CEO tenures are becoming increasingly nasty, brutish and short. Some 60% of today's Fortune 500 CEOs have held their jobs for six years or less.
- The Wall Street Journal, June 15, 2005
Extensive research into corporate leadership trends shows a significant increase in "CEO churn" - the resignations and retirements, forced or otherwise, of chief executive officers.
Unrelenting pressure from the financial markets, regulators and shareholders for top financial performance, exquisite corporate governance and an almost puritanical adherence to ethics has affected every top executive. The downstream effect of Enron, WorldCom and Sarbanes-Oxley is being felt in every C-suite.
Imagine the disruption in productivity, strategic momentum, management retention, and operational effectiveness when a CEO position suddenly becomes vacant. Separation costs alone for the departing CEO (estimated recently at $62 million for one top Wall Street executive) and acquisition costs of the search for a replacement add up to a significant expense on top of the organizational disruption.
Meanwhile, the risk of making a wrong choice for an externally hired CEO has risen. According to the Harvard Business Review, 55% of these outside hires last less than 18 months.
How can these trends be reversed? Since the role of the CEO and other top executives is described as lonely, highly stressed and without enough "agenda-free" confidants available, the answer could be WJM Associates' Advisorship™ program, which provides top officers with an external advisor with extensive and relevant experience. The idea of having a trusted, objective, pragmatic, and supportive resource provides a powerful antidote to the isolation felt by CEOs and other senior executives.
Most often these kinds of resources cannot be found on the board or within the management team, given the inherent nature of boss/subordinate relationships. Ideally, an ongoing environment of respect, trust and candor should exist between the CEO and board members, but such a dynamic appears to be rare in today's corporate governance environment. Similarly, the relationship with the executive team members generally involves information flows that are heavily filtered.
The Advisorship™ differs from what is typically offered as "executive coaching" in that it pairs clients with peers who themselves have had many years of high-level management and the direct P&L experience necessary to truly empathize with and advise these top executives.
WJM Associates has identified a cadre of individuals with high-level corporate and/or board experience who are available as confidants to CEOs and other senior executives. These individuals can deliver objective and candid feedback and recommendations on an executive's leadership capabilities. They become a sounding board, and a trusted advocate who will provide advice from a unique perspective of having "been there" in a similar role. In effect, a mutual teaching/learning dynamic is created.
The value of Advisorship™ can be leveraged in a number of ways, starting with the potential to reverse these troubling trends of churn in the executive suite. This combination of trust, advocacy and advice from a fellow top executive may ultimately prove invaluable.
David Fowler is a member of WJM Associates' Advisorship™ Cadre. He has had over 37 years experience with the Chubb Corporation, a $12 billion financial services company, as EVP and Chief Administrative Officer, enterprise head of human resources, Vice Chairman of Chubb Life and Chairman & CEO of the Chubb Institute, an educational services subsidiary.