How long should a CEO get to turn around a struggling company?

Nearly two years after Elliott Hill took over as CEO of Nike, his leadership raises a common question faced by leaders of struggling businesses. How long should a CEO have to turn around a faltering company before proving their efforts are effective?

Executives brought in to revive a company, division or function often inherit problems that have built up over years. They face added pressure to demonstrate improvement within a relatively short time frame. Hill's arrival at Nike in 2024 came at a challenging time - the company was dealing with weakened relationships with retailers, excess inventory, slowed innovation and a declining cultural relevance. Despite these hurdles, Hill has managed to restore wholesale growth and improve overall performance.

However, Nike Direct and digital sales have struggled, China has continued to pose challenges, and the company's stock has lost the initial excitement generated by Hill's appointment. Studies on corporate transformations suggest that expecting an immediate turnaround is unrealistic. McKinsey's research indicates that about half of a transformation's value is realized within the first 18 months, with the rest coming later.

Spencer Stuart's research provides a more detailed timeline, with the first year being a launch period where new CEOs face a steep learning curve and tackle inherited issues. By the end of the second year, stakeholders can look for movement in key metrics such as customer retention, product momentum, market share and operating performance.

Ideally, by around year three, early decisions should translate into stronger revenue, margins and returns.

With more than two years under his belt, Hill can now evaluate whether his early decisions are producing results. Guggenheim Partners' senior managing director, Simeon Siegel, points to Nike's North American region as a test case. While this area was initially among the business's biggest struggles, it has since returned to low single-digit growth.

Siegel argues that if Nike has found an approach that works in North America, it may take time to determine if this strategy can be replicated in other regions facing similar issues. Regardless, there must be evidence that the decisions made in the early stages are yielding positive results for a leader to justify more time. For Hill, North America represents one such piece of evidence. The next challenge will be to see if similar progress can be achieved in other areas.