Solving the Supply-and-Demand Challenge: Why Hiring a First Time CEO Can Be a Strategic Power Play

Looking exclusively at candidates who have done the same job for a similar company is always a safe choice. But hiring one may not always be possible. In our series on solving the supply-and-demand challenge, we explore alternative sources for executive talent.  

In our first installment, we are focusing on “step-up” candidates: individuals who may not have held a CEO role before, but demonstrate the talent, drive, and capabilities necessary to succeed in the position. Considering first-time CEOs broadens the available talent pool, providing greater optionality for hiring teams when “been there, done that” candidates are limited.  

60%+
of replacement CEOs hired by PE-backed companies during the ownership period are first-time CEOs.
Source: McKinsey, 2026 

While taking a chance on a first time CEO might seem like a compromise, experienced hiring teams recognize that step-up leaders can bring distinct advantages.  

A Powerful Hunger to Succeed 

A step-up executive has more to prove than a leader who can point to years of accomplishments at the top. For many, the opportunity to hold the title and build something meaningful or solve a complex business challenge is a life-long aspiration. That motivation can translate into resilience, grit, and a willingness to do the heavy lifting needed, which is especially critical in a private equity-backed environment where the demands on executive leaders can be intense. 

At Argosy Capital, where hiring first-time CEOs is core to the firm’s talent approach, an appetite for hands-on leadership is a critical attribute for success. 

“First-time CEOs are the right fit for our companies because they’re stepping into a business that was owner or operator led with no infrastructure or resources in place. The team, systems, processes, and technology all have to be built from scratch. A first-time CEO is excited by that challenge because it’s their chance to operate the day-to-day with a player-coach mentality while building the team and infrastructure for where the company sits in its evolution,” says Paul Barrett, Managing Partner at Argosy Healthcare Partners. 

A willingness to roll up their sleeves can distinguish step-up candidates even when experienced CEOs are in the mix. For example, a leading contract development and manufacturing organization (CDMO) providing integrated pharmaceutical development, clinical and commercial manufacturing, and clinical trial supply services, was seeking a new CEO to take over the helm of the organization from the founder. They needed a hands-on, high-energy leader who was committed to driving the business forward, not just operating it. The ideal leader needed to be deeply customer-focused, take ownership, make decisions with confidence, and seek support rather than direction.  

After a robust review of potential candidates, one individual without prior CEO experience stood out as the ideal culture fit in a pool of experienced CEOs. His energy, previous operating experience, and deep customer focus were considered by investors as the “lowest risk, highest probability.” Combined with his compelling case study presentation, it was clear he had an edge over his experienced peers. 

Coachability Combined with a Fresh Perspective 

Motivation to succeed is often coupled with a willingness to be coached and a fresh perspective. Step-up leaders are ambitious and nimble, with the ability to reimagine ways of working.  

Experienced CEOs often come with existing playbooks and, in some cases, prior executive team members who may follow them to their new organization. These are clear advantages when a business needs a new strategy and leadership team. But in situations where the path forward is clearer, and many of the key executives are already in place, those advantages may matter less. A founder, chairperson, or experienced board can provide valuable coaching and guidance, creating an environment where a talented, highly coachable first-time CEO can thrive.   

Some private equity firms are taking this concept a step further by intentionally developing first-time CEOs. Alpine Investors and Shore Capital Partners are examples of two highly successful private equity investors that have established formal CEO development programs. These programs combine hands-on operating experience, mentorship, and leadership development to prepare high-potential talent for the CEO seat. Participants from both programs have advanced into first-time CEO roles. 

Experience does not have to reside solely in the CEO seat. By pairing first-time C-suite leaders with highly experienced boards, investors can get the best of both worlds — a leadership team that possesses the wisdom, industry knowledge, and situational context required to be successful, along with the energetic persistence needed to get the work done. 

When an occupational medicine provider entered a period of financial distress, it needed more than an experienced operator. The organization sought a leader who understood its specialty and who could bring new thinking to the business. The company selected a former COO of a large healthcare provider whose experience in industrial medicine, leadership of a multistate network, and track record leading both a turnaround and build distinguished her from more seasoned candidates. Her fresh perspective on restructuring and growth proved more valuable than the strongest operating résumé.  

