Hitting the deck running

We all know that the average tenure of a CEO has been dropping. Boards are more vigilant, and bosses are expected to have a more-or-less immediately positive influence on share price, or out they go. And, really, it’s not just CEOs who are paying the price. A recent BusinessWeek Online article offers a careful look at the nature and extent of this rapid turnover throughout the executive ranks.

For example, according to the article, approximately 50% of senior executives recruited from outside a firm fail within two years, and most of those fail in substantially less than a year. Over 28,000 executives changed jobs last year, an increase of over two-thirds from the year before - and, again notable, almost half of these had been recruited into their jobs from outside. Key victims in this overall group, interestingly, are marketing officers, who have a shorter longevity in their jobs than CEOs. Typically, the article reports, outsiders are brought in to shake things up, and, perhaps for that very reason, they are singled out for resistance by the rest of the organization, often leading to their failure, for which they are dismissed.

Is the lesson here that executives need to be proactive and produce immediate results or risk being replaced? It certainly appears that that is the fate of many of these executives - especially, but not exclusively, those recruited into a firm from outside. And that would suggest to such executives that they must find effective ways to produce positive results, usually as measured by stock price, in short order or risk having their careers sorely bruised.

So, how are one’s strategic, operational, and planning time-lines affected by such an environment? They are shortened, of course, and executives find themselves taking recourse to measures that have been shown statistically to promote positive commentary by analysts and upward ratings on stocks, followed by positive price movement. They buzz-saw their way through the organization, cutting staff, selling non-core or under-performing business units, jury-rigging a strategic alliance or two, or other such high-visibility stunts ranging from traditional to trendy.

But the core problem here isn’t that executives are being driven to taking dramatic steps with short time-horizons - that’s a real enough problem, and a real enough part of it is the unfortunate fact that so many of them see this as merely a fact of life in the world today that they simply need to adapt to.

The core problem is that directors aren’t really becoming more involved, just more assertively uninvolved. They continue to foist responsibility for their firms off onto the latest heroic executive, close their eyes until they hear the corporate ship start to founder, then fire that one, hire another, and return to their irresponsible somnolence.

Boards need to find a way to discern what shareholder interest really is in their firms, learn how to translate that into corporate strategic direction, and then use that to hire and guide their managers. The truth is, managers should insist on this, themselves. Otherwise, they’ll likely be pulling the cords on those golden parachutes sooner rather than later - perhaps even within their first year. This is a basic fact; we can’t just keep on running from it.