike Smith, who in 2016 was named IBM New Zealand’s managing director. He’d left the company 17 years earlier and even competed against it in his subsequent roles, while retaining affection for the tech giant.
“I had an amazing 13-year career with IBM from the mid-eighties to the late nineties across four completely different roles,” Smith he tells bluenotes. “My 17 years working in other companies added to my workplace perspectives but I always kept an eye on IBM, and even competed against it at times.”
“I retained a strong connection with the company, its fantastic people and its innovative products and services.”
He describes being appointed as IBM’s managing director as “a very special career moment”.
Back in Australia it appears boomerang executives remain an exception rather than an emerging trend.
“Boomerang CEOs are very rare in Australia,” managing director and CEO of business networking group The CEO Circle John Karagounis says.
“CEOs tend to have the mindset that once they have made the decision to move on, there is no going back. Boards are also reluctant to hire people back because… they would prefer to get someone who comes in with a fresh set of eyes and… adds value that hasn’t already been added.”
One reason boomerang CEOs may be less common in Australia is due to a strong preference for outside hires.
A 2017 study by PwC found in 2016, 52 per cent of new CEOs at ASX 200 companies came from outside the organisation. This is almost three times the global average and four times greater than the US and Canada during the same period.
The trend towards outside hires began to emerge five years ago in Australia, according to PwC director Julian Ballard, co-author of the 16th Annual CEO Succession Study. Yet it doesn’t necessarily produce greater success. And there have been waves of external hires over recent decades – with mixed success.
“In the Australian context, the performance of outside CEOs is far more volatile. In some years, they may do a lot better than insiders, while in other years they may do a lot worse,” Ballard says.
While the study doesn’t focus on boomerang CEOs it does note success depends a lot on on how quickly an outside appointment can pass through the ‘learning lag’ – a challenge a boomerang CEO simply doesn’t have to confront.
“Typically, an insider who has been within an organisation for many years will understand the organisational culture and the needs of the stakeholders,” Ballard says. “They will also be less likely to be disruptive and lead in a counter-cultural way.”
Another likely reason why boomerang CEOs are rarer in Australia is because CEO successions are overwhelmingly planned.
“Globally, it’s a case of one in five boards having been forced into a position where they haven’t planned for a succession,” Ballard says. “In Australia, nine times out of 10, they were planning for it.”
A boomerang CEO appointment is more likely to occur during a crisis, when a company’s board lacks the time to do a comprehensive search for a new CEO and when it seems logical to bring back the person who knows the organisation inside out.
However, to many, a boomerang CEO appointment is indicative of a failure in succession planning in the first place.
“Calling back an old CEO is rather like calling back a plumber: he should have done the job properly in the first place,” Dr Bo Qin, Associate Professor of Accounting at Melbourne University and specialist in CEO-succession research says.
Brisbane-based executive coach and leadership specialist Rebecca Livesey disagrees.
“It’s not necessarily indicative of a failed succession plan,” she says. “If somebody has gone out and grown in some way and they can bring back different thinking to the organisation, there’s no reason why they shouldn’t be able to come back.”
“It’s that diversity of experience that drives great innovation and creativity in an organisation.”
A boomerang CEO appointment is only undesirable, she says, if either the board or the CEO is “recruiting for comfort”.
“If a CEO is coming back because he or she didn’t succeed in whatever they went out to do, well, that’s not great,” Livesey says.
A 2014 study cited by The New Yorker found in the US, profitability at companies run by boomerang CEOs fell slightly, while an earlier study detected no significant difference in long-term performance between firms which reappointed a former CEO and ones which hired someone new.
While the media is quick to jump on stories about boomerang CEOs there is a paucity of academic research because sample sizes are simply too small, Dr Qin says. For the time being at least there isn’t sufficient evidence to conclusively support or disprove the argument for a boomerang CEO appointment.
“Boards all like triumphant comeback stories but not all returning CEOs will be the sequel of Steve Jobs at Apple, Charles Schwab at his namesake brokerage business or Howard Schultz at Starbucks,” Dr Qin says.
“In fact most boomerang CEOs end up being just okay – such as A.G. Lafley at Procter & Gamble and Michael Dell at Dell – or even worse than that, like Kenneth Lay at Enron, Paul Allaire at Xerox, and Jerry Yang at Yahoo.”
Past success doesn’t guarantee a strong performance a second time around, Dr Qin cautions.
“Boards should be aware when considering the appointment of a boomerang CEO that business conditions may be changing a lot faster than expected; what makes a CEO successful in her first stint may not work during the second tour of duty.”
The CEO Circle’s Karagounis says boomerang success has been found in the past when “an entrepreneurial founder of a start-up who has been involved from inception and subsequently successfully sells the company to a larger enterprise”.
“When that acquisition doesn’t work for ‘X’ number of reasons, we have seen the original founder purchase back the company, in some cases for a discount, and hence go back into their former role.”
This was precisely the case for Anthony Podesta, a former high school teacher who now owns a billion-dollar company. He is arguably Australia’s most-successful boomerang CEO.
Podesta launched his salary packaging business in Melbourne in 1989 in response to the then recently introduced Fringe Benefits Tax regime. In 1998, he sold his stake in McMillan Shakespeare to Zurich Financial Services Australia Ltd for $A23.5 million.
“I thought perhaps we needed a big brother, for want of a better word – someone who could shield us through not just the approaching millennium bug, but also shepherd us and give us a sense of strength,” Podesta says.
“Obviously there was also money involved: after 10 years of hard work, it seemed like a good time to cash out.”
A new CEO and general manager was brought in to run McMillan Shakespeare while Podesta took on an executive role within Zurich.
“I allowed [the new CEO] to have their space because it wasn’t the focus of my new role - and at any rate I was asked not to focus on it. [McMillan Shakespeare] was to make its own way in life.”
Podesta quickly realised things weren’t turning out as planned.
“At the time, Zurich was going through its own internal turmoil,” he says. “McMillan Shakespeare became like an unwanted child. It sat to the side, with the bigger issues consuming Zurich.”
“After 10 years of hard work, I could sense things going down the drain and I wanted to act.”
In 2004, Podesta bought the company back for $A32.5 million, with many of his original employees becoming shareholders when it listed on the stock exchange.
The company saw staggering growth within the space of a few years and today it is worth $A1.4 billion.
Podesta says the buyback wasn’t motivated by financial considerations.
“I was already independently wealthy – I wasn’t there for the money,” he says. “I wanted to drive home a dream and achieve all the things we wanted to do without the shackles and constraints.”
“I was also looking forward to having a level of governance and accountability that I hadn’t had before as the CEO of a private company. The last piece of the puzzle in my journey was to go back and experience that.”
It was a move Podesta says he never once regretted.
“Arguably McMillan Shakespeare made some people millionaires, as well as home-owners and helped educate their kids,” he says. “It was such a wonderful feeling to see that happen.”
Jessica Mudditt is a freelance journalist in Sydney.