CHICAGO–Why do CEOs leave their posts? What sort of “CEO killing” mistakes and miscalculations take place? One person has some ideas and suggestions.
According to business coaching firm Challenger, Gray & Christmas. that CEOs left their posts in November of 2019 alone. With 1,480 CEOs having left their jobs in the first 11 months, 2019 is likely to exceed the previous record number of CEO departures -- 1,484 in 2008, according to the latest data.
So what’s at work?
Writing on Inc.com, Peter Cohan said the high profile examples of CEO departures in the last few months suggest CEOs leave for a variety of reasons, including:
- They can't keep the company growing fast enough,
- They can't forge a path to profitability,
- They violated company policies, or
- They don't want to deal with tighter regulatory scrutiny,.
Taking a closer look at recent CEO departures that fit into these categories, Cohan offered suggestions for how leaders can sidestep the challenges and create tenure-ending situations.
Can't Get Company Growing Fast Enough
“Melanie Whelan, the CEO of SoulCycle, whose company has faced competition from Peleton, the at-home exercise company that went public in October. Whelan became CEO of SoulCycle in 2015, attracted a cult following, but lost out because it lacked the online streaming classes that Peloton offered.
If that was not bad enough, SoulCycle investor, Stephen Ross's fundraising for Donald Trump caused celebrities like Chrissy Teigen to cancel their SoulCycle memberships, according to the Observer.
“If you're skilled enough to grow your business by catching a market as it's poised to explode, you should also anticipate that this growth will attract rivals. As I wrote in Disciplined Growth Strategies, the new competitors will take some of your market share and the only way you can keep growing is to move onto a new, breaking wave before rivals catch on. If you can't do that well, you could be out of a job.”
No Path To Profitability
“Failure to forge a path to profitability can cost a CEO their job. That is a big reason why Adam Neumann is no longer WeWork's CEO. Despite doubling its revenue, WeWork burned through $1.4 billion in cash in the first half of 2019 on $1.5 billion in revenue.
“If your company is growing fast and burning through cash, you may soon find yourself out of a job unless you can convince investors that you know how to build what I call a scalable business model.
“To do that, make processes such as bringing in new customers, answering their technical questions, and building new products much, much quicker and less costly. If you can't do these things, preserve the value of your company by hiring a replacement who can.”
Violated Company Policies
“A May PwC study of the world's biggest 2,500 public companies found that about 20 percent of CEO turnover was forced. But for the first time, 2018 turnover was due more to "ethical lapses than for poor financial performance or issues with the board," according to YahooFinance.
“There are many examples of this, but the one that sticks in my mind is the November 2019 departure of McDonald's CEO Steve Easterbrook who was fired over "poor judgment involving a recent consensual relationship with an employee."
“I have no useful advice for leaders about this,” wrote Cohan. “If you lack the self-control to be a role model for your employees, nothing I can say will make any difference. With today's heightened scrutiny of CEOs, you will quickly find your way out of a job if you violate your company's policies.”
Skipping Out On Responding to Regulatory Scrutiny
“If you have enough shares of your company that your job is secure, you still might want to leave the CEO position. This is what Alphabet CEO Larry Page and co-founder Sergei Brin (who control 84% e company) did -- ceding the job to Sundar Pichai.
“It seems to me that Page did this so he would not have to deal with global political and regulatory attacks on the company -- such as gearing up for an antitrust fight, according to the New York Times -- or communicate with investors. Pichai will take over those unpleasant tasks.
“The lesson for leaders who are eager to avoid such as a departure is to keep their company from attracting political and regulatory attention by spending more time communicating with staff so they will know ahead of time whether they are getting close to overstepping the bounds of conduct that such regulators will tolerate,” wrote Cohan.