The CEO is the latest endangered species
The revolving doors are spinning ever faster in the executive suites of corporations.
CEO turnover has reached an all-time high, according to figures kept by recruiting firm Challenger & Gray. Last year, 1,484 U.S. CEOs resigned, stepped down or were fired — six casualties every business day.
Resignation has outpaced retirement as the leading reason for departure, as the credit crunch has dealt a savage blow to prospects for growth and investors grow restive over share dilution, dividend cuts and shrinking outlooks.
High profile departures stretch from the bosses of the global retailer, Carrefour, to computer maker Lenovo to a succession of financial leaders including those at AIG, Merrill and UBS.
Turnover among top executives may even be accelerating as we descend into 2009. Similar defections appear to be occurring around the world, although no one keeps track of exact totals.
Given the public’s newfound lust for revenge against the CEO class, this exodus may provoke little more than a wry smile among anyone struggling to fend off the effects of the credit crunch in their own lives.
But it presents a practical problem for those boards of directors left to pick up the pieces after a CEO departs with his reputation and strategy in ruins: Where to find the talent and experience to step in and shore things up as well as start to build towards the recovery?
Executive recruiter Heidrick & Struggles has come up with one idea to solve the brain drain. It has lined up hundreds of executives across industries and functions for what amounts to an executive temporary service.
Think Manpower or Kelly Girl, only for former captains of industry — CEOs, CFOs, chief marketing, human resources and information officers. The idea is to place these individuals with companies needing short-term leaders — either to solve a crisis or seize a new business opportunity.
Many of the executives taking part in the Heidrick & Struggles’ Chief Advisor Network have left high-powered positions and are no longer interested in full-time work. But, like many in their baby boomer demographic facing the prospect of retirement, they are unwilling to completely disengage from work.
Executive temping is a natural extension of Heidrick & Struggle’s established executive search and leadership advisory businesses. Tapping the experience and talents of executives with a solid track record of corporate leadership makes sense to fill obvious leadership voids. The idea of bringing back a wise old head, perhaps one that can even remember the last recession, after a disastrous few years under a whiz-kid CEO probably appeals to many shaken boards.
But while the approach may offer a quick fix to companies in deep crisis — and there are plenty of those around right now — it’s not clear that it is the way forward in other situations. And there are even questions about how effective that fix might prove. Bringing in an outsider with no deep knowledge of a company can be a recipe for chaos — especially when things are in flux.
There’s also the risk of bringing in someone who is motivated principally by financial incentives and won’t stay around to see how their decisions pan out over the long term. Wasn’t short-term decision making by managers and directors often what tripped up these companies in the first place?
Lastly, the ability to rely on a temping service may even encourage boards not to take hard decisions on management succession, figuring they can plug the gap if they need to.
Leadership is vital in the wake of an important executive’s departure. But dialing up a CEO is symptomatic of the wider breakdown in corporate governance that has occurred over the past decade. If the practice becomes widespread, such short-term solutions are likely to breed further disillusionment with corporate management.
— At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. —