Surviving the Coming Executive Job Churn

 
 
By Elizabeth Millard  |  Posted 2008-05-28
 
 
 

The here-today, gone-tomorrow climate of CEO changeovers has almost become routine in the past few years, and executive outplacement firms track the numbers as closely as bookies at a racetrack. But in a recent survey, one firm has discovered that it’s not just the top spot that’s seeing a dramatic turnover, but the entire executive suite.

IMD International Search Group asked its 24 offices, in multiple countries as well as the U.S., to identify the top 100 most important companies in their area. Although many were chosen because of their large size, others were seen as significant because of their market clout or innovative strategies. The top executive in human resources at each firm completed the survey, covering company trends for the past three years.

The survey was undertaken to determine client needs and get a sense of the impact of Baby Boomer retirements, notes Thomas Fuller, general managing partner at IMD. Although much business discussion has been sparked by the advancing age of upper-level management, Fuller believes that a surprising number of organizations will be affected more than they realize.

“A lot of people have their head in the sand,” he says. “The numbers don’t lie. In the U.S. alone, there will be a shortfall of 33 million workers. That means 50 percent fewer people in the workforce.”

The Baby Boomer generation dominates executive offices, with more than two-thirds representation, IMD notes, although on a hopeful note, the firm did point out that 32 percent of the executive committee members are from younger  age groups, commonly referred to as Gen X and Gen Y.

One of the most striking aspects of the survey is the lack of comprehensive succession planning at many companies, he adds. More than 70 percent of respondents noted that there is no successor identified for the top three spots in their organizations.

“So, you have seven out of 10 CEOs sitting in offices without a successor waiting in case anything should happen,” notes Fuller. “Given the pace of CEO change, that doesn’t seem to be the best strategy.”

IMD points out that there was record-setting C-level turnover in 2006, which continued into 2007. And, in the first quarter of 2008, those surveyed reported 55 percent turnover of CEOs, 11 percent for CFOs and 10 percent for other C-level managers.

According to the survey, primary factors for high executive churn include corporate performance, increasing market instability, the rising complexities of business, and growing domestic and international competition.

Not Celebrating Diversity
Another survey result that should draw attention is the dearth of women and minorities at the C-level throughout the world.

Women have “cracked the glass ceiling,” Fuller says, but are still a long way from breaking through. Only about 20 percent of the C-suite is female, which Fuller says is not a surprising statistic on its own, except when a deeper look is taken at what that number comprises.

Half of the 378 companies that responded to the survey had no women at all in their C-suites, meaning the other half of companies must have about 40 percent of women in those upper decks. The lack of any women in the top levels of management at the responding companies is dismaying, Fuller believes.

In terms of ethnic minority candidates, Fuller isn’t surprised that only around 10 percent hold a position in the C-suite, considering that minorities have faced numerous challenges in finding spots in the upper echelon open to them. But what is eyebrow-raising, notes Fuller, is that 71 percent of respondents indicated that no diversity strategy is in place at the upper management level, and 86 percent don’t anticipate any diversity changes, meaning not only that are there no minorities on the job, but no plans are in place to begin being more inclusive in the next few years.

“Race and ethnicity in hiring are not nearly as important in other parts of the world as in the U.S.,” Fuller says. But they deserve to become more prominent, in part as a response to hiring, but also because a diverse talent pool can increase market share among multicultural customers and create a corporate reputation for social responsibility, the survey’s findings note.

Fuller admits that the news about a talent gap could prove beneficial for IMD in the near future, but looking at the long term, he advises companies to start thinking about how they’ll replace their C-suite executives as more Boomers retire, and to consider widening their searches to include more diverse candidates.

“Regardless of whether it’s a social issue, the fact is that organizations are ignoring a potential talent pool out there,” he says. “Already, it’s a very tight talent market, and it’s only going to get worse as turnover keeps happening and Boomers leave. More companies need a proactive hiring strategy, or they’ll be in trouble.”

Lessons Learned

As the results of the IMD International Search Group survey indicate, a deficit in superior talent that's intensified by a retiring baby boomer population is a critical issue facing global organizations. IMD believes CEOs and management boards must make talent acquisition a top priority. Here are some strategies that can help:

  • Proactive bench building
  • Succession planning driven from the top
  • Building a true talent brand
  • Creating a culture that makes “employer of choice” a critical corporate value
  • Expanding the talent pool by increasing diversity
  • Adopting and implementing a diversity policy that is endorsed and signed by the CEO.

Source: IMD International Search Group