UnitedHealth’s Stephen Hemsley joins a long tradition of former chief executives returning to lead their companies through a crisis. The record of other “boomerang” CEOs suggests he faces a tricky challenge.
UnitedHealth tapped its 72-year-old chairman and former CEO to help the health-insurance giant recover from a series of business challenges, including federal investigations and the fallout from the shooting death of a top executive. Hemsley, who led UnitedHealth for more than a decade until 2017, follows other executives in making a repeat run, including Disney’s Bob Iger, Starbucks’s Howard Schultz and UBS’s Sergio Ermotti.
Corporate boards bring back former CEOs in difficult times for good reason: They often understand the company inside and out and can capitalize on lingering goodwill and relationships throughout the organization. Many companies believe relying on a tried-and-true leader is a faster path to a turnaround than hiring someone who might need months to get up to speed.
“When you take a returning general, they hit the ground running and take command,” said Jeffrey Sonnenfeld, a professor at the Yale School of Management. Hemsley, he added, “knows where everything’s buried in the place.”
Yet success is far from assured. Executive recruiting firm Spencer Stuart studied the performance of boomerang leaders appointed at S&P 500 companies since 2010. The stocks of companies that permanently appointed their former CEOs averaged an annual 3% decline in shareholder return during the leader’s second stint, compared with a 7% annual increase the first time, Spencer Stuart found.
Some returning leaders find their old playbooks no longer work against a new set of challenges, or they underestimate the problems lurking within the organization, said Jim Citrin, who leads Spencer Stuart’s CEO practice. Plenty of returning CEOs stumble in re-creating their old magic because they must contend with a vastly different business environment.
“The company is in such a challenged state,” Citrin said.
Procter & Gamble brought A.G. Lafley out of retirement in 2013 to reignite sales growth after he more than doubled P&G’s revenue and market value in his first term. Back in the top spot, he cut thousands of jobs and announced more than $20 billion in divestitures from brands such as Duracell batteries and Clairol hair dye.
Still, P&G faced tepid sales growth and a sluggish share price during his second stint. Some P&G executives noted he traveled less frequently to P&G’s operations outside the U.S. and was impatient with the company’s slow-moving culture. A P&G spokesman said at the time that Lafley was focused on eliminating barriers to growth and that business conditions were much different his second time around.
“Returning CEOs need to familiarize themselves with the changes that took place in their absence,” Lafley wrote in a 2022 Wall Street Journal opinion column titled “A Two-Time CEO’s Advice to Disney’s Bob Iger,” when Iger had just been appointed to return as CEO. “A lot happened during my three years away from P&G. Consumer needs and wants had shifted.”
Iger returned to Disney’s helm less than a year after leaving the entertainment giant after his successor, Bob Chapek, oversaw disappointing financial results.
Iger, though, faced his own challenges, including streaming losses, a decline in Disney’s traditional television business and an activist investor. The entertainment company’s streaming business is now profitable and its operating margin is at its highest level in several years. Yet it is still below what Disney commanded during much of Iger’s first act, when the cable-TV business was at its peak.
At Starbucks, Schultz held three stints atop the coffee company. He led the company to soaring growth as CEO from 1987 until 2000 and came back to turn it around in 2008. When Schultz returned as interim CEO in 2022, Starbucks was in a different place. The company faced a growing unionization campaign among its baristas and operational challenges across its stores. His handpicked successor, Laxman Narasimhan, lasted roughly 16 months on the job as its business sputtered.
CEOs should return for a second stint only if they feel a genuine sense of purpose and duty to right their companies, Spencer Stuart’s Citrin said.
“You’re very likely not going to be as successful, and your legacy is going to be reduced,” he said.
The lackluster performance of boomerang CEOs is nearly universal, according to Spencer Stuart’s data: Of 19 S&P 500 companies that permanently appointed former CEOs since 2010, 14 of those executives fared worse in their second go-round, based on total shareholder returns.