High CEO turnover could damage UK firms

The
trend for decreasing CEO tenures is a global phenomenon, which could result in
long-term harm to organisations, the HR consultancy DBM has warned in its
annual global survey of CEO turnover.

The
survey, Turnover at the Top: Research Highlights from a Global Study, shows the
median tenure for a global CEO is just 2.75 years, with the UK showing one of
the lowest average lengths of service. In all, 62 per cent of CEOs in the UK
had less than three years in the job. This compares to an average of 50 per
cent of CEOs elsewhere.

The
survey also reveals that 86 per cent of company heads are still chosen from
within the organisation – indicating a clear opportunity for companies to focus
on succession planning to encourage consistent long-term strategies. On average
a CEO will have spent more than 20 years with a company before reaching the top
spot.

"Today’s
CEOs are under tremendous pressure to prove themselves within a very short
period of time," said John Gilkes, head of DBM’s international directors’
centre. "A company’s ability to nurture a successor could prove crucial to
ensuring the long-term health of the organisation.

"Pressures
such as quarterly reporting, mass industry consolidation, the economic downturn
and the growing emphasis on corporate governance have meant CEOs are
increasingly required to demonstrate visible short-term bottom line growth,
often at the expense of the long-term company strategy."

At
present only 2 per cent of companies surveyed rated their succession planning
at excellent, two-thirds described it as fair or worse.

The
study polled 481 large public and private organisations covering 50 industries
in 25 countries and was conducted over a two-year period between 2000 and 2001.

By Ben Willmott

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