2019 was a record year for CEO turnover. What can we learn from it?
Based on CNN report from January 9th, 2020, only in the US, 1,640 CEOs left their positions in 2019. Among them, we can find huge corporations such as Boeing, McDonald's or Nike. Reasons are different from company to company but there are some unforgettable lessons to learn and to plan for us.
1. Succession planning.
We all know about it but are we planning for it? Many companies are not! In November 2018, Carlos Ghosn was arrested and stepped down as the chairman of Renault-Nissan-Mitsubishi alliance.
After almost a year, the results of the alliance are bad and surely one of the reasons is the absence of Mr. Ghosn. Based on The Guardian The alliance reported sales of 10.76 million vehicles in 2018, marginally behind rival Volkswagen's 10.83 million. Yet it has been riven by infighting as the companies struggle to fill the gap left by Ghosn, who as well as heading the alliance was chairman of each of the three carmakers, and chief executive of Renault.
Renault is looking for its third chief executive in 18 months: Seat boss Luca de Meo is thought to be the frontrunner. Nissan appointed Makoto Uchida as chief executive in December, after previous boss Hiroto Saikawa resigned for being improperly overpaid.
But why is it like that? There are three reasons:
A) CEOs are not serious in succession planning. They only talk about it without taking necessary action.
B) CEOs ignore it intentionally. It's a bit tricky to be so much frank but it is true in many cases. CEOs are human too. They have all negative and positive emotions that all other people have. Sometimes they enjoy seeing the boat getting sunk after they step down. We must not accuse all CEOs but this might be true, unfortunately.
C) HR departments are not capable enough to plan succession planning successfully. It is sad to see that many HR leaders don't know the real value of their role. They see themselves as a tool in the hand of higher management to pay salaries, to follow certain simple rules and to hire and to terminate people. They don't believe in what they can do in their company. They don't see their developing role.
2. Lack of risk communication
It seems that investors and shareholders expect more. They want more profit, a brighter future, and promising plans.
Usually, at the beginning of each year, CEOs set some targets for the company and raise the expectation of board members and shareholders. Sometimes they modify targets but still, they would like to be positive and motivating. This is not bad up to this level. The bad part starts when CEOs don't study their targets and plans according to risk management standards and therefore they don't communicate the risk with people properly.
Of course, if a CEO doesn't reach to a target, reasons will be communicated but communicating the risk in advance makes board members and shareholders ready to predict the situation and to be ready for the next step.
This readiness will be a great support for CEOs since in crisis instead of briefing people what to do, they can be prepared and aware of their role to solve the problem at the earliest.
Anyway, if there is not a mutual understanding and continual risk communication between CEOs and board members then board members may ask them to quit even though CEOs might be right!
3. The complexity of the business environment.
Business environments are getting more complex and therefore more uncertain. Sometimes one mobile application can manage the job that was done with big number of teams. Disruptive models are increasing and therefore many CEOs can't survive the competition and deliver less profit which is against shareholders' expectation and eventually, they are asked to step down.
There are many solutions for the above problem but we can focus on the followings as lessons and solutions as basics.
A) Agility: High level of awareness regarding the business environment and enough flexibility to change processes.
B) Focusing on innovation by investing in R&D activities and training employees to develop their skills as a competitive advantage factor.
C) Making the business as relevant as possible as we spoke in our article 6 Strategies to sustaining business relevance.