Management Turnover as Change Agent

Wednesday, October 13, 2010

Quarterly Executive Turnover Continues to Decline While Overall Unemployment Remains High

Executive turnover has continued to decline throughout the economic and financial crisis and even as the recession ended according to the official proclamation by the National Bureau of Economic Research. Liberum Research’s latest quarterly turnover numbers for CEOs, CFOs, Board of Directors and C-level executives (defined to include CEOs, board of directors, CFOs, COOs, down to VP level) continued to show a drop in turnover for all key categories for the third quarter of 2010. The declining trend in executive turnover has continued since the first quarter of 2008 for all key executive turnover categories (see the CEO, CFO and C-level graphs below for quarterly turnover comparisons). While the first three quarters of 2010 continued to show significant declines in executive turnover, particularly when compared with the first, second and third quarters of 2009, we are beginning to see the overall executive turnover declines slowing when the quarterly figures are compared with each previous quarter of 2010.

  • Third quarter 2010 CEO changes dropped 27%, CFO changes dropped 8% and overall C-level changes for the third quarter dropped 32% respectively when compared with the third quarter totals for 2009.
  • The drop in changes for the third quarter of 2010 was much smaller when compared with the second quarter totals for 2010 - the drop was 21% for CEOs, 7% for CFOs and 6% for overall C-level changes.

While monthly executive turnover numbers have been smaller since early 2008, the investment opportunities they represent are still quite significant. Below Liberum put together three graphs representing the total executive related changes (CEOs, CFOs and C-level changes) by quarter for 2005 through the third quarter of 2010.

Total CEO Quarterly Changes by Years 2005 - 2010 -

Total Quarterly CFO Changes 2005 - 2010 -

Total C-level Changes by Quarter for 2005 - 2010 -

Friday, October 1, 2010

HP Selection of New CEO Slammed by Analysts and Market

Yesterday’s long awaited announcement on who would replace Mark Hurd as Hewlett Packard’s HPQ (NYSE) CEO went down with a thud. The selection of Leo Apotheker, a former short lived CEO of SAP, was not hailed by the market nor many analysts. I am on the other side of the fence on this appointment. I think HP’s board has come up with a surprisingly excellent choice.While ApotheLeo Apotheker, New HP CEOker was not very successful while CEO at SAP he faced a great deal of opposition within the organization and more than likely learned what he would need to do to be successful a second time around. SAP’s culture did not fit his needs for change. He should be able to make more change at HP than he was able to accomplish at SAP.

HP’s board appears to have gone strategic in its appointment. Its decision to go outside the firm for its selection should in the long run work out. Apotheker has the right background to help HP move into the software side of the industry in a big way without seriously jeopardizing its current bread and butter businesses. Who knows he might even move to go for an acquisition of SAP or some kind of alliance. If he can manage to keep many of the key players currently at HP and work with them to get the firm’s overall strategy right, he has a great chance at being very successful. He is a strategic thinker and he understands technology.

Shareholders and investors need to give him time to get up to speed. Stay tuned this latest selection may turn out to be a really winner despite the conventional wisdom. One year stock performance of Hewlett Packard

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