U.S. companies from Avon Products Inc. to Yahoo! Inc. recruited externally for 29 percent of chief executive officer hires in 2012, the most in at least 17 years as desire for growth sparked demand for new leaders.
Avon’s hiring of Sherilyn McCoy from Johnson & Johnson and Yahoo’s choice of Google Inc.’s Marissa Mayer helped fuel a 36 percent jump in outside CEO recruitment at Fortune 500 and Standard & Poor’s 500 companies, according to Crist|Kolder Associates. The Hinsdale, Illinois-based search firm analyzed management changes at 669 companies through December.
External hiring is rising as companies that may have sought to preserve management continuity through the recession look to shake things up with fresh perspectives and more expansion-oriented skill sets, according to Hugh Shields, co-founder of Chicago-based executive recruiter Shields Meneley Partners.
“During the recession, many of these CEOs were kind of hunkered down in their positions and quite frankly, boards saw termination of their CEO as additional risk to the organization,” Shields said in a telephone interview. “Now as the market has improved, what they’re seeing is the window has opened up” and they’re more willing go outside for talent if necessary.
Total CEO turnover in 2012 cooled to a rate of 9.3 percent, just 0.4 percentage points higher than the 15-year low set in 2010, Crist|Kolder data show. Churn among chief financial officers and chief operating officers rose to 13.8 percent and 26.5 percent respectively.
Increased volatility in executive roles typically reflects more favorable economic conditions, according to Matt McGreal, chief of the search firm’s corporate governance practice.
While turnover still trails pre-recession levels, demand for new leaders is rising, said Greg Gabel, managing director at Canny, Bowen Inc., a New York-based boutique executive search firm.
“People are maybe finally believing the recovery is real,” he said in a phone interview. Companies are “looking at potential acquisitions or at least in investing in the businesses in terms of the talent.”
At New York-based Avon, the world’s largest door-to-door cosmetics seller, McCoy was recruited in April after three years of profit declines. She ended the reign of Andrea Jung, who still serves as a senior adviser.
Recruiting From Rivals
Yahoo!, based in Sunnyvale, California, hired Mayer in July from rival Google to help turn around the company after sales dropped for three years. Mayer, the fifth CEO in four years, took after Scott Thompson resigned over inaccuracies in his academic record.
Many corporations may be forced to scout executives at their competitors after scaling back recruitment and succession planning during the recession, according to Ana Dutra, Chicago-based CEO of Korn/Ferry International’s leadership and talent consulting business.
“Companies cut down on leadership development programs and coaching,” she said in a phone interview. “Now they’re finding themselves essentially with a gap, with a void between the top layers and the next layers of the organization.”
Another trend resulting from the improving economy: The percentage of CEO hires with experience in financial jobs dropped to the lowest level since 2006 last year after peaking at 44.2 percent in 2007, according to the Crist|Kolder study.
It’s a sign there’s less need for an executive who can shepherd a company through financial stress than for one who can build revenue and leverage new markets, Crist|Kolder’s McGreal said.