The recent rash of CEO departures, presumably involuntary, punctuates a growing trend of Boards of Directors making changes at the top with an urgency not seen in earlier decades. The Wall Street Journal recently noted the trend with the headline: “The Angst of Endangered CEO: How Much Time Do I Have?” (public access here).
Three trends in the current business environment are exacerbating time pressures for CEOs:
1. Faster moving business environments
The growing specter of market disruptions for industries, fostered by the exponential growth in new technologies, has led boards to more decisively make changes in response to faltering company performance. The fall of a company like Blackberry from product icon to irrelevancy in seemingly a matter of minutes represents a warning call regarding the current fragility of business life.
When you are Ford, and see yourself lagging among competitors, while a relative upstart like Tesla surpasses you in company valuation, change is made at the top. Same with Molina Healthcare, when the CEO is not responding fast enough to industry changes, even if the CEO is a Molina running what was the family business.
2. More independent boards
The financial meltdown of 2007 underscored the importance of boards and generated additional regulatory mandates and consequences for directors seen as derelict in their fiduciary duties. Although, most of these requirements pertain to financial reporting within public companies, it is relatively easy to extend fiduciary judgment to other matters. Uber’s recent issues are an example of a board acting on bad behavior despite good financials. Similarly, independent boards feel empowered to question CEOs more aggressively rather than rubber stamping strategy.
3. Activist investors
Another huge factor impacting CEO shelf life is the increasing aggressiveness of activist investors targeting companies with flagging stock prices. Just in the last few months, a handful of CEOs have lost their jobs wholly, or in part, through pressures put on boards by activist shareholders disappointed with company results, and by extension CEO performance.
Ultimately, this combination of rapid market transformations, empowered boards and activist investors, has worked synergistically to heighten the precariousness of CEO tenures.
How does a CEO restart a career after being fired?
That depends of course largely on a myriad of issues and circumstances, starting with what the executive really wants to do next — another CEO position or something else? That inquiry alone takes time, particularly as the executive tries to put in context what went wrong in the last role.
Additional questions for those seeking another CEO role: How big a name? How long in the role? How public the termination and the circumstances surrounding it?
Losing a CEO role doesn’t generally mean that an executive is lacking the right skills. Steve Jobs got fired. Often it’s the match between the individual and the company and/or the particulars of that situation.
When I first meet a departing CEO client, my initial focus is to both understand the reasons for the departure and get a picture of the broader narrative of that executive’s previous success. Reflecting on the dynamics of a departure helps an executive focus on what situations to pursue (or avoid) next. Importantly, it also begins the process of shaping a public story explaining the departure in a manner that publicly protects the executive’s competence and integrity without looking like he or she is shifting all blame.
Why CEOs are fired
Most CEO terminations can fit one or more archetypical patterns that recruiters and potential employers understand:
- Differences in strategic vision between the CEO and the board.
- A changing board, an activist investor, or internal board conflict.
- Lack of patience for a strategy to take root.
- A cultural mismatch between the CEO and the company.
- A reaction to a CEO moved too fast for an organization in making changes.
Equally important as telling a story of why one left a role, is the need to put the departure within the broader context of that executive’s career success, articulating a professional “brand.” That is, “How does my experience as an executive represent potential value for a company or a set of investors?”
Paradoxically, as boards have increasingly pulled the trigger faster on CEO changes, the firing of CEOs has become recognized as a part of the CEO life cycle. It’s a little like the firing of most baseball managers — from the time a manager is hired, it’s less a matter of if the manager will eventually get fired, rather than when.
The same is becoming true for CEOs. In an environment of breathtaking fast business change and market pressures, patience is in short supply when evaluating CEO performance. However, rather than the end of an executive’s career, departures can represent a career reboot, with the help of deep reflection, a smart narrative and a good dose of professional resilience.