Attrition at CEO level

Attrition refers to the departure of employees from an organization by means of either retirement, death, resignation or termination. Though high attrition rates pose a threat to the competitiveness of the organization, it is also a misconception that zero attrition is a symbol of organizational well-being. Zero attrition should never be aimed at because it curbs the infusion of new ideas into the organization. Attrition at all levels needs to be checked but a high rate of attrition at top-level management is definitely an alarming situation for the organization. While death and retirement are uncontrollable, checking the rates of resignation and termination at CEO level can make significant difference.

Why CEO attrition takes place?

It is often believed that people working at the top get the best industry perks along with a right to exert control on everybody down the organizational pipeline; thus they neither resign nor they are terminated. But reality somehow differs. The problems occur throughout the organizational hierarchy; only the scope of the problems may differ. A CEO is basically the person responsible for everything that happens in the organization. As such, they are entitled to lavish perks and authority when organization performs well but also face severe penalties in case the things go wrong. While resignation at CEO level is mostly the outcome of workplace conflicts and employee poaching; termination usually results from unethical conduct.

Why CEOs’ resign?

In this era of cut-throat competition among firms, the CEOs’ are usually not given a second chance to perform. Even a single mistake can prove disastrous to the organization thus, there are greater incidences of workplace conflicts at top-management level. The conflicts arise both on the issues of roles and responsibilities as well as CEO’s compensation; many times ending up with CEO’s resignation. Apart from that employee poaching is very common at this level. Most of the times it is observed that CEOs’ switch over to the competitive firms offering better roles and perks.

Why CEOs’ are terminated?

While resignation is a personal decision, termination is forced departure. The CEOs’ are responsible not only for achieving financial revenues but also maintaining ethics in the organization. There are several incidences of CEOs’ found to be engaged in acts of bribery, manipulation of facts, sexual harassment, non-disclosure of incomes, and misuse of authority. Though most of the times the CEOs’ are not questioned due to lack of evidences or even when such acts are proven, these are never disclosed publicly to save the firm’s goodwill. The general public comes to know of such acts only in the incidence of CEO’s termination.

What are the impacts of CEO attrition?

The organization faces critical challenges when a CEO departs. A few have been listed here:

  1. Fluctuation in the company’s stock prices is very common as soon as any such news is spread out. Most of the times, the prices of company’s shares witness a rise or fall even before a real departure takes place.
  2. Loss of investors’ trust is another serious repercussion of CEO attrition that can have long-run impact on organizational well-being.
  3. Employee’ unrest is also very common following a CEO’s departure. Most of the times, the departure of CEO is followed by mass resignations in the organization.
  4. In many cases, the companies do not have any succession plan in practice. As such, a complete leadership loss takes place with the departure of CEO.
  5. Every CEO brings with him his unique management style. Thus, when a CEO leaves there is a complete change in organizational management style.
  6. The company may have to hire the new CEO from outside the company which may cost a lot to the company.
  7. It may take some time for the new CEO to deliver results in a new setting; by that time the organization suffers loss of productivity.
  8. If the company is reporting a high rate of CEO attrition or if the attrition has resulted out of termination, it negatively impacts the organization’s goodwill.
  9. If it is a hostile departure, there is every probability of loss of information to the competitors.
  10. CEO directs the whole organization towards pre-determined aim but as soon as the CEO leaves, there is chaos and confusion in the organization.

Ankita Agarwal

Analyst at Project Guru
Ankita is working with the editorial board of Project Guru as a Research Analyst and Writer. With Masters in Commerce and Business Studies, Ankita learned much of what she knows about management through experience. She has previously worked in various financial institutions like Birla Global, HDFC Ltd. and Citi Financial. She is self-motivated and writes for the Knowledge Tank section of Project Guru. She has authored more than 80 articles so far in Human Resources Management, Strategic Management, Finance and Marketing. She likes to pen her thoughts about the latest issues gripping these areas across the world.
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