In William Shakespeare’s play Julius Caesar, the Soothsayer forewarns “Beware the Ides of March” to which Caesar remarks “He is a dreamer; let us leave him: pass”. Later he is assassinated.
Earlierthis month the government reported that the unemployment rate rose to a 25-year high of 8.1% in February, as employers cut 651,000 jobs from payrolls. A CNN Special Report (March 5, 2009))
“The Worst is Yet to Come for the Job Market”, points out that the unemployment rate is the worst it has been since the Great Depression for many reasons, including that this is the biggest six-month job loss since March 1975, that all business sectors are effected and that February marked the 14th straight month of job losses, the third-longest streak since 1939. This long period of job losses is swelling unemployment rolls to record levels and causing long-term unemployment
to rise sharply. The author concludes that “economists say the steepness of this decline will make it tougher for the job market to improve any time soon.”
But, as bad as these statistics appear, our analysis causes us to conclude that these unemployment figures largely do not include senior executives. It appears executives at thetop of the house have largely been able to avoid job loss while their subordinates have been less fortunate. We believe also that as the
economy improves the underlying dynamics that “protected” them will
cause them to become vulnerable to job loss.
My partner, Hugh Shields, recently spoke with Richard Jacovitz, SVP Director of Research for Liberum Research (www.twst.com/liberum), an independent research firm focused on corporate management change. Jacovitz agreed that senior executive turnover will accelerate over the next few months. According to Liberum, senior executive turnover for February 2009 as compared with February 2008 showed major declines for all key executive categories: CEO turnover declined 41%, CFO turnover declined 38%, C-level turnover declined 41% and board of director changes declined 37%. In a Liberum Research Report (March 4, 2009), they concluded “most top executives were able to keep their positions while lower level employee jobs have been significantly reduced.”
We think that the lack of senior executive turnover thus far has resulted from a variety of factors, but one compelling issue, which Hugh remarked, is that “you don’t change a General in the middle of a
battle.” Evidently, you don’t change many of the senior command either. We think that the bad economy may actually have temporarily saved some executives who might have been on the firing block because of the idea that “maybe nobody could do any better in this economy.” But, as the economy improves, we predict the dynamics will change and boards will want executives who can deliver performance. This will produce greater senior executive turnover.
Our recommendation for senior executives is not to become overly optimistic, to heed the warnings,
determine what skills will be necessary for them to add value to their companies as the economy improves … and watch their back. (by Daniel J. DeWitt, PhD)