CEO turnover rate grows with technology shifts

Today's leaders need to possess intellectual firepower to master new skills in digital world

PUBLISHED : Saturday, 30 November, 2013, 4:27am
UPDATED : Saturday, 30 November, 2013, 4:27am

United States corporations are switching chief executives at the fastest pace in five years as companies from Wal-Mart Stores to Microsoft grapple with shifting customer tastes, competition from start-ups and restive shareholders.

This year, during the third quarter, 43 companies in the S&P 500 Index were working under new chiefs, according to executive recruiter Spencer Stuart. That suggests 2013 will surpass the 49 of 2011, the biggest for turnover since 2008. Wal-Mart joined those ranks this week, saying Doug McMillon, head of its international business, would replace Mike Duke in February.

Chief executives are required to master a broader range of skills than in the past. Companies are bigger, more global and increasingly complicated, and there is accelerating competition in countries such as China and India. Executives must also adapt to quicker technological change, including shifts brought on by widening use of mobile devices.

"Companies in every industry are dealing with a new digital world where sales happen differently, the consumer is reached differently and products have to be made and moved around the world in a new way," said Bob Benson, who heads RL Benson & Associates, a consultant to search firms. "[Chief executives] who don't have a digital orientation are worried."

Chief executive change at Wal-Mart and Microsoft had been propelled by the need for better strategies, said Michael Useem, director of the Centre for Leadership and Change Management at Wharton School of the University of Pennsylvania. Wal-Mart needed to improve performance in some overseas markets where it had stumbled, while Microsoft needed to better tackle the internet, he said.

"[Chief executives] today have to think about where smartphones and the internet are going, which no one had to do before," Useem said. "So you need leaders with the intellectual firepower to master new things who can also figure out how to grow huge global organisations."

Microsoft chief executive Steve Ballmer has said he will retire as the company transitions from its roots as the world's largest software maker to focus on devices and services.

Chief executives not comfortable around technology and digital trends would have difficulty setting strategy for the future, said Dawn Lepore, former chief of Drugstore.com and a director at AOL, TJX and RealNetworks.

"If you don't understand the digital landscape, how will you make the right decisions about what your company will be for the next 10 years?" Lepore said. "Everything from cars to manufacturing plants has more computers in them."