This may not come as a great surprise to many considering that there were several factors present in the business environment that made 1Q 2008 challenging. Consider these:
- A downturn in corporate performance overall
- Increased business complexity due to a difficult economy and the intricacies of Globalization
- Intensifying competition both domestically and probably more importantly, internationally
- Shareholder dissatisfaction with diminishing returns
- General market instability
- The sub-prime credit crises
OK, I agree. This is very logical and makes sense due to the fact that in most companies the CEO and/or CFO are accountable for broad company shortfalls, especially associated with things more strategic in nature.
Subsequently, on May 22, I read an article in the Atlanta Journal Constitution about a speech ex-Hewlett-Packard CEO Carly Fiorina gave to a group of executives where she said “adapt or die”! Then I really got it!
Turnover of a CEO and/or a CFO is clearly an indication of a company that did not achieve what it was expected to achieve. Whether it be financial results, share price, market share or other measurements of progress, growth, and success, the bottom line is that when the leader leaves or is removed, the entire company is almost certainly off course. Sure, people retire - but when turnover rises so dramatically, negative factors are likely in play. While the six items listed above were obviously large contributors, they were just factors that contributed to a bigger problem. I suspect the main reason for the sudden and precipitous increase in turnover relates more to a failure of leadership and the failure of that leadership to adapt, to change and to plan ahead and was simply amplified by the six items listed above.
It is human nature that when things are going well to stay the course and to bask in the glory of your current success. When business is going smoothly it’s a great time to hit the golf course or take your family on an extended vacation. I remember when I was a CEO I actually began to feel a little nervous when things seemed to go “on cruise control” and all was running smoothly. I never could understand the uneasy feeling I was having. Results were good, I was paying my shareholders dividends that exceeded expectations, the plan was being met and life was rosy. Ms. Fiorina addresses what I was feeling when she said “To make good decisions, business leaders must look beyond quarterly reports and trailing indicators and focus on customer service, the pace of innovation in their industry, the diversity of their work force and client bases, and ethics.” In other words, don’t sit back basking in your success, rather look forward and use your success as a platform to move to the next level and clearly determine what that next level needs to be. The best time to plan for the worst time is when it seems as if things are well under control. That is when a leader can show real leadership - by looking forward and anticipating the next step before it is even necessary.
There is no doubt that much of the increase in turnover for CEO’s and CFO’s referenced in the report resulted from the six factors listed. However, the deeper cause is the failure of business leaders, over the last several years when the overall business environment was relatively stable, to look forward and anticipate the changing global market place. They failed to anticipate where the company needed to be at a future point in time within that changing marketplace and to develop the plan it needed to navigate the company through the change. Is it a failure of planning? Partly yes, and I am still surprised at how many companies do not have business plans that relate to reality and use changeable, living documents that are designed to provide some quantifiable answers to hard questions asked by managers that should always be asking “what if” and “if I did this, what would happen.” Planning is a key component of leadership, one that allows questions to be asked whose answers can lead the company to adopt the strategies and tactics needed to meet new and different challenges.
“Adapt or die” - where looking forward rather than backward, planning rather than sitting still and providing real leadership rather than passive acceptance of the status quo differentiates the successful from the unsuccessful. A failure of many to look forward and anticipate the magnitude of change and the potential of a worse case scenario would help explain the sudden rise in turnover at the most senior levels. That failure of vision is a failure to lead.
Finding the right talent and the right leaders to lead during the toughest of times in a difficult marketplace remains the most important ingredient of a successful company, even when things are running smoothly. Leadership ability is probably the single most difficult skill to “ferret out” during the interviewing and screening process. Business skills can be evidenced by actual results and quantifiable data but that doesn’t always translate to leadership. Leadership reveals itself when things are tough. Unfortunately many companies realize their lack of leadership only after the company is in trouble. When circumstances turn difficult you can only hope that it is not too late to find a new and better leader to change the direction, vision and plan of the company in order to turn it around. Or, you can make sure you have the right leadership in place before trouble strikes, leaders that will “adapt and thrive”!
