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Time Is The Enemy

Contary to the old Rolling Stones lyric, time is not on your side. It’s no secret that a CEO’s tenure …

Contary to the old Rolling Stones lyric, time is not on your side. It’s no secret that a CEO’s tenure has been dropping precipitously over the last 10 years. In the 1990s, a chief could expect to hold onto his job for at least 10 years. Today, he or she would be fortunate to average half that. Jack Welch held the top job at GE for over 20 years, and one of the contributing reasons why Jeff Immelt was thought suitable to replace him was that the board wanted someone who at least had a shot at a similar 20-year stint. Long tenures are said to allow for long-term thinking. If the boss knows he has the equivalent job span of a Monarch butterfly, he may be less inclined to invest in endeavors where he will never see the payoff, or have his successor reap the reward of his effort.

The prospect of recession in 2008 will also wreak havoc with CEO tenure. There is academic evidence that companies that face layoffs also face a greater likelihood that the boss will resign. A Cornell University study in 2006 of the previous 31 years revealed that management turnover has increased over time. The research further reveals that on average, 12.2 percent of companies hire a new chief executive in any given year. The chances of this happening are significantly higher when the price of a company’s stock drops in response to the planned reduction in force. Perceptions and subsequent actions by these stakeholders will determine whether the top executive is punished or rewarded.

Arguably the first 100 days of a newly minted CEO are the most critical. Honeymoons between the board and a new chief are becoming shorter and shorter even for insiders who may have come up the ranks. Beginning on page 28, Michael Watkins and Dan Ciampa explore this phenomenon and set forth eight principles that their research shows would give a new CEO a higher chance for success. Even veteran bosses who have seen it all are invariably surprised by something. A few years ago, I asked Jim Kilts about his experience coming to Gillette. A former brand manager for Kool-Aid who led Kraft Foods and Nabisco, Kilts was a marketing guy born and bred and he had every reason to expect that his talents in that sphere would be uppermost in fixing Gillette.

Despite his best due diligence, Kilts learned that the company’s financial reporting systems were in far worse shape than he at first reckoned. As a result, he spent the first six months of his tenure fixing something altogether different than what he supposed at first glance. Even for the experts it’s always something.

About J.P. Donlon

J.P. Donlon
J.P. Donlon is Editor Emeritus of Chief Executive magazine.