I read with interest the recent report released by Strategy& that found the CEO turnover rate of 17.5% of the world’s largest 2500 companies were at its highest level in 20 years since the study began.
It went on to say that the average tenure of a CEO in the year 2000 was eight years, while today the average is just five years.
In Australia the average tenure for CEOs in financial services is five years – in line with the global average. It has been an unusually high turnover period since the Royal Commission, with at least four large organisations still to appoint a new CEO after high profile resignations.
It seems like both our political leaders and business leaders are now turned over faster than ever before. Barely getting time to make their mark before a new leader is bought in to replace them.
While I am all for new blood in an organisation to shake things up, and to add a new perspective, I have got to wonder what all this short termism is doing to real long-term strategic vision in our industry. The pressure to deliver to shareholders, and the dual master of serving clients often causes our leaders to understandably make decisions on revenue first, long term strategic outcome second. After all, if you know you are going to be rewarded and remembered for what’s happening now, it’s very hard to make unpopular or unprofitable decisions for the long-term gain.
I believe that the most effective leaders for the long term usually have a large personal stake in the outcome. Which is why the firms that usually hang onto their leaders much longer are the ones where the CEO is the biggest shareholder (think Kerr Neilson at Platinum Asset Management, Connie Mckeage at OneVue Group and Hamish Douglass at Magellan.)
Unless a leader feels support and security to make decisions for the long-term future of an organisation without immediate consequences, they will never be able to truly make the right long-term strategy work.
We should all try and stop looking at daily, weekly and monthly performance figures, and start looking longer term to the impact a business is having on our society and its stakeholders. Easier said than done I realise, but when enough of us start valuing the strategy over the short-term revenue, our industry will become a better place – where major strategic reforms like the Royal Commission are not needed again.
Something we can all aspire to – and start practicing today.
Until next time,
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