The Great CEO Exodus is massive risk to shareholder value - Organizations need a proactive CEO succession planning!

?? In the first half of this year, CEO turnover hit a new high and it’s not yet showing signs of slowing down and it’s a potentially massive disruption to firm.

?? 142 CEOs left their positions so far this year. This compares to 148 across the same period in 2022, which was a record year for CEO turnover - some researchers call it "Great CEO exodus".

Only 25% of leaders say their organizations have proactive succession plans. That’s despite the highest performing and most progressive boards starting to think about their next succession as soon as they select the current CEO. On average, CEOs who were internally appointed had a 1.8-year longer tenure than their external counterparts. Although more women are becoming CEO than ever before with 21 new appointments in the first three quarters of 2023, in Q3 2023, only 13% of new CEOs appointed were women, according to a new interesting research published by Russell Reynolds Associates using data from 1,822 companies listed on the world’s leading stock indices.

?Burnout, a major cause of this high CEO turnover?

From COVID-19 to wars and economic uncertainly, businesses have faced unprecedented challenges in recent years. And the pressure has been on CEOs to steer their organizations through it. There is some disagreement about the exact causes of these CEO departures according to researchers:

1?? For Russell Reynolds Associates researchers, CEOs, who were planning to step down earlier, may now feel that they can do so without risking further turmoil for their organizations. While others are ready for new opportunities after navigating such a difficult period. Boards are also increasingly looking for fresh leadership. Many are now in a position to re-examine their strategic goals, and question whether or not they have the right CEO in place to address them.

2??For Korn Ferry researchers, Burnout is a big factor, and it goes back to the cocktail of COVID and then pace, complexity and globalization, pace, complexity and globalization is a recipe for burnout to begin with.

?? But all of these researchers agree that as higher levels of volatility and uncertainty in G7 economies persist, they expect annual CEO turnover to remain high in the years to come. This potentially opens the door to a greater number of women candidates and could help accelerate the world toward more equal gender representation in senior leadership.

?Women remain largely underrepresented in the CEO role

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Although more women are becoming CEO than ever before with 21 new appointments in the first three quarters of 2023 in Q3 2023, only 13% of new CEOs appointed were women.

Researchers highlight that this picture varies around the world in Q3 2023:

• 20% of new CEOs appointed in the S&P 500 were women.
• 25% of new CEOs appointed in the ASX 200 were women.
• No new women CEOs have been appointed in the FTSE 100.

?Average CEO tenure is significantly longer for men

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Researchers also noticed that since they began tracking the data in 2018, women's CEO tenures are much shorter than men’s.

Women on average last 5.2 years in the CEO role, compared with 8.1 years for men.

?? While this is a significant gap, there’s considerable variation across the globe.

?Solution: a multi-year CEO succession planning.

Researchers found that multi-year succession planning enables organizations to identify, develop, and retain top talent, raise team performance, strengthen culture, increase value creation, and achieve their strategy. Currently, only 25% of leaders say their organizations have proactive succession plans.

Best-in-class planning integrates strategy, culture, assessment, development, and team effectiveness, all aligned to a clear vision.

Researchers provide 7 steps below which can and should overlap in a multi-year succession planning process:

?? Create a forward-looking strategy and success profile

?? Assess internal leaders

?? Develop and coach potential successors

??Align culture to organizational strategy

??Enhance top team effectiveness

?? Benchmark the external CEO market and run selection-oriented assessments, including contextual immersion

??Appoint a new CEO and provide support with a tailored transition plan

??Finally researchers conclude that companies that manage CEO turnover effectively are likely to emerge stronger than ever.

When a CEO leaves, it can disrupt operations and create uncertainty for employees and investors. In light of these trends, it will become increasingly important for companies to prepare for CEO turnover and have the succession plans in place to ensure a smooth transition.

Thank you ?? Russell Reynolds Associates and 光辉国际 researchers team for these insightful findings: Sarah Eames Justus O'Brien Ernie Brittingham Stephen Langton Margot McShane Luke Meynell Constantine G. Alexandrakis Alan Guarino Gary Burnison

Dave Ulrich George Kemish LLM MCMI MIC MIoL

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