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CEO Turnover and Top 100 RF Companies

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CEO Turnover Epidemic Strikes RF/Wireless Industry 
More than a third of RF/wireless CEOs have been on the job fewer than three years.  

By Rich Bradfield,
Management Recruiters of Boulder

It seemed only fitting that I was pulling through the drive-through window at Wendy's when I heard on the news that Jack Schuessler, the fast food giant's chairman and CEO, was "going into retirement.” This, of course, was just a nice way of saying that the burger chain's ongoing financial struggles had cost its top executive his job. And it reminded me that stockholders and analysts demand immediate results from today"s CEO, regardless of the industry or the challenges that a particular company might face. 

This wasn't always the case. In the mid 1990s, an American CEO could expect to remain at his post for at least eight years, according to research from Challenger, Gray & Christmas, an executive outplacement firm. Today, meanwhile, the average mean CEO tenure has dropped to five years, according to the latest report from Spencer Stuart, an executive search firm. 

As an executive recruiter for RF/wireless companies, I began to wonder if our industry is really so different from the fast food world. Don"t we, too, expect our CEOs to deliver positive results and improving news quickly... or else? 

In an effort to answer this question, I conducted an extensive analysis of the "top 100” publicly traded RF/wireless companies using the LexisNexis corporate research database (March 2006). I started by pulling together all of the companies that fall into the following Standard Industrial Classification (SIC) codes: 

• 3577 - Computer Peripheral Equipment
• 3629 - Electrical Industrial Apparatus
• 3663 - Radio and Television Broadcasting and Communications Equipment
• 3672 - Printed Circuit Boards
• 3674 - Semiconductors and Related Devices
• 3679 - Electronic Components
• 3721 - Aircraft
• 3724 - Aircraft Engines and Engine Parts
• 3812 - Search, Detection, Navigation, Guidance, Aeronautical, and Nautical
Systems and Instruments
• 3825 - Instruments for Measuring and Testing of Electricity and Electrical Signals
• 3841 - Surgical and Medical Instruments and Apparatus
• 4812 - Radiotelephone Communications
• 4833 - Television Broadcasting Stations
• 4899 - Communications Services
 
Then I filtered the results to create a list of the "top 100” companies that are directly involved in the RF/wireless field. 

As you know, it can be difficult to classify RF/wireless companies, mostly because they often cross different industry lines. So the companies I included cover a wide range of disciplines. They range from equipment manufacturers like Analogic and Comdel, to test and measurement companies like Tektronix and Keithley, to wireless carriers like Alltel and Cingular, to major U.S. Department of Defense prime contractors like Boeing and Northrop Grumman. You can view the complete "top 100” list at www.mrboulder.com/content/industryfocus.php. 

From my analysis, I discovered that while the average mean tenure of a CEO in an RF/wireless company is longer than the overall general business market average (71⁄2 years compared 5 years), 38% of RF/wireless CEOs have been in position for fewer than three years and 56% have been in position for fewer than five years (see graph below). This means that the median tenure of an RF/wireless CEO is actually fewer than five years. So we tend to keep our cars longer than we keep our CEOs.

There is some good news, however. If you isolate the top 10 companies in terms of tenure (see table below), those CEOs have been in position for at least 19 years. Comdel's Ted Johnson, who has had a 40-year grip on the company"s CEO title, leads this group. (Comdel, by the way, has an excellent reputation for employee tenure and retention in general -- kudos to Mr. Johnson for creating such an environment at the company.)

But if you remove the top 10 from our tenure analysis, the average mean tenure for the remaining 90 CEOs drops from 71⁄2 years to 51⁄2 years. This leads me to believe that most RF/wireless companies are, in fact, stuck in a "fast food” mentality, giving their CEOs a very small window of opportunity in which to achieve positive results.

One of the biggest factors impacting CEO tenure in the RF/wireless space is company size (see graph below). Organizations at the lower end of the revenue spectrum tend to have CEOs with longer tenures. In fact, CEOs at companies with under $1 billion in 2005 revenue have been at the helm for a mean average of nine years. On the other hand, companies at the other end of the revenue spectrum (over $4 billion) have CEOs with a mean average tenure of only four years.

