The story behind CEO attrition

Attrition is a hot-button issue particularly if its about the CEO of the organisation. What he does in the top jobs sends a clear signal down below.

But if a study done by EMA Partners, an executive search firm, is to be believed than the situation isn't that encouraging. A five-year study done across 100 companies between 2001-06, reveals that a high 66% of the companies has had a change of CEO in the last five years.

There are of course patterns depending on pedigree of the companies and sectors they belonged to. "Not a single company (who were being tracked) sacked its CEO - clearly in India CEOs "resign" never get sacked" says K Sudarshan, managing partner, EMA Partners.

Here's the story behind the CEO churn in the last five years:


Outsider CEOs

MNCs: 37%
Family-owned firms: 42%
Professional firms: 0%

Conclusion: Succession planning is the best in companies who are run-managed by professional boards, a reason why they have almost zero churn.


Reasons for leaving

Death: 2%
Global Transfer: 17%
M&A: 11%
Resigned: 41%
Restructuring: 5%
Retired: 24%

Conclusion: CEOs in India rarely get sacked - they just resign and move on. Still a substantially high percentage - 24% - change in CEO happen because the CEO is retiring. Change of CEOs due to global transfer is at 17% - perhaps a fair endorsement of the demand of Indian CEOs overseas


Churn due to global transfer

Manufacturing: 9%
FMCG: 29%
IT&ITES: 13%
Pharma: 13%
Banking: 29%

Conclusion: We can see it at HLL, P&G, a large number of banks - FMCG and banking lead in sending Indian CEOs to man other global positions.

Churn in CEOs

MNCs: 86%
Family-owned firms: 57%
Professional firms: 43%

Conclusion: There's far more stability at the top in family-owned (understandable because most of the time its the promoter who runs it) and board-run businesses than the headquarter-driven MNCs. Coca Cola has had three CEOs in the last five years.


Sectoral CEO Churn

IT&ITES: 88%
Banking: 70%
Pharma: 67%
FMCG: 61%
Manufacturing: 58%

Conclusion: The industry with the fastest growth has the highest churn in CEOs - understandably due to tempting offers coming in for the CEOs. understandably, manufacturing figures the lowest though that might change going forward.