The waltz of the CEOs and senior executives continues. You can’t stop change. As of March 2013, the rate that CEOs are leaving is practically the same as in 2008. Crisis or not, if you are an executive you’re sitting in an ejection seat with fewer and fewer parachutes at hand…
The latest report from the American outplacement firm Challenger Gray & Christmas noted 223 CEO departures this year as of February 28, 2013. The average for the months of January and February (usually very conducive to CEO departures, as the 31/12 year end requires) for the last 6 years is close to 219 departures. So 2013 looks like a good crop… This is not counting recent departures announced with the last few weeks: Pierre Karl Péladeau (Quebecor) announced that he’s retiring to devote himself to his family; the former COO of Metro, Robert Sawyer, is becoming the CEO of RONA, replacing Robert Dutton; Marc Tellier has announced that he is leaving the Yellow Pages; Ben Verwaayen will be leaving Alcatel Lucent; etc….
For the past 15 years the CEO waltz has risen by 59% – 15 years ago it was 1 CEO out of 8, compared to 1 out of 3 today. In 2011, 14.2% of CEOs of the 2500 largest companies were replaced, marking a record high according to the report from the Booz strategy consulting firm http://www.strategyand.pwc.com/global/home/what-we-think/chief-executive-study
Looking more closely, it’s no longer a waltz but a frenzied rock that’s igniting the high offices of large companies. I’m thinking here of Yahoo (5 CEOs in 5 years…), Encana, RIM, CN, Supervalu, http://www.startribune.com/business/201259201.html?refer=y , GAP, JetBlue or Motorola. The list is too long so I’ll stop… Interestingly, it’s easier to change CEOs in private companies that in companies that are listed on
the stock market. Financial markets heavily penalize changes in top management and fear that too much change in the course of activities curbs the Board’s enthusiasm. In this regard, I recommend reading a recent article from the Harvard Business Review entitled “What CEOs really think of their boards" http://hbr.org/2013/04/what-ceos-really-think-of-their-boards/ar/1 . To believe the CEOs, they more often than not feel abandoned and poorly supported or understood by their Board. Some will even let it be understood that some directors would prefer to replace them than risk losing their seat and prestigious position of corporate directors. It’s disturbing when you think that loyalty and interest towards the organization is more important than towards the shareholders. However, that’s another story. To go back to our CEO…
Why are there so many precipitous, forced or arranged departures? It doesn’t matter how it’s announced or the pretty packaging, the result is the same. Hiring a CEO is a huge investment in terms of time and money invested (head-hunters can rest assured; at this rate they will be busy for a long time…). How much does a CEO departure cost? I’m not talking here only about direct costs associated with hiring and severance pay. I’m talking here about costs that are rarely revealed: demobilization of the troops, inaction and lack of decision-making before and after he leaves, changes in direction and strategy, loss of focus on the “business" while competitors have a field day with your setbacks and the volatility of share prices. In short, it’s not the year’s pay and various premiums accompanied by a transition program that costs you. It’s everything else: up to 3 years of total pay and even more in some cases. Do the math…
How to stop the haemorrhaging? Can it be done? Is it desirable? It begs the question… There are several schools of thought ranging from sacrificing the CEO on the altar of the financial markets to the importance of bringing in new blood at any price to the chagrin of internal candidates (read my column on this subject on succession planning…) to the CEO who commits Harikiri to avoid a more difficult period. And there are also those who, exhausted and drained by the pressure borne by a CEO, abdicate and go home to do gardening or take a hike in Nepal. The CEO’s job is becoming more and more difficult. To further believe the headhunters, recruiting is becoming more and more difficult. A thankless job, sandwiched between multiple stakeholders, today’s CEO is under stresses with little support over the long term to avoid making missteps one day. I don’t want to excuse those who make errors in ethics or judgment but it could be debated whether this job is still human. 24 hours a day, 7 days a week, 365 days a year… There’s nowhere left for the CEO to catch his or her breath. To this, I’ll say that one of the Human Resource Department responsibilities is to support the CEO not only by offering support but especially by teaching him to step back and take care of himself. How many HR VPs show up in their CEO's office to tell him to take the afternoon off or schedule a vacation for him without his knowledge? I can hear you crying out about interference and patriarchal management but who will take care of the CEO aside from you? Who?
Here are some tips for CEOs for those who will take over their duties soon (free adaptation of the list from Booz Management)…
1. As soon as possible assess the status of your management staff and any changes to be made if necessary
2. Be careful before changing strategy too quickly even if that’s why you were hired
3. Make sure you understand all the organization's operations
4. Include trust and transparency in your management and communication style.
5. Be selective about the advice you are given
6. Find yourself a reliable colleague that you are able to talk freely with (internal or external)
7. Pay attention and don’t forget yourself
I am convinced that with this list HR professionals will find a way to support the CEO.