The Right Experience for What Comes Next 

The best CEO isn’t always someone who has held the title. The most effective CEO searches begin by asking, “What does the business need next?” rather than “Who has done this job before?”  

In an environment where top talent is scarce, investors and boards need to spend time clearly defining the capabilities the business needs and the leadership attributes to build those capabilities. Do they need a great communicator? A product visionary? An executive who excels in customer-facing interactions? When the search is anchored around the value creation plan rather than past titles, “been-there, done-that” may not be essential, or even the best fit. 

First-time CEOs tend to come from roles that are closer to customers, commercial execution, operations, and product development compared to seasoned CEOs who have spent years managing at the enterprise level. Closer proximity can provide a more current understanding of customer needs, market dynamics, and operational realities.   

For an emerging medical equipment manufacturer preparing for explosive growth, the priority was finding a leader with deep commercial strategy expertise and established health system relationships to accelerate clinical expansion. After evaluating both experienced and first-time CEO candidates, the company selected a commercial executive whose customer proximity and network, proven go-to-market expertise, and hands-on leadership style made him better positioned to achieve the company’s growth objectives. Equally important, he understood the unmet clinical need and was passionate about expanding provider access to the company’s medical equipment. 

Complexity, Scale, and Intent 

Another approach for finding a qualified first-time candidate is to look at the scale and complexity of the business that they have already managed. A divisional president running a larger, more complex business may be well equipped to step into the CEO role at a smaller company. For example, a business seeking to grow from $200 million to $500 million might find that an executive already leading a $750 million division has operated at the scale and complexity the company is working toward.   

Experience at a greater scale is only valuable if the candidate genuinely wants the realities of the role. Leaders accustomed to running larger organizations may be frustrated by the day-to-day demands of a smaller, owner-operator business, making intent an important part of assessing fit.  

As Barrett explains, “Given the size and stage of many of our investments, the profile often looks like a search fund candidate, someone who was already looking to acquire and run their own small business. Several of the CEOs we’ve hired fit exactly that mold. Partnering with us gives them the opportunity to do that, but with the backing, resources, and support of an institutional partner behind them, rather than going it alone.” 

Greater Financial and Hiring Flexibility

Step-up candidates may not command the same cash and equity compensation as a proven CEO, potentially giving boards greater flexibility to allocate resources elsewhere, such as hiring a team of experienced functional leaders or investing in other priorities critical to the value-creation plan. 

Step-up candidates may also face fewer hiring restrictions. In sectors where non-compete agreements limit the mobility of seasoned executives, expanding the search beyond sitting CEOs can broaden the available talent pool, accelerate hiring timelines, and reduce legal complexity.  

In a highly fragmented life sciences consulting market dominated by either large enterprises or founder-led firms, a middle market company recognized that pursuing a seasoned CEO would likely mean navigating highly restrictive non-compete agreements. To ensure they could move quickly, the firm focused on candidates without any barriers to entry. That meant considering several step-up candidates.  

Ultimately, the organization selected a first-time CEO for the role. She was a former president with full P&L responsibility whose company had recently been acquired by a larger organization.  Her industry expertise and operating experience matched what the business needed, without the legal hurdles that could have delayed the search.  

When investors and boards find themselves needing to move quickly or scraping what feels like the bottom of the barrel with experienced executive talent, taking a more expansive approach to hiring top executives can be a strategic advantage.  

Investors who routinely hire first-time CEOs look closely at whether candidates have deliberately been building toward the role. Because step-up candidates lack prior CEO experience, placing greater emphasis on behavioral interviews, case studies, and thoughtfully designed reference checks can reveal how candidates have influenced strategy, led through ambiguity, and responded to complex business challenges. Investors and boards may be surprised to discover that in some cases step-up leaders outperform their more seasoned peers — not despite their lack of C-suite experience, but because of the unique attributes they bring to the seat.