“The phenomenon whereby a minute localised change in a complex system can have large effects elsewhere”
CEO tenure is decreasing and whilst this may be reflective of the changing needs of business, a lack of succession practices means a reactive cycle of events is triggered when a CEO departs. The resulting wave of hires, we call the butterfly effect; the theory that a single occurrence, no matter how small, can change the course of the universe forever.
In our latest white paper, we have analysed twenty, recent high profile CEO moves. The results show that the majority of replacement CEOs came from the external market, most of these from direct competitors.
We examined the number of moves that were triggered as a direct result of the outgoing CEO. We estimate the recruitment cost to the industry of these moves alone to be in excess of £25m. A cost borne in many cases, by the direct competitors of the company from which the CEO has departed.
CEO succession is poor, with 61% of CEOs planning to leave within the next five years, and doing so with no successor in mind. More broadly, leadership risk and succession throughout organisations is poor, and it is clear that there remains a significant challenge in hiring the next generation of global, strategic leaders.
In this paper we demonstrate the butterfly effect caused by recent high profile CEO departures. We estimate the subsequent cost to industry and then look at how a reactive culture of recruitment is self-perpetuating. We discuss how to break this cycle, and change the culture, through the proactive use of people intelligence.