Turnaround or Compounder? The Question That Should Pick Your Next Executive

Picture two companies opening a search in the same month for the same title. One is a $60 million distributor whose margins have slid for three years. The other is a $45 million services firm growing 20% a year on a model that works. Both job descriptions say "President." Both list the same ten bullets. And if both searches are run off those bullets, at least one of them is going to hire the wrong person.

The best public evidence for why comes from Spencer Stuart's report on 2025 CEO transitions across the S&P 1500, published in early 2026. It is about chief executives of large public companies, so it maps onto a mid-market president search only directionally. But the pattern it describes is the one we see in nearly every leadership search we run: the variable that predicts the right hire sits upstream of the résumé, in the question of which mode the company is actually in.

What the 2025 data shows

Spencer Stuart counted 168 new S&P 1500 CEOs in 2025, the most since 2010. Of those, 84% were in their first enterprise CEO role. And the smaller the company, the more often the board went outside: 27% of new S&P 500 CEOs were outsiders, against 41% in the MidCap 400 and 50% in the SmallCap 600.

The report's most useful sentence for anyone writing a search brief is about situation, not pedigree. In Spencer Stuart's words: "A CEO with prior experience may be the best option for turning around a poor-performing company or one rocked by scandal, while a talented first-time CEO is more likely to deliver higher performance over time." The firm also found that the performance of the most successful CEOs "markedly diverges" from lower performers in years three to five of tenure, and that 37% of departing CEOs left within their first five years.

Spencer Stuart's CEO practice leader Jim Citrin added two findings in an interview with Fortune in December 2025, drawing on the firm's research into 950 S&P 500 CEOs. Insiders and outsiders perform virtually the same on average — 34% of insiders and 33% of outsiders were classed as overperformers — but outsiders show wider swings in both directions. And among CEOs who led two companies in succession, 70% performed better in the first role than the second. The one exception Citrin named was a clear turnaround, where a leader with a credible playbook earns the edge.

Read together, the data says the familiar debates — insider or outsider, veteran or first-timer — are second-order. The first-order question is whether the company needs to be turned around or needs what already works multiplied. That is the question most job descriptions never ask.

Two searches, one title: a composite timeline

The two companies above are composites built from patterns we see repeatedly, not specific clients. Follow both searches from the brief to year five.

• Week 0 — The briefThe distributor's owner writes "proven president, P&L leadership, industry experience." The services firm's founder writes nearly the same thing. Neither brief says that one company needs margin repair, a supplier renegotiation, and probably a painful branch consolidation, while the other needs someone who can hire twelve managers without diluting a culture the founder built by hand. Run off these briefs, both searches will produce the same slate.
• Week 3 — The slateIn a fit-first search, the slates diverge here. The distributor sees operators who have run a turnaround before, with references from people who watched them make the unpopular calls. The services firm sees leaders who scaled a working model, including at least one strong number two who has never held the top title, which is exactly the profile Spencer Stuart's data favours when the business is healthy.
• Week 10 — The offerBoth companies are tempted by the same candidate: a polished veteran president with a recognisable logo on the résumé. For the distributor, that experience is the point. For the services firm, it is a risk, because a leader whose last success came from restructuring tends to reach for the same tools, and a compounding business does not need restructuring.
• Month 6 — Early evidenceThe distributor's turnaround president has closed one branch, renegotiated two supplier contracts, and made enemies who were expected. The services firm's new president, if it hired the veteran, has redrawn the org chart and introduced a reporting cadence the founder's best managers experience as distrust. If it hired the builder, the first new managers are in seat and the client renewal rate has held.
• Month 18 — The verdict windowThis is where mismatched hires surface. The pattern we traced in The Year-Two CEO Exit applies: the board finally has enough evidence to name what was wrong, and what was wrong is almost never talent. It is a turnaround operator in a compounding business, or a builder asked to cut.
• Month 24 — The seat it has becomeEven the right hire faces a shift. A successful turnaround hands over a stabilised company that now needs compounding, which is why turnaround leaders often plan their own exit or reinvent their role. A successful builder in the services firm is now running a business twice the size and needs a leadership team the original brief never imagined. A search that asked what the seat looks like at month 24 hired for this moment too.
• Years 3–5 — Where results divergeSpencer Stuart's life-cycle research puts the real separation between strong and weak CEOs here. A hire who matched the company's mode at the start, and whose brief anticipated the month-24 shift, is the one still compounding in year four. A mismatch is more often the 37% who left inside five years.

The job title describes the seat. The company's mode describes the job.

Writing the mode into the brief

The fix is upstream and unglamorous: the brief has to name the company's mode before anyone sources a single candidate. Three questions get it there.

Is the business being repaired, reshaped, or multiplied? Repair is the turnaround case Spencer Stuart describes, where experience with a playbook earns its premium. Reshaping is a transformation — a new market, a new model, a new ownership thesis — and McKinsey's research has long found that roughly 70% of transformations fail, which argues for a leader who has led one through, not merely survived one. Multiplying is the healthy-company case, where the data tilts toward a capable leader on the way up rather than one who has already arrived. We made the same distinction for boards in What Boards Owe the Next CEO and for PE holds in Seven Years In.

Who does the hire report into, and what mode is that person in? A founder who still wants to run the product will clash with a president hired to take over everything. A PE board in month eighteen of a hold wants different evidence than a family owner planning a ten-year handover. The reporting line is part of the job, and a candidate who would succeed under one principal can fail under another.

What will the seat need at month 24? The answer is rarely the same as today. Write both into the brief, and screen for a candidate who can do the first and grow into the second — or say plainly that the second will need a different leader, and plan for it.

That brief takes longer to write than ten bullets. It also produces a shorter list, which is the point we made in A Long Candidate List Is a Sign Nobody Read the Brief. Volume search optimises for filling the requisition. Fit-first search optimises for the hire still being right in year three, which is why we run about ten searches at a time and expect to fill eight to ten of them.

What this is not

This is not a rule that first-timers beat veterans, or that outsiders are riskier. Spencer Stuart's averages come from large public companies, and the gaps between groups are narrow on average and wide at the edges. A mid-market company can find the exception in either direction. The point is narrower and more practical: the mode of the business should decide which kind of leader you are looking for before any résumé decides it for you. It is also why the cheapest-looking search is rarely the cheapest outcome, the trade-off we priced in Retained vs. Contingency Search.

The two companies in our composite will each get a good president if the brief says which company they are. Without that, they will likely get the same one, and at least one of them will be back in the market by month 24.