We'd never hire a CFO who didn't know GAAP. Where's the GAAP for CEOs?
Imagine the following scenario.
Your board has just appointed a new CFO. She’s a math prodigy with degrees from MIT and Stanford. On top of that, she’s got a great personality: driven, analytical, and works well with others.
There’s just one catch. She’s never heard of Generally Accepted Accounting Principles, a.k.a. GAAP.
She’s not familiar with balance sheets. Or cash flow statements. Or how revenue is recognized. She’s never made a chart of accounts.
But the board seems unbothered. They tell you she’s smart. Give her a year or two and she’ll have cobbled together a system for tracking the company’s finances. It might even work.
By now you see the absurdity. No board would hire that CFO.
Yet this is precisely what we do almost every time we appoint a first-time CEO. Those new CEOs have no systematic understanding of the role, no codified way to approach its details and duties.
Instead of finding someone who understands the CEO role – or offering immediate training on it - the board sends out hopes and prayers that things go OK.
The Paradox of the C-Suite
I can’t be too harsh on these boards, because the truth is a GAAP-like framework for the CEO job hasn’t existed for much of modern history.
In fact, every position in the C-suite - except the CEO role - comes with a framework that defines how the job gets done.
The CFO has not only GAAP but a wealth of sophisticated ERP and business intelligence systems available to understand the finance department. They can get certifications (CPA, CFA, CMA), follow professional standards, and access literally centuries of accumulated best practices. A mediocre accountant who knows the system will outperform a genius who’s inventing their own approach.
The CMO has the marketing funnel and customer acquisition frameworks, plus marketing automation platforms (HubSpot, Marketo), CRM systems (Salesforce), and analytics tools (Google Analytics). Guidance and resources for running a marketing organization abound.
The CTO has Agile, DevOps, and system architecture patterns, plus cloud platforms (AWS, Azure, GCP), development tools (Jira, GitHub), and established reference architectures.
The CHRO has talent management frameworks and HRIS platforms (Workday, SAP SuccessFactors), performance management tools, and methodologies like competency modeling and succession planning. They can get certified (SHRM, PHR) and access decades of research on organizational behavior.
And so on.
Even entry-level employees get systematic training in a way that’s rare for CEOs. We don’t hand someone a sales territory and say, “You’re smart! Figure it out.” We teach them the sales methodology. We give them a CRM system. We provide a playbook.
This is why it has always struck me that we don’t do this for the person responsible for running the organization holistically, the CEO.
Why do we just appoint them and wish them luck?
Is it because we assume total competence from someone so advanced in their career?
Is it because we think the CEO job is too complicated to be captured in a system or playbook?
Is it because so few people really understand what, specifically, the CEO job entails?
It’s probably some combination of these – but in my view, it is a problem.
Executive coaches exist, but they’re expensive, inconsistent, and often reactive. Peer groups like Vistage provide valuable support but rely on anecdotal sharing rather than systematic frameworks. MBA programs teach strategy and finance (and a lot of other, less-useful stuff) but rarely the mechanics of actually running a company.
The Staggering Cost of Learning on the Job
The consequences of this approach are measured in billions.
It’s hard to pin down the exact failure rates of new CEOs, but estimates run all the way up to about 50%. And CEO tenures overall are shrinking, another sign that chief executives are struggling.
Per BCG:
The average tenure for outgoing CEOs in the first half of 2025 was 6.8 years, down from 7.7 years in the same period of 2024 according to Russell Reynolds data tracking leadership changes at over 1,800 leading public companies worldwide. This marks the lowest tenure level since the firm began collecting the data in 2018.
These aren’t incompetent people. They’re proven high performers who excelled in their previous roles.
My contention is that the failure rate is high because being excellent at sales, or operations, or product development doesn’t teach you how to be a CEO. And once you become CEO, you’re pretty much on your own.
