NEW YORK, N.Y. – Used to be that CEOs were hired for their knowledge of the industry, years of experience and the ability to lead with a tight fist. But the role of the top job has changed dramatically over the last several years.
CEOs increasingly are being pressured to cut costs, while growing their business. They’re being prodded by investors to push for global expansion, while being asked by customers to be more socially responsible. And at a time when having strategies for social media and data security are becoming integral to doing business, CEOs are expected to keep up with the frantic pace of technology.
The new skill sets that are required for the job mean that corporations are more likely to hire from outside of the organization — and the industry — than they were in years past. It also can mean that the corner office is less forgiving than it used to be: security software maker Symantec, for instance, ousted its CEO Steve Bennett in March, the second time it has pushed out its leader in less than two years.
In fact, in the first four months of the year, there have been 460 CEO departures, of which 9 have been forced out or fired, says a survey of private and public U.S. companies by Challenger, Gray and Christmas. The total of CEO terminations was up 14.1 per cent from the same period a year ago.
And that doesn’t count those who resigned, retired or stepped down who were actually pushed out.
Moreover, the average tenure for a CEO last year was 7.9 years down from 9.4 years in 2007, the start of the recession, according to Challenger.
“We are in an unprecedented era of challenge at leadership levels,” said Mark Cohen, a former CEO of Sears Canada and a professor at Columbia University’s Business School. “There’s less patience with CEOs now.”
The changing priorities have created a challenge for company’s boards of directors, which must filter through a slate of candidates. They want to fill to role as quickly as possible to assure investors and customers. But the new requirements and skill sets mean the search is a lot more difficult than it has been in years past.
Here’s how the search has gone for a few big companies:
Target’s announcement last week that it’s searching for a new CEO sheds light on a major shift.
Target’s CEO search follows the abrupt departure of Gregg Steinhafel in the wake of a massive data breach and a botched up expansion plan in Canada. The nation’s third largest retailer said it will search outside the company — and the industry.
If Target hires from outside, though, it would mark the first time in its 112-year-history that its leader wasn’t homebred.
“It’s a difficult search for a company of our magnitude,” said John Mulligan, Target’s chief financial officer who is interim CEO, in a recent interview with The Associated Press. But he added: “We will find the right person.”
Mulligan said Target is looking for someone with the right skill sets but that understands the culture of Target. Elaine Hughes, founder and CEO of E.A. Hughes, an executive search firm that specializes in retailing, said Target needs to look outside the clothing industry and can’t just use the “same Rolodex” as the retail industry keeps using.
In February, when Microsoft picked Satya Nadella, a company veteran since the early 1990s, some worried it would reinforce perceptions it wasn’t a risk taker as it competes with younger rivals like Google.
Nadella’s style of leadership is already winning praises because he is collegial and humble. Among recent moves; the unveiling of Office for iPad, which was well received by the stock market.
That’s in sharp contrast to his predecessor Steve Ballmer, who uses the blustery, rally-the troops approach and is known for his larger-than-life displays of emotion
“He’s more deliberative and more thoughtful,” says Suresh Kotha, a professor at the University of Washington’s Foster School of Business in Seattle.
Penney decided in 2011 to hire Ron Johnson, a former Apple executive, to run the department-store chain.
Johnson vowed to transform the beleaguered company with trendy merchandise and break shoppers’ addiction to sales by rolling out everyday low prices.
But the rapid-fire changes alienated Penney’s customers, resulting in nearly a billion loss and a 25 per cent sales drop in the first year of Johnson’s plan.
The board fired Johnson after 17 months and Penney rehired his predecessor, Mike Ullman, who is stabilizing sales as the company searches for a permanent replacement.
Penney declined to comment on the search for its new CEO. New York-based retail consultant Walter Loeb speculates Penney could hire an industry insider: Roger Farah, who announced earlier in the month that he was retiring from Ralph Lauren after 14 years. Farah was most recently executive vice chairman.
In 2006, Ford hired Alan Mulally away from Boeing. At the time, the automaker passed over internal candidates, including Mark Fields, who takes over the reins on July 1 when Mulally retires.
The decision to hire an outsider proved to be wise. When Mulally was hired, Ford was on its way to a $12.6 billion annual loss and management was widely seen as dysfunctional.
Mulally gained superstar status by ending the infighting between executives and regions that had long plagued the company. He developed a plan to get Ford back to profitability, dismissed executives who wouldn’t follow the plan or work together and borrowed billions to keep the company out of bankruptcy.
Taking over for Mulally, Fields, who was instrumental in that turnaround, will inherit a healthy company. But he will have to push the company for bigger growth.
Tom Krisher and Dee-Ann Durbin in Detroit and Ryan Nakashima in New York contributed to this report.
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