Who took the initiative?
What triggered the move?
Bad executive-firm match?
Reluctant or happy to leave?
Forced or voluntary departure?
How intense was the pressure?
Who turned their back on whom?
More than one reason for the change?
And why now?
When a top manager leaves, many questions arise.
exechange gets closer to the answer.
Why did the top manager leave?
- Reported reasons for departures are often not reliable.
- Firms are not required to reveal the true reason for a departure.
- An announced retirement may simply be a euphemism for a firing.
Jump before being pushed
C-suite executives are rarely openly fired. They may resign “voluntarily” before being ousted and “jump before they are pushed”.
A true leader always knows when it is time to leave and seizes the opportunity to inform the company’s board of directors of “his decision to retire” before being pushed out in disgrace.
Forced to resign “voluntarily”
Managers may also be forced to resign “voluntarily” and are paid to leave quietly. An overtly forced departure could end up being more costly (including non-monetary costs).
Both the company and the executive in question have motives not to reveal forced turnovers as such.
Legal, monetary and ethical issues are involved.
And life is not always black and white. It is enriched by subtle nuances.
Clear and dubious
Some cases seem pretty clear:
- “for cause”,
- “agreed to step down”,
- “at the request of the board”.
Some cases remain dubious:
- “to pursue other opportunities”,
- “to spend more time with his family”,
- “for personal reasons”.
Irony, sarcasm and truth
And a statement full of irony, sarcasm and truth is not everyone’s cup of tea:
“After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today.”
(Groupon CEO Andrew Mason in March 2013 in a memo to staff)
Half-truth and lie
The division of truth, half-truth and lie may be blurred.
The truth may be bent or distorted. And a lie of omission is still a lie. This applies to corporate announcements, “people familiar with the matter” and “people familiar with the board’s thinking”.
- Everyone follows their own interests.
- There are many truths.
- And there is often more than one reason for a change.
Given all of the above, exechange works with an independently designed scoring system. It focuses on objective factors.
Our proprietary model was developed in close interaction with our readers.
Our readers include personnel professionals, global executive search and leadership consulting firms, executive coaching companies, management consulting firms, event-driven investment managers, corporate governance experts, private equity firms, banks and corporations.
Algorithms and a dash of gut feeling
The model is based on academic research on executive turnover, proprietary algorithms and a text corpus containing thousands of management changes.
We start with the hard facts and examine how the soft factors fit into the picture.
We use a rule-based and transparent process. In order to avoid bias, we work with a standardized set of data and flags.
Last but not least, we work with a dash of gut feeling, derived from twenty years’ experience.
Push-out forces and pull-out forces
Whether stepped up, stepped down, stepped aside; whether quit, resigned, retired, replaced, demoted, praised away, seen to the door, shown the exit, helped out the door, ousted, pushed out, forced out, terminated, dismissed or fired:
Our model generally assumes that leaders who leave a position react to push-out forces and pull-out forces from within and outside.
If there were no driving forces, they would not move.
According to the exechange model, a management change may be triggered by
- push-out forces (e.g., board, activist shareholders),
- pull-out forces (e.g., prestigious new job, “an offer that can’t be refused”, leisure opportunities),
- a combination of push-out forces and pull-out forces (e.g., deteriorating working conditions in the current job and new career opportunities).
Reason and decisive reason
Many executives leave due to a combination of factors: pressure, the need to make room for others and a desire to take on new tasks.
The company may highlight one reason for the change rather than another. But what is the decisive reason?
Was the decision “to pursue other opportunities” primarily triggered by
- unsatisfactory work performance,
- lack of skills and experience or
- misconduct (e.g., conflict of interest, insubordination, sexual harassment, fighting, bullying, stalking or other violent or threatening behavior)?
Is the resignation actually a resignation in lieu of termination?
In any case, the amount of force has to be strong enough to make the leader leave the current position.
Newton’s second law of motion
From a physics point of view, force is the product of mass and acceleration.
Partially forced and partially voluntary
Even if the driving forces may not be visible, a combination of certain signs may indicate them.
In some cases, we spot no sign for push-out forces. In some cases, we spot seven or more.
Seven signs for push-out forces definitely indicate a severe earthquake.
Turnover may be partially forced and partially voluntary. Managers may be pushed and pulled at the same time (by people and/or events). We want to take that into account.
“One sign alone is not a sign.
A sign is a sign only as part of a context of signs.”
Quantity, quality and constellation
The quantity, quality and constellation of the signs enable a more sophisticated view of a complex situation and enable our highly professional readers to build up a picture for themselves.
The signs should be seen in the context of the entire situation. For a meaningful result, signs for push-out forces and signs for pull-out forces have to be considered together.
A relatively high quantity of signs for push-out forces does not necessarily indicate a forced turnover. It indicates a high probability that the manager felt pressure to leave the position.
Direct or indirect pressure
There are many ways to put direct or indirect pressure on an executive. And sometimes no pressure is needed to make a leader leave the position.
