In a dramatic shift, CEO turnover has become the new norm amongst major corporations, creating a ripple effect throughout the business world. Christine Barton, BCG North America CEO advisory lead, confirmed the increasing trend but noted that the S&P 500 has remained relatively stable over the last five years, with the exception of 2022, which saw a significant increase in external CEO hires. This surge in leadership transitions reflects the broader macroeconomic and societal shifts post-COVID-19, with companies aiming to adapt to a dramatically altered operational landscape.
Recent weeks have seen a flurry of CEO exits and new appointments in companies like PayPal, Synopsys, Kraft Heinz, and Dutch Bros. The reasons for these leadership changes vary, but London Business School professor Randall Peterson identifies the drastic changes in the business environment over the last 18 months as a significant factor. As companies transition from dealing with the immediate impacts of the pandemic to navigating the new normal, CEO strategies that were effective during the crisis may no longer be relevant.
Corporate America Experiencing a Surge in CEO Turnover
In recent times, the corporate world has witnessed an upsurge in CEO turnover in some of the most influential companies. This trend, as explained by Christine Barton, BCG North America CEO advisory lead, has remained relatively stable in the S&P 500 over the last five years. However, 2022 saw a significant increase in external CEO hires, although there was an overall decrease in turnover.
A Week of Massive CEO Exits
The roster of exiting CEOs has expanded dramatically in the past week alone. PayPal recently announced that CEO Dan Schulman would be succeeded by Alex Chriss, a veteran executive at Intuit. In the same vein, Synopsys declared a CEO shift, with Aart de Geus stepping aside for Sassine Ghazi to assume the position of president and CEO.
Moreover, Kraft Heinz’s CEO, Miguel Patricio, unveiled plans to step down and will be succeeded by Carlos Abrams-Rivera. Dutch Bros also named Christine Barone as their new CEO, replacing Joth Ricci. These leadership changes will take effect from January 1 of the upcoming year.
The Impact of Macroeconomic and Societal Shifts
The high rate of CEO turnover can be attributed to the macroeconomic and societal transitions following the subsiding of the COVID-19 pandemic, according to London Business School professor Randall Peterson. He pointed out that the drastic changes in circumstances over the past 18 months have necessitated a shift in leadership styles. The strategies that proved effective during the pandemic might not be as effective in the current economic climate.
The Wider Workforce Reflecting C-Suite Changes
Keith Giarman, a managing partner at DHR Global, noted that CEOs’ tough actions to right-size their workforce and organizational structures often align with broader workforce trends. Particularly, layoffs and CEO departures tend to correlate over time, although not always exactly, as noted by Andy Challenger, senior vice president of Challenger, Gray & Christmas.
The Risks and Rewards of Leadership Changes
CEO changes often come with an increased degree of risk, as new leaders may lack the ideal level of confidence, and their priorities quickly cascade down the chain of command. However, a new CEO, chosen by the board, can provide valuable insight into the company’s intended direction.
Choosing a successor from within the company or externally, as seen in the cases of Kraft Heinz and PayPal respectively, comes with its own sets of advantages and disadvantages. External successors have become increasingly common but don’t always guarantee stability, according to BCG’s Barton.
The recent surge in CEO turnover is an indicator of how companies are adapting to the post-pandemic economic landscape. While this transition comes with its share of risks, it also presents an opportunity for companies to redefine their strategies and priorities. As the corporate world continues to adjust to these shifts, it will be interesting to see how these leadership changes impact the respective companies and their performances in the long run.