The skills that got you promoted (deep functional expertise, individual achievement, intense execution) don’t translate to the job you’re now in. In fact, they can hinder you:
When the CEO isn’t functioning properly, there’s no glue to hold the whole operation together, no one to consistently reinforce the vision, no one to hold the entire organization to its commitments. Employees, shareholders, customers, and the board all feel the effect. We sometimes invest gobs of money recruiting the perfect CEO, hiring executive search firms, doing multiple interview rounds and extensive reference checks, but then we provide virtually no structured support for their success once they’re in the chair.
Why Great CEOs Exist Despite This
So if CEOs have been disadvantaged for decades by a lack of professional frameworks, why are there any great and legendary CEOs at all?
Some leaders do quickly build systems that work for them. The luckiest and most skilled get into the role and learn its nuances and levers fast. But this is difficult, risky, and rare.
A much more common path is for the CEO to get the job, then immediately feel overwhelmed and isolated. Not all of them reinvent the wheel fast enough to survive.
What a CEO Operating System Gives You
One thing I’ve long said about the CEO job is that, 90% of the time, success is less about being brilliant and more about avoiding shooting yourself in the foot.
You don’t have to be a genius or a dynamo. You just have to understand the core responsibilities of the job and how each one works. In many cases, your primary job is gentle but sure guidance, not running around making big interventions yourself.
After years of studying CEOs across industries, it has struck me again and again how CEOs do remarkably similar things.
They create clarity around the company’s mission, vision, and strategy.
They provide and allocate resources (people and capital) across competing priorities.
They build a strong culture based in differentiating values.
They make wise, timely decisions and empower their team to do the same.
They turn strategy into measurable goals across the six functional areas of the company.
I’ve codified these as the five responsibilities of the CEO and broken them out into a full CEO Operating System. For the CEOs we work with, there’s near-universal agreement that such a system makes a night-and-day difference.
Like any good executive framework, the CEO Operating System works because it offers proven guidance on an integrated set of factors. Together, these factors give you a full mental model for the job and the best possible chance of success in one of the hardest jobs there is.
The system helps you understand:
the discrete stakeholder groups your job affects
what each group needs and expects from you
what key data you must create and track
when certain recurring activities need to happen
protocols for communicating critical messages
inputs for key decisions you must make
common pitfalls relating to your job
With this structure in place, CEOs can follow a repeatable cadence that creates predictability. They can make decisions faster and better because they understand the components and stakeholders at play. They have a rubric for sorting the urgent-seeming from the truly important. They can scale their impact because they’re building systems, not relying on heroics. And they compound their effectiveness every quarter as the operating system matures.
Great CEOs aren’t born knowing how to balance shareholder, employee, and customer interests. We’re not brought up to understand how to structure executive teams, how to lead departments we’ve never worked in, how to set quarterly goals for a whole company, or how to run board meetings.
CEOs must learn these things - either slowly and painfully through trial and error, or quickly and systematically through proven frameworks.
The question isn’t whether systematic training helps. The question is why we’ve waited this long to provide it.
Final note: This is especially important for private equity CEOs
For private equity firms, a CEO operating system offers particular value. Each portfolio company requires a competent CEO, and PE-backed CEO jobs are among the hardest in business. The investment thesis typically demands tangible results within three to five years. There’s no time for two years of expensive on-the-job learning. The CEO needs to understand the full scope of their role from day one.
A systematic approach changes the equation. Train each CEO of your portfolio companies on the same operating system, and you ensure baseline competence across your entire portfolio. You create a common language for discussing business operations and reduce the variance in CEO performance. From an investment perspective, that reduces risk significantly.
For PE firms managing multiple investments, this systematic approach to CEO competence is a competitive advantage that too few firms currently exploit.
Interested in learning the CEO Operating System or providing training on it to your portfolio CEOs?
Email me at joel@ceosys.co to request a brochure on our CEO Masterclass
Nice post and agree with a lot of it. One comment I would offer is you can test the framework and principles used by someone before you place them into a first time CEO spot. I’ve seen first time CEOs do a fantastic job of injecting new life in companies, challenging the status quo and the way things have always been done.