- 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.
Media Contact:
Chiara Pierdomenico +44 (0)20 7075
4236
cpierdomenico@heidrick.com
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