An article by Thomas Black (“HP, GM CEO exits buck ‘C-suite churn’ falling to five-year low”, August 16, 2010) in the Washington Post (http://www.washingtonpost.com/wp-dyn/content/article/2010/08/16/AR2010081600855.html) analyzes recent data on C-suite churn from Liberum, the executive employment data firm that I have mentioned in prior blogs. The conclusion mentioned in this article is despite the news of some recent high profile CEO departures, it is not thought that we will see a significant increase in the number of CEO’s leaving companies for
performance reasons. The idea is similar to what we have seen through our own research. But, Hugh Shields adds “the writer calls this drop a five year low. In fact, it’s a much longer span of time than that.” Hugh reasons that the author bases his conclusions on the Liberum data, but “he does not account for the fact that the firm has only be in existence for five years and that is the extent of their data collection.” He suspects that “this is the lowest churn rate in decades.”
The author quotes a variety of sources reinforcing the idea that boards have become quite
conservative with respect to making CEO changes. Gail Meneley is quoted “directors prefer to shake up top management in good times and stick with “the devil they know” during a recession.” We see that there are a few trends that will affect CEO candidates:
- An emphasis on companies looking strongly at internal candidates rather than being enticed by the sirens call of “the grass is greener. ” Being an outsider is now a disadvantage.
- CEOs are retiring at a lower rate or being less willing to make a change than in prior years. There are fewer open positions.
- Boards that usually are reluctant to change a CEO for moderate performance reasons have become even more conservative because of the bad economy. Again, less opportunity to position yourself as being different.
- Recruiters say to us that companies are taking a much longer time to determine who they want to hire, such that they may take six months to reach a decision, about twice as long as in recent years, to ensure they make the right choice. They are using a “check off the boxes” approach to making a decision. We have seen otherwise highly qualified candidates, not get hired because he did not have something that would not even have been on the list in the past.
Finally, we believe that turnover will probably stay low into 2011 as the strength of the recovery remains in question. What does mean for an unemployed C-suite candidate? It is important to recalibrate your time frame and expectations. For many, this career transition period will be longer than in times past. For others, that job you have in your sights is really a mirage. So, we recommend two ideas: First, you need to diversify your target companies and industries. Our client data shows that over our 15 years, the majority of clients who stayed in a similar industry and functional responsibility were hired by a larger company than in their previous position. But, we believe that instead of looking at a similar sized or larger company, you should now consider a smaller firm and companies in related industries. Second, think differently. We have had three clients in the last year start their own firms. In each case they came to the conclusion that this was an ideal time to go after that dream. While you will want to invest a certain
percent of your time in researching and networking into the formerly “expected” job, you should consider spending at least a quarter of your time exploring these other options. You may find this to be time well spent. (by Daniel J. DeWitt, PhD)