After enough seemingly random events, it’s natural for the human brain to start looking for patterns (just ask Daniel Kahneman). So when I recently heard news that one of my executive team was leaving the company to pursue the inevitable “other opportunities,” I started to wonder:
- how did I manage to accept an offer with another company with an unstable leadership team?
- where did my post-offer diligence break down?
- what other blind spots do I have that are hiding major risks about this company?
Then a surge of awareness kicked in, and I realized that my self-orientation was causing a perilous bias in my view of the situation. ELC-Mercer data from 2013 put C-Suite turnover among Fortune 500 companies at 7.4%, in 2015 Crist|Kolder put CFO turnover at 10.9%, and in 2015 PwC measured the turnover rate for CEOs as 16.6% in the largest 2,500 companies globally. So after a couple years at the same company, seeing one or two executives walk does not seem like a rare and exceptional event, or necessarily precede a corporate apocalypse.
And why does executive churn even matter? For a few reasons, at least:
- the remaining execs will have to pick up the extra work left by the open seat
- the instability of the team may spark a power struggle and additional executive vacancies
- uncertainty among analysts and investors could spark a period of volatility and decline in the stock price, further devaluing the long term options for the remaining execs and increasing the risk that they walk away
Of course understanding why the executive team is leaving, and how extensive of a search the Board and CEO are doing in order to restore a balanced, effective and aligned executive team, are important questions to answer in order to understand whether the executive churn at your shop is in-line with the industry average, or a precursor to an epic corporate meltdown. So here are a few questions to consider when estimating the executive churn risk at your business, whether you are evaluating an offer of employment or already an employee:
- how long has each executive been in place, and how does this compare to the median tenure?
- how aligned is each executive’s experience with the go-forward strategy for the company?
- which executive’s “work-life balance” is increasing the risk of burnout? Warning signs include execs who live in a city other than the corporate HQ and commute more than 2 days per week, or those who are temporarily filling open division or functional leadership roles in addition to their core responsibilities.
- is there a defined executive succession plan in place?
- have there been significant corporate turbulence that increases the succession risk for your company’s executives? For example: merger & acquisition activity, entering or exiting markets, or significant upward or downward movement of the stock price.
There is a certain balance to be struck between staying focused to be successful in your own role, and staying aware about existential risks for the company that could threaten your career stability, regardless of your own performance. Everyone has their own risk tolerance, and hopefully the questions above will help you make decisions to find a place in an organization where you can thrive.
image credit: Alamy via dailymail.co.uk