The conversation you need to have about your CEO

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It’s not only general staff turnover that’s up: with the economy on the uptick, CEOs have more opportunities available to them as well. And when Challenger, Gray & Christmas monitored departures from the top job in December, they found that 5.3% more CEOs left their employers in December than November in 2013. Throughout 2013, there were also 2.6% more CEO changes than in 2012, the study found.

According to a Temple University study of 365 US companies over a decade, the average CEO’s tenure lasts 7.6 years, and the longer the tenure, the stronger the relationship between employees and CEO. However, tenure varies wildly by company, a University of Pennsylvania study shows. At Sears, for example, the average 2011 executive had only been at the company for three years, while at Chevron, that number was 33 years.

Across America, the study showed that CEOs’ average ages were higher as they delayed retirement due to the economy. However, the study author Peter Cappelli predicted that there would be more movement around 2015. “People wear out their welcome,” he says, “and even the people who are welcome don’t want to stay any longer.”

And despite the number of executives leaving, many HR departments are unprepared. According to a SilkRoad survey late last year, only 38% of HR department feel prepared for the sudden retirement of a top executive. And 50% of CEOs say they rarely or never talk about executive succession with HR (The Economist, 2012).

Indeed, it took Microsoft six months to find a leader after Steve Ballmer announced his departure. The company’s situation became so dire that satirical websites popped up, inviting the public to vote on who they think should take the job.

Chris Lamb, HR director at LendLease Australia, said at a roundtable recently that the lack of succession planning was often due to market expectations of public companies. “I suspect internal (succession) is still not common enough,” he said. “You can have the best succession plans; you can have five people internally lined up, but the market still expects you will look outside.”

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