Executive Turnover Is Speeding Up, and the Consequences Are Severe
The velocity of executive turnover is increasing, which is a concerning trend. Departures within upper management sends ripples through organizations both large and small. The consequences are costly and can hinder a business’s success and sustainability.
Let’s take a closer look at this phenomenon, shedding light on why executive turnover is on the rise, how it affects business, and how companies can bypass these challenges by partnering with executive search firms to secure top-tier leadership positions promptly and effectively.
The rising tide of executive turnover
To understand the current surge in executive turnover, we must first examine the unique dynamics of the past few years. Pre-pandemic, an estimated 1,640 CEOs of major U.S. corporations departed — the highest recorded turnover since 2002.
This number was expected to continue its upward trajectory, but economic turbulence and uncertainty during the pandemic unexpectedly impacted executive roles. Many in leadership positions chose to stay in their roles, bracing themselves and their organizations against the storm. Stability was the order of the day.
However, a global pandemic makes poor financial performance inevitable in many sectors, and decreased profitability emerged as a prominent factor driving executive turnover after the pandemic. And as the economic environment gradually stabilized, many executives reassessed their roles and careers. That soul-searching appears to have encompassed the entire C-Suite.
A study on the Fortune 1000 showed an increase in average annual turnover across all C-suite roles from 2018-2022:
- Chief Operating Officers (COOs) by 27.3%
- Chief Marketing Officers (CMOs) by 22.2%
- Chief Human Resources Officers (CHROs) by 18.9%
- Chief Financial Officers (CFOs) by 16.0%
- Chief Executive Officers (CEOs) by 11.6%
Another intriguing aspect of this departure is the decrease in executive tenures, and not just in the U.S. In recent years, CEO tenures across the globe have dropped significantly, from 8.5 years in 2003 to only 3.7 years in 2019. While the pandemic saw tenures slightly increase as executives held their positions in the face of uncertainty, the current situation shows it was merely a response to the crisis of the time.
The costly consequences of executive replacement
While the acceleration of executive turnover is a cause for concern in itself, the ramifications of replacing executives are equally worrisome. Among the most critical consequences are the financial implications of replacing an executive, estimated to cost an astounding 213% of an executive’s annual salary. The impact on an organization’s bottom line cannot be overstated.
Moreover, to find the right people to fill leadership gaps, organizations must commit to extensive executive searches, which are known to be time-consuming endeavors. On average, such searches take anywhere from four to five months to complete and can run even longer.
This lengthy timeline does more than just harm an organization’s operations and strategic initiatives — they pose a serious threat to an organization’s overall performance. A vacant C-suite position is equivalent to a captainless ship drifting in the business waters. Such circumstances decrease employee morale and productivity, erode customer confidence, and devalue an organization’s market position. In today’s highly competitive environment, these issues can lead to serious financial loss and destabilize an organization’s sustainability.
The role of executive search firms in mitigating the effects of turnover
Though the rapid pace of executive turnover can’t be rectified in the aggregate, individual businesses can sidestep the disastrous consequences for their own organizations by partnering with an executive search firm, like hireneXus, that specializes in filling hard-to-acquire executive roles. Beyond executive acquisition, the benefits of these partnerships include:
- Talent acquisition and hiring efforts tailored to specific organizational requirements
- Access to an extensive network of talent for various industries, roles, and responsibilities
- Expertise and resources to take the burden off internal HR departments
- Speedy placement and long tenures (indeed, hireneXus fills executive positions within 68 days on average and boasts an executive tenure of 10 years)
Moreover, by building a strategic relationship with such firms, organizations take a proactive approach to meeting their future leadership needs and maintaining stability as executives depart.
Securing leadership with hireneXus
Executive turnover is not slowing down, and the consequences are more than just the exceptionally high cost of replacement. Vacant executive roles can weaken an organization, leading to a loss in productivity, credibility, and market position. Responsible organizations must mitigate the risks effectively and partner with executive search firms like hireneXus.
At hireneXus, we go beyond merely finding candidates. We become an extension of your HR department, understanding your leadership needs to secure the right talent. Through concentrated efforts and our network of highly qualified talent, we find top-tier leadership with the long-term commitment, expertise, and skills to support your organization’s growth.