Global CEO turnover for the world's largest public companies increased to a new record level in 2005, according to a new survey released by the consulting firm Booz Allen Hamilton in May 2006. This survey of 2,500 companies revealed that 15.3% of CEOs left office in 2005, which was a 4.1% higher rate than in 2004. And if this pace keeps up, "one of seven CEOs will be out of their jobs next year,” said Paul Kocourek, a senior VP at Booz Allen. Kocourek added, "there is a lot of pressure now by hedge funds to push for results. When we looked at this 10 years ago, the tenure was a lot longer and CEOs were kind of looked at as a steward.  It looks like there is a very fundamental shift toward performance.”

I recently discussed this atmosphere of scrutiny and impatience with Dale Tomrdle, a partner with the NorthStone Group, a management consultancy firm based in Louisville, Colorado. "Lasting organizational change, meaning habits and behaviors that are resilient within the business environment, usually takes two or three years of focused executive attention,” he told me. However, many CEOs don"t feel that they have the luxury of time to make that happen, so it becomes a matter of "wills.” Will a company's employees simply hope to “ride the wave” until the current CEO gets pushed out? Or will the CEO find a way to influence his personnel to help him move the company in the direction he wants to take it?

“Any time a CEO is replaced, the organization will be in flux,” Tomrdle added. He believes that the new CEO should not focus on strategy alone, but must also be ready to answer tactical questions: “what,” “how,” and most importantly “who.” Tomrdle continued, “Failure to answer these questions quickly and directly can result in uncertainty and organizational paralysis, which then leads to unplanned turnover at both the executive and staff levels.”

Tomrdle was referring to a sort of “trickle down” effect that CEO turnover can have on a company. When a new CEO comes in, upper and middle management are suddenly under immense pressure to achieve quick returns. This, in turn, puts an incredible burden on the people below them, who are asked to make things happen. As a result, what was originally turnover only at the top of the company becomes turnover throughout. “Organizations are complex systems,” Tomrdle explained. “Inputs always have unintended and often unexpected results.”

Many of the people I talk to in the RF/wireless world are simply frustrated by what they feel is a lack of recognition for the effort they put into their jobs. And when a new CEO comes in, all of their hard work appears to evaporate before their very eyes, because the new management offers no recognition, understanding, or appreciation for what they've contributed to the company.

Some people might think that this turnover-laden environment is ideal for an executive recruiter. (More turnover means more business, right?) But while it may indeed provide some short-term opportunities, most recruiters would prefer to work with a company where we have established relationships, and where we are helping the company add talent (rather than replace it) because of its continuous growth under steady upper management. When our clients are experiencing turnover at the CEO level every five years or so, we could spend years trying to redevelop relationships and validate vision and objectives. In addition, we also want to feel like we are providing great long-term career options for our talented candidates.

As an executive recruiter, I also see a certain irony in the whole situation. When RF/wireless CEOs come to me looking for an “impact player” - someone who can make an immediate difference on their team - they always tell me that they don't want a “job hopper,” or someone who has bounced around from company to company. But if those CEOs looked at their own resumes, they might end up placing themselves at the bottom of the pile!

Unless we acknowledge that replacing CEOs is no cure-all for what ails companies, including companies in our industry, and become more committed to longer-term initiatives and leadership, expect the executive carnage to continue. Tomrdle offers a warning: “Bad markets always trump great leadership. You won"t fix an underperforming company in a lousy market by installing a rock star CEO, or even a very competent CEO with a new strategy. If you try it, be prepared to go the distance, because it will take time.”

For many CEOs, however, time is not on their side. They have about as much time as it takes to eat a hamburger, I would say.

About The Author 

 Rich Bradfield is a principal of Management Recruiters of Boulder, an executive search firm founded in 1976 that specializes in the RF/wireless industry. He is also the host of the Career Development Forum on RF Globalnet. You can send comments to him at rich.bradfield@mrboulder.com. For additional information related to this article, please visit www.mrboulder.com and go to the “Top 100” page.