Jump before you're pushed

The frequency with which CEOs are unceremoniously dumped is making the dilemma of knowing when to jump an increasingly important art.

Based on the observations of HR consultant David Doyle, only 20 per cent of CEOs truly spring surprise resignations on boards. For any number of reasons Doyle suspects the life span of most CEOs is scuttled well before their fixed-term contracts expire.

As a result, Doyle urges CEOs to contemplate whether a pre-emptive break-up might be in their best interests and cites the exit of Metlife Care CEO Gavin Aleksich as a case in point.

After second-guessing the board's indifference towards his future with the firm, Aleksich decided it was time to contemplate his next career move.

With an initial term almost completed, Aleksich started looking for signals the board was interested in committing to another four-year contract. When it became clear the board had no interest in entering these discussions, Aleksich realised it was time to dust off his CV.

But Aleksich recalls what the board was unprepared for, was his decision to jump ship before being pushed. The timing of his decision to accept an offer to run a retirement village chain in Britain came as a bolt from the blue to chairman Peter Fitzsimmons.

"Once the board advised me they weren't interested in discussing ongoing commitments, I realised it was again time to start managing my next career move," says Aleksich.

Based on Doyle's observations, too many boards orchestrate the premature departure of CEOs such as Aleksich through no fault of their own. He cites the unexpected exit of Hewlett-Packard CEO Carly Fiorina as another example. Doyle claims that Fiorina's departure, after six years at the top of the US IT giant, illustrates that competence is seldom the issue when CEOs and boards part company.

Fiorina's reputation as the most powerful woman in IT counted for little when the board disagreed with her management style and direction. Doyle says New Zealand's corporate landscape is littered with similar examples. The departure of Gary Toomey and Greg Muir from their top jobs at Air New Zealand and the Warehouse respectively are two high-profile examples.

"Not delivering on the bottom-line may have more to do with key external factors than your capability, but as the CEO it's your head that will roll," says Doyle, a director with recruitment firm Chamberlin Doyle & Associates.

He says too many CEOs fail to jump ship before they are pushed because they become so complacent they overlook vital signals around them.

Another common reason for an exec's downfall, claims Doyle, is their unwillingness to seek advice once they get to the top.

For example, he says sales gurus who burn the midnight hours to deliver the numbers, can end up being ignorant of the sales team falling apart around them.

"Really focused people aren't always open to the warning signs," says Doyle. "The inherent flaws any CEO or senior exec might have are forgivable when bottom-line performance is there. But these flaws become real issues when they're not."

Fitzsimmons believes Aleksich's exit from Metlife Care shows how the strengths a board first sees in their CEO can eventually become a weakness. He admits that while Aleksich came to the organisation when it needed a change agent, the company is now in a different place, and the next CEO appointment will reflect that.

"The skills we now require of a CEO are those required to husband an existing situation," Fitzsimmons says.

But if CEOs and their boards are as "simpatico" as they would like us to believe, why do these break-ups occur so regularly? From Fitzsimmons' perspective, modern-day pressures associated with flying at this corporate altitude means CEOs and boards are seldom as "tight" as the market imagines.

For example, while Aleksich could have stayed in the role another year, his decision to move was precipitated by a desire to live and work overseas and issues over share option availability.

As boards don't always see what lies adjacent to these decisions, Fitzsimmons says it is a challenge for a CEO's financial and family considerations to always harmonise with board objectives.

On top of that, he says today's CEOs are contracted to deliver key performance indicators on a fixed-term basis.

"These days there is a high level of edginess about the precision and delivery of performance expectations," explains Fitzsimmons.

So what lessons can be taken from the litany of derailed CEO careers littering New Zealand's corporate landscape? Assuming unexpected departure from a top job is uncontrollable, Doyle says it is de rigueur for senior execs to keep a roving eye on where their next job opportunity might come from.

The best way to do that, explains Gordon Buswell, CEO with ITM, is to perform within your existing job.

"There is a common view that CEOs always have an eye for the main chance. But, in reality, if they are adding value to their business job opportunities will find them," says Buswell, who is four years into his first role at the CEO level.

He suspects CEOs whose jobs are most at risk are those who are either demonstrably unsuccessful within their first year in office or those who have been in the CEO's seat for four years or more.

If the passion and challenge have gone from the job, he says, CEOs need to look for their next opportunity. Similarly, if they are nearing the end of their fixed-term contract, he says they need to contemplate their departure.

But if their departure comes as a surprise to the board (or vice versa) then communication channels between the two have broken down.

He says if the board is functioning properly, every monthly meeting should be a revolving review of the CEO's performance.

"These rifts tend to occur when boards only focus on the short-term numbers. But if they're building sustainability, the numbers will come," says Buswell, who is on an open-term contract with ITM. "CEOs shouldn't be fall-guys for external events beyond their control."

To ensure they have time to jump before being pushed, Buswell urges CEOs to seek ongoing board commitment up to 18 months before their contracts expire.

The earlier CEOs ask the board how their contract is looking for renewal the better.

"If they say it doesn't look good, ask what issues need to be addressed for you to continue in this role," suggests Buswell.

"If you conclude, you're unable to improve on those areas - it's time to start looking for another job."