CEO Turnover to Rise Along with Demand for Talent
Top executives are calling for a new approach to leadership. That’s according to a survey of 155 senior executives at Fortune 500 companies conducted by Booz & Company. The survey found that chief executives and other senior managers are struggling with the downturn’s scope, timeline, and solutions. In short, traditional cost-containment measures are falling short during this recession and CEOs must adjust their mindsets for a shifting landscape. Chief Execs must have the courage to deviate from the strategic plan when faced with “the unthinkable,” according to Fortune.
It is seemingly a new era for the CEO. The economic storm is a test of leadership, according to Booz & Company. The firm also predicts the rate of CEO turnover will increase. Fortune quotes Jim Collins, author of Good to Great, as saying, “It will be a time of spectacular opportunity for the right leaders.” Amid the trend, executive search firm, A.E. Feldman, reports demand for CEOs is on the rise. The jobs opening up include opportunities for Chief Executives with proven track records of running companies in the following industries: healthcare, specialty chemicals, infrastructure, precision engineered components and logistics services.
A New Era for CEOs
The vast majority, 92%, of senior executives polled by Booz & Company cited “constantly changing objectives due to unstable economic conditions” as a major challenge to achieving their cost-reduction goals. The study concludes that companies - even entire industries - may look very different at the end of this recession than they did at the beginning. As a result, CEOs should remain flexible and open to new opportunities and adhere to the following guidelines to have a significant impact on their companies’ success:
- Concentrate business portfolios on long-term winners
- Attack costs in a strategic, coordinated manner to reduce break-even to its lowest possible level without losing market advantage
- Adopt a long-term view of how the industry should and will restructure, including possible government intervention
- Prepare to take intelligent risks, including preparation for the upturn, planning for price increases, and possibly recapitalizing debt
“Success will require leadership to aggressively seek out new ideas and opportunities – not just cut costs,” said Booz & Company Senior Associate Matt Mani. “In spite of the challenges of the current economy, those players who are strategic and bold will lead their industries into the eventual upturn.”
CEO Turnover to Rise
A separate Booz & Company survey, which tracks the degree, nature and geographic spread of leadership changes among the world’s 2,500 largest publicly traded companies, also found that the “economic storm is being viewed as a test of leadership.”
The study shows there was a slight rise in the numbers of CEO departures last year, with the financial services and energy sectors seeing the most turnover. In fact, the financial services industry saw 18% of its CEOs lose their jobs in 2008, breaking with the patterns of previous years where an average of 11.2% of CEOs left, the survey found. Forced turnover in the energy sector also hit a record high, with 5.6% of its companies’ CEOs being ousted, versus the typical 2.7%.
The study also found that the rate of turnover among CEOs may soon increase. “Scrutiny of CEO decisions has increased, and we expect turnover rates to rise again as boards assess their leaders’ performance,” said Gary Neilson, Senior Partner at Booz & Company. “Moreover, we’ve seen more former CEOs stepping into the chairman role, which indicates that boards are managing against risks in leader preparedness.”
A New Approach to Leadership
The leadership approach of “visionaries” who believed they could singlehandedly control their firms’ destiny has failed, according to Fortune. The report cites a recent study from Harvard’s Center for Public Leadership, which finds that confidence in business leaders has seen a more dramatic decline than that of any other group - even politicians or the media. And as confidence in the old style of leadership fades, a new model is emerging, states Fortune.
Anticipated government regulations will undoubtedly help define the role of the CEO. Fortune quotes David Gergen, the political expert and Director of the Center for Public Leadership at Harvard, as saying, “The CEO of the future is going to have to be someone who deals well with government.” The report concludes that in today’s economic climate, CEOs cannot fully control their destinies “in a world of competing entities, ranging from regulatory agencies to angry shareholders, from consumers to foreign powers.”
International experience and vision is also clearly becoming more important, adds Booz & Company. More than half of the incoming chief executives studied had previously held an international title, with just 13% hailing from countries outside the company’s home nation.
Looking ahead, Booz & Company outlined some seven basic steps CEOs need to take to steer a steady course for their organization through the current economic turbulence and position it for long-term success. Among those steps are resetting expectations of how the business would work, affirming or changing the leadership team within 60 days, keeping an ear to the market through customers and suppliers and engaging the board around its expectations.
Are you a CEO? If you want to grow your career or discuss your company’s talent needs contact A.E. Feldman’s President, Mitch Feldman today.