Request, suggest, discuss
- Did the chairman explicitly request the resignation?
- Did the chairman suggest the executive “might want to resign”?
- Did the executive “decide” to step down after a “discussion” with the chairman?
Demoralize, isolate, wear down
- Was the executive demoralized to provoke a resignation?
- Was the executive advised to no longer have the support of the board and to be isolated?
- Did the board and the executive “agree” to part ways “amicably” because the manager was worn down?
Quit, throw in the towel, turn their back
- Did the executive decide to quit on his own volition in times of high pressure and stress (“I can do without that”)?
- Did the board even try to persuade the executive not to throw in the towel in difficult times (“leave the sinking ship”)?
- Did the executive turn their back on the company because of better opportunities elsewhere (“I deserve better than this”)?
External and internal
Who can say it? “People familiar with the matter” may give answers. But are they always right? We prefer to stick to the facts. We watch out for
- external factors (e.g., activist shareholders, new career opportunities, family) and
- internal factors (e.g., board, performance issues, desire for change).
Hard and soft
We gather as much information as possible. We ask simple and difficult questions. We consider
- hard indicators for push-out and pull-out forces (e.g., age, tenure, time between announcement and departure, share price development) and
- soft indicators (e.g., language, structure and form of the announcement).
Visible and invisible
We focus on
- visible signs (e.g., concrete future plans) and
- invisible signs (e.g., gaps, omissions).
“Where information is missing, rumors grow.”
We prefer not to speculate. We indicate it when a company opens the door to speculation and check to what extent speculation may be limited.
Empty phrases and false pathos
We look to the left and look to the right to see who is right and who is left. Language is imprecise. Everything can be ambiguous.
The best way to expose empty phrases and false pathos is to read carefully and to pay attention to the difference between what people say and what they do.
We tell well-informed and fair stories when we sample a variety of perspectives.
In order to avoid bias, we employ a standardized approach to assess a management change.
Bias can be created by the way facts are selected, arranged and presented. Therefore, we work with a standardized structure and proprietary natural language generation (NLG) tools.
We transform unstructured data into structured data. We watch out for patterns and draw our conclusions from hundreds of individual data points.
Clear indicators and seemingly trivial observations
We consider clear indicators. Facts tell their own story. The fact that the CFO leaves the position effective immediately sometimes tells enough.
We identify inconsistencies and weak spots. We also point to seemingly trivial observations.
- The chairman showers the newly appointed CEO with praise and does not say a word about the departing CEO?
- The departing CEO pats himself on the back and the chairman does not mention his successes at all?
- The resigning CEO gets many warm words of appreciation and no accolades for concrete successes?
It may be noteworthy. What is not said may be more significant than what is said.
Wording is important
The devil is in the details, and the exact wording may be important.
- We wish him the best of luck in his future endeavors.
- We wish him success in his future endeavors.
- We wish him continued success in his future endeavors.
The nuance can make the difference. What looks alike turns out not to be the same.
Is it just a boilerplate phrase randomly and carelessly selected from prepared text modules?
Maybe. But corporate announcements often go through long coordination meetings beforehand, where every single word gets wrestled with until there is an outcome:
Disagreement, material disagreement or dispute?
- Johnson’s resignation was not due to any disagreement with the Company.
- Johnson’s resignation was not due to any material disagreement with the Company.
- Johnson’s resignation was not due to any disagreement or dispute with the Company.
Not related to any disagreement, but related to what?
- Johnson’s resignation was not related to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
- Johnson’s resignation was not related to any disagreement with the Company including any matters relating to the Company’s operations, policies or practices.
- Johnson’s resignation was not related to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices, but rather was for family reasons.
Advised, confirmed or explained?
- Johnson has advised the Company that his decision to resign was not due to any disagreement with the Company on any matter relating to its operations, policies or practices.
- Johnson has confirmed that his decision to resign was not due to any disagreement with the Company on any matter relating to its operations, policies or practices.
- Johnson explained to the Board of Directors at its meeting this week that he is leaving in order to return to Southern California and that there is no disagreement with the Company with respect to any matter.
Sign of dubiousness
Is such a statement a confirmation or a denial?
Or is it a “non-denial denial”?
And should an unsolicited reassurance be considered as a first sign of dubiousness?
To understand better what is happening, it is helpful to turn things upside down, inside out, take them apart, look inside and put them back together again.
Who speaks, who is silent
Who is in the driver’s seat regarding the communication of the change?
We pay special attention to what the departing leader says.
Every word counts. Therefore, we count words.
The first verse of “The Star-Spangled Banner”, the national anthem of the United States of America, contains 80 words (not including the title).
Some managers say less than 20 words when they leave, some say more than 200 words, some say nothing at all.
If the outgoing manager gets no chance to speak or doesn’t want to take advantage of the opportunity to say something, it may be an eloquent silence.
Words can hurt. Silence can hurt even more.
