Heidrick & Struggles FTSE 350 and global surveys reveal rising CEO churn rate
Jun 5, 2018
- Global CEO churn rate has nearly tripled from 2001 to 2016, to 9.3% a year from 3.4%
- FTSE 100 and FTSE 250 CEO churn rate was 16.5% in 2016 compared to the global average of 9.3% for companies worth more than $1 billion
- Only 13 out of every 1,000 global CEOs take up equivalent positions
- Globally, telecoms, leisure and insurance sectors show the highest CEO exit and arrival rates
- An increasing proportion of CEOs now come from internal promotions
- Most CEOs will only fulfil one role as a chief executive
- Lack of CEO reintegration could lead to "brain drain"
The frequency of CEO transitions has increased steadily since 2001, a study carried out by Heidrick & Struggles has revealed.
LONDON, June 5, 2018 /PRNewswire/ -- Heidrick & Struggles (Nasdaq: HSII), a premier provider of executive search, leadership assessment and development, organization and team effectiveness, and culture shaping services globally, publishes its latest research examining current trends on CEO success rates. The survey examined CEO transition rates in the FTSE 350 and companies globally with $1 billion or more in annual revenue.
Heidrick & Struggles' key findings show that the percentage of publicly listed global CEOs at companies with $1 billion or more in revenues has increased from 3.4% in 2001 to 9.3% in 2016. One in five FTSE 100 CEO appointments were made within the past year and just over one in three CEOs appointed since 2012 currently occupy that role.
The churn rate for FTSE 100 and FTSE 250 companies is currently approximately 6 percentage points higher than the average of global companies with $1 billion or more in revenues. In 2001 the UK churn rate was at 9.5%, against a global average of 3.4%, and has subsequently risen to 16.5% in 2016, against a global average of 9.3%.
Almost three in four FTSE 100 CEOs are now being promoted from within their respective companies, presenting a lower-risk and lower-cost option. These internal appointments are also likely to be younger, with over half of FTSE 100 appointments under 55.
Organisations with higher revenues are also more likely to appoint their CEOs internally; approximately five out of six CEOs for FTSE 100 companies with revenues greater than $30 billion are internal appointments, compared with four out of six CEOs at FTSE 100 companies with revenues of $10 billion or less.
Given how fast they evolve and the volatility the sectors are subject to, telecoms and leisure see the highest CEO exit and arrival rates, with the former's churn rate increasing from 9% to 17% in just under four years.
The overwhelming majority of global CEOs will fulfil one role as a chief executive, with only 13 out of every 1,000 CEOs surveyed going on to take up another equivalent position.
Jenni Hibbert, Regional Managing Partner, Financial Services at H&S, said: "CEOs' transitions have considerable significance for companies. Although competition is fierce for the top positions, few people are equipped to deal with the enormous demands of the role. 'Inside out' organisational knowledge helps, hence in part why we've seen a trend toward internal CEO appointments alongside a focus on proactive internal succession planning.
"What this research shows is just how insecure a CEO's position is. It is significant that only 13 out of every 1,000 global CEOs find themselves in an comparable role when they leave their roles. This has serious implications for the business world and is already leading to what we refer to as a 'brain drain'.
"Organisations need to project ahead and equip their teams to be agile, attuned and responsible. It comes down to being and staying relevant. We are fully aware that the profile of a leader will not be the same in five years. But, finding ways to harness the experience and wisdom of former CEOs to complement evolving leadership demands is key."
Heidrick & Struggles interviewed four leaders for a separate report who have been through the CEO transition process, who discussed life after holding senior positions: Nils Andersen, ex-CEO of Maersk Group; Mike Rees, former deputy group CEO of Standard Chartered; General Sir Richard Barrons, former commander of the UK's Joint Forces Command and Antony Jenkins, ex-CEO of Barclays.
Andersen commented: "If you have run a global company, you have seen a lot of the world. You know a lot about markets, you know a lot about government, about geopolitics, and, hopefully, quite a bit about business as well.
"Most CEOs will appreciate advice and a prudent steer. That's where the ex-CEO comes into play. The current CEO might turn to someone who has tried to navigate disruption, who doesn't panic when things go a little bit wrong, and who can provide advice based on experience. A seasoned manager can give advice on how certain things should be handled and what opportunities look interesting."
Jenkins decided that he wanted to take a more entrepreneurial approach to life after his tenure at Barclays: "The first few months [after departing the CEO role] were both odd and, on occasion, difficult because you find yourself in all sorts of strange parts of the world talking to people you hadn't talked to before. My motivation for not pursuing another big CEO job was primarily because I thought I'd already done that. I wanted to try something different and do something more entrepreneurial.
"There's always been a part of me that wants to do transformational things, and, in a way, that is the heart of an entrepreneur. I have to say that my work life now is extremely varied [and] very stimulating…starting a business from nothing is not an easy thing to do. There are lots of ups and downs, but on the whole I find it very gratifying.
"An entrepreneur is somebody who sees that the world can be different, as opposed to a lot of people who see the world in a particular way and just want to optimise it.
"Building a team around you is the hardest thing in any business. It doesn't matter if there are 130,000 people or 10. At its heart, it's all about getting people to put in discretionary effort. You want people to be passionate about the mission, to care about it more than themselves, and to put in that extra work."
About Heidrick & Struggles
Heidrick & Struggles (Nasdaq: HSII) serves the executive talent and leadership needs of the world's top organizations as a premier provider of leadership consulting, culture shaping and senior-level executive search services. Heidrick & Struggles pioneered the profession of executive search more than 60 years ago. Today, the firm serves as a trusted advisor, providing integrated leadership solutions and helping its clients change the world, one leadership team at a time. For more information about Heidrick & Struggles, please visit www.heidrick.com.
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