Management Turnover as Change Agent

Tuesday, July 19, 2011

Second Quarter Executive Turnover Shows Real Growth

With the end of the second quarter, the United States economy appears to have turned a major corner in relation to executive turnover. Executive turnover, as tracked by Liberum, has seen a continuing jump in the totals for June 2011 and the second quarter. The jump in turnover has been apparent when second quarter was compared with the same quarter in 2010 as well as in relation to the previous first quarter of 2011. The continuing jump in executive turnover appears to be at odds again with the level of employment and unemployment in the United States economy. Troubling signs for overall employment continue to haunt the U.S. economy as the recovery continues to limp along.

Now that we are finally seeing changes at the top of corporations, hope can increase that companies will finally begin to start hiring again. Liberum contends that the slow level of executive turnover over the previous number of years related to the reluctance corporate boards and top executives had to change top leadership during tough economic times except in situations where the firm in question performed so poorly that a top executive change was necessary or if a major strategic change change in strategy was needed. As we moved into 2011, we finally saw the level of unemployment bottom out.

Liberum expects that if the economy manages to recover, even ever so slightly, the level of executive turnover will continue to rise. Both the pent up demand for new top executives and the possibilities for new job opportunities will account for growing executive turnover. Also boards are expected to be more willing to make changes as the economy continues to move in a positive direction especially if the debt ceiling problem is resolved, even temporarily.

Below are three simple graphics outlining the quarterly management changes as registered through Liberum’s Management Change Database for 2008 through 2011 (second quarter) for CEO, CFO and overall C-level turnover. The first two quarters of 2011 dramatically illustrate the reversal in trends we have seen for a number of years. Executive turnover is again in the ascendancy. We expect this trend to continue unless the economy encounters some kind of major shock, lack of agreement on the debt ceiling, for example, a major sovereign bankruptcy (Greece) or something totally unforeseen.