CEO turnover is on the rise. Close to two-thirds of all major companies replaced CEOs in the past five years. Challenger, Gray & Christmas, the outplacement specialists, reported a 22% increase in chief executive departures in the first half of 2001 compared with the same period in 2000. It also reported a record 2,246 CEO departures, voluntary and involuntary, since August 1999. All these public lynchings beg the question: What's behind all the CEO churn?
hunger for fast results
Simply put, shareholders and other key audiences want results and want them fast. According to new CEO reputation research, the time period given to CEOs to perform-and perform well-is now exceedingly short. Business influentials, such as fellow CEOs, senior executives, financial analysts, business media and government officials, grant CEOs only five poor-earnings quarters on average before their jobs are in jeopardy. That's about 15 months!
Within the first 12 months, new CEOs are expected to nail down a strategic vision and win employee support. Before year two ends, they are expected to have their management team firmly in place, earn the allegiance of Wall Street, stage a turnaround and reinvent how business gets done.
It comes as no surprise corporate reputations are on shaky ground today. It seems as if a reputation has just begun to evolve when a new CEO rises to power. And the rising expectations of CEOs have a strong ripple effect on other departments, including advertising and marketing. Too often, the ink has yet to dry on a marketing officer's new ad campaign when word comes down of a new CEO, one who wants to put his or her imprint on the company's corporate identity and brand. The creative process must then begin again. And we wonder why marketing has become so schizophrenic.
Wall Street and the media join in to fan the fires of impatience. At eight months, Business Week (Oct. 29, 2001) sized up American Express Co.'s new CEO, Ken Chenault, and after seven months The New York Times (Nov. 15, 2001) asked analysts to weigh in on newly installed Terry Semel's progress at Yahoo.
Making a measurable impact under these circumstances is a tall order for any new CEO. By 18 months, The Wall Street Journal (Nov. 14, 2001) had delivered its report card for Mattel Chairman-CEO Robert Eckert. Luckily for him, he made it to the head of his class. With intense timelines and unwavering scrutiny, we'd have to agree with Alice, who said: "They're dreadfully fond of beheading people here: The great wonder is that there's anyone left alive!"
To reap optimum results from our corporate leaders, we need to make three shifts in thinking. First, stakeholders need to adjust their quick-fix-o-meters. CEOs require more than 15 months to make their marks. A new definition of success is called for. Short-term measurement criteria harm us all.
Second, board members should be held more responsible for these so-called CEO failures. After all, they had a big hand in selecting the CEO, rubber stamping the corporate strategy and watching over its execution.
Third, let's hear more lessons-learned from the other side, from CEOs themselves. Although CEOs are tightly bound by severance and confidentiality agreements, they have countless experiences on building and losing reputation to share with both fellow CEOs and rising stars.
Without naming names, departing CEOs should be able to unknot the legal strings tied to their compensation packages to impart the lessons learned from their days at the top.
The public beheading of corporate leadership should not be treated as a fairy tale. Boards should act responsibly. They should not throw up their hands and exclaim to CEOs, "You're nothing but a pack of cards!" As our resolution for 2002, let's give our business leaders more latitude, being fully aware leadership will have its diamonds and spades.
Leslie Gaines-Ross is chief knowledge & research officer at WPP Group's Burson-Marsteller, New York.