CEO departures break record
The economic crisis forces heavy corner office turnover in 2008. Will successors learn from others' mistakes?
(Fortune) -- When the going gets tough, the tough get going.
Or get pushed.
So it stands to reason that in the toughest period for business in modern history, the number of CEOs leaving their jobs -- voluntarily or not -- has hit a record level. According to new data from Challenger, Gray & Christmas, 1,484 CEOs headed for the exits in 2008 -- which works out to an average of six every business day, the most since Challenger first began the survey in 1999. "CEOs are under intense pressure," says John Challenger, CEO of Challenger, Gray. "They have little room for error."
Yet while high-profile firings seem to draw most of the media attention -- some of this month's big ones include the heads of Seagate Technology and Tyson Foods -- Challenger's research shows that resignation was by far the biggest reason for an empty corner office this year, with 623 either retiring or "stepping down." Some of these are veiled firings, of course, but it is also highly possible that once-supremely confident CEOs actually feel as unqualified to lead their company through this crisis as many members of the public think they are (not to mention the fact that their pay has fallen dramatically for a job that has suddenly become a lot more difficult and a lot less glamorous).
What is even scarier is that fact that their replacements -- at least so far -- don't seem much better qualified to navigate these rough seas. In part, that's a function of age: No one currently in the work force was of working age during the Depression; no one has first hand experience with a truly global meltdown. But it's also because the executives who are still around seem to have fallen into a type of paralysis that prevents many of them from making the tough decisions that they need to make -- perhaps because they, too, fear getting canned or forced out.
Just look at an incredible tidbit from the latest in a series on the economy from consulting firm BCG, entitled Collateral Damage. In a study in early December 2008 of about 60 major companies worldwide -- long after the creation of TARP and the clear collapse in consumer confidence, mind you -- more than half of the companies had not made any significant changes to their strategic plans. On average, they were assuming no more than a 5% reduction in volume in a year that was already shaping up to be disastrous. "What is striking," the report reads, "is that, outside of the construction and auto industries, many companies are assuming that the crisis will have a very modest impact in 2009."
Say what? It's hard to believe that chief executives were still whistling their way to work in December 2008. What seems much more likely is that they simply didn't know what to do -- so did nothing at all. Taking risks, it appears, has gone from the measure of a chief executive's success to a dirty word, just as it becomes clear that standing still is the worst thing to do. Sydney Finkelstein, professor of Management at Dartmouth's Tuck School of Business and co-author of the new book "Think Again: Why Good Leaders Make Bad Decisions and How to Keep it From Happening to You" (Harvard Business Press), says that the executives he works with are falling into two different categories. "Some are saying they can't believe this has happened to me; it's one part denial and another part whining. Others are just facing up to the reality that this is going on and we have to do something about it. The difference in leadership is dramatic."
What all this suggests is that there will be even more leave-taking -- by design or by force -- this year than next. It also suggests that there is room to create a new role for the successful CEO; one who understands the relative powerlessness of the job in this volatile world and who has the guts to ask others for a hand. Large company executives might, therefore, look to the heads of smaller companies, who have long operated in a world in which they have little control over their own environments. Rafael Pastor, CEO of Vistage International, a CEO membership organization for heads of small and medium companies, says the number of CEOs joining his group, which provides 10 hours a month of meetings with peers to work together on business problems along with 2 hours of private executive coaching, has risen by 8% in the past year -- even with a charge of $15,000 to join. "People are reaching out for help," he says. What a concept.
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