Poisoned and ambiguous praise
Much can be said in an indirect and ambiguous way. Phrases may contain hidden information.
“He has the skill set that will help propel the company to its next stage”: These words of praise for the successor can be interpreted as:
- a work order (“propel the company”),
- positive reinforcement to encourage good behavior (“help”) and
- hidden criticism or humiliation of the departing executive (who might be considered incapable of propelling the company to its next stage).
Decoding the CEO code
Reading between the lines?
The only thing between the lines is empty space.
All it really takes is reading the lines carefully and decoding corporate jargon, management speak and the CEO code.
The challenge is to interpret mixed and noisy signals in corporate announcements.
“In the right key one can say anything. In the wrong key, nothing:
the only delicate part is the establishment of the key.”
(George Bernard Shaw)
Dropping hints, hiding details
Management changes are important and critical events. Companies often take advantage of the opportunity to combine the event with a message or a moral, particularly in the case of alleged misbehavior or poor performance.
- Is the company eager to give broad hints regarding the departure?
- Does the company drop a hint?
- Does the company try to “hang someone publicly” as a deterrent?
- Does the company obviously try to hide something?
“Now is the right time for new leadership.”
Why? And why exactly now? Never change a winning team?
- Does the company need a CEO with a different skill set?
- Is the chemistry between the chairman and the CEO not right?
- Did the CEO’s quality fall below the expected quality of a replacement?
- Does the executive feel it is the right time to go because he wants to leave on his own terms?
- Is a scapegoat or a sacrificial lamb needed?
- Who else has recently left the company? A management exodus is a wake-up call for investors.
Enhance execution? Drive change? Continuing evolution?
What is the reason for the management change? The welcome address in the corporate announcement often provides valuable insight.
- Is the successor expected to “enhance execution, better capitalize on the market opportunities and drive the company to profitable growth”?
- Is the successor characterized as “a pragmatic and tenacious leader who brings strong experience in driving change”?
- Or was the board’s decision to name the successor “based on how his skills align with the company’s strategic direction and continuing evolution”?
Succession: Insider or outsider?
In general, insiders are best when a company is performing well.
Outsiders do better when an organization is in crisis.
The leadership challenges presented by a company in trouble are fundamentally different from those faced by a stable organization.
Outsiders also have more freedom to implement changes. And they bring a fresh perspective.
Form and content
We have a special passion for form and style.
Form expresses the attitude to the content.
“Form is the highest content.”
(Christian Friedrich Hebbel)
Is the management change:
- buried deep within a big announcement?
- communicated in an announcement consisting only of one sentence?
- announced in an extremely formal and impersonal news release?
Appropriate recognition of the outgoing top manager is important. It is not just a question of good or bad style. Failing to show appreciation for an outgoing executive’s service risks alienating their supporters on the board and in the company.
Pomp or silence
Is it a departure with great pomp and ceremony?
Or does the company silently remove the manager?
Does the departing executive receive accolades, praise, thanks and good wishes, and perhaps even words of regret? Will the outgoing executive be missed?
We analyze form and content.
- Are the phrases sincere or hypocritical?
- Are the words thoughtfully chosen?
- Are they a patchwork of carelessly compiled empty phrases?
“It is of the utmost necessity to make words correct. If words are not correct then speech is incoherent, if speech is incoherent then actions will not turn out right.”
Are the words poisoned?
- Does the executive receive accolades for important achievements?
- Does the company offer praise for trivial accomplishments?
- Does the manager receive thanks for clearing the way?
Does the company memorialize the legacy of the departing leader?
Or does someone try to wipe out the remembrance of the outgoing executive?
Honor and honorarium
Some fight for honor, some fight for money.
- Money matters.
- Money decides.
- Money shows appreciation.
We follow the money. Current and future salary, golden hello, golden handshake and golden parachute tell an interesting story.
Deep insight and quick overview
At the end of our analysis, we assemble hundreds of details of an overall picture. To keep it clear, we always use a distinct structure and a synoptic table.
Our first priority is to help our readers see what they need to know.
Our second priority is to show our readers what we see.
We provide details to give a deep insight and summarized information to give a quick overview.
Bold and humble
We know our method will never be perfect. A system based on quantification of non-quantifiable factors is by its nature never completely error-free.
“Not everything that counts can be counted; and not everything that can be counted counts.”
We always strive to do better. Our model is constantly improved and updated to deliver the best possible results.
In the meantime, we are bold enough to make assessments.
We are humble enough to know that we will never know the whole story, let alone the whole truth.
One person’s subjective truth may not be another’s truth. There are many truths we can tell.
When all is said and done, everything may seem clear.
But things are not always what they seem.
We know what people say and what they do. We don’t know what they think, even when we see them being pushed out the door:
- “You have every right to fire me. I deserve it.”
- “I was just about to leave anyway.”
- “I’m sorry, but if you want me gone, you will have to fire me.”
Let us know what you think.
We are open for your comments, suggestions, ideas and criticism.
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