The number you need to know
Forced or voluntary departure? Retired or fired? The Push-out Score is the number you need to know.
C-suite executives are rarely openly fired. They may resign “voluntarily” before being ousted and “jump before they are pushed”.
We can attempt to arrive at a reasonable assessment of the likelihood of a forced departure by systematically evaluating observable evidence. That’s why exechange developed the Push-out Score analysis model, which helps in gaining more clarity.
The Push-out Score on a scale of 0 to 10 gauges the likelihood that a manager was pushed out or felt pressure to leave the position. A Push-out Score of 0 indicates that it is “not at all” likely that the executive was pressured to leave, and a score of 10 indicates that an involuntary departure is “evident” – for example, in the event of termination for cause or after an open dispute.
The Push-out Score draws on publicly available data along nine dimensions, including the form and language of the announcement, the age and tenure of the departing leader, the reason given, the length of time between the announcement and the departure, the share price performance and the succession plan.
How the scoring works
The Push-out Scoring System is based on academic research on executive turnover, proprietary algorithms and a text corpus containing thousands of management changes.
The higher the score, the more likely the manager was pushed out or felt pressure to leave the position.
In order to avoid bias, we work with a standardized set of data and flags.
10 points: Openly pushed out
When the manager is openly pushed out (e.g., “terminated for cause”) or when there is absolutely no doubt that the manager left the position due to pressure, then 10 points are given.
If the manager was not openly pushed out and the reason for the departure is not health-related, one point is given for each of the following parameters (proxy variables) when certain criteria are fulfilled.
- Form of the announcement
- Language in the announcement
- Notice period
- Share price development
- Official reason given
- Circumstances of the management change
A Push-out Score of 0 to 1 suggests no significant signs for push-out forces.
A Push-out Score of 2 to 5 suggests significant signs for push-out forces.
A Push-out Score of 6 to 9 suggests strong signs for push-out forces.
Form of the announcement (1)
Our analysis starts with the form of the announcement. Form expresses the attitude to the content. The form should always be appropriate to the move. Form also means to align with etiquette and customs.
There may be a reason for breaking the norm. If the management change is buried deep within a big news release, communicated in a statement consisting only of one sentence or announced in an extremely formal and impersonal news release, it may cast a bad light on the event.
Language in the announcement (2)
Nothing but warm words?
Wording is important. Nuances can make the difference. Corporate announcements often go through long coordination meetings beforehand, where every single word gets wrestled with until there is an outcome. The result is many warm words.
The devil is in the details. Does the departing executive receive accolades for concrete successes, praise, thanks and good wishes — and perhaps even words of regret? Does the company silently remove the manager?
The challenge is to decode corporate speak. The highly focused look with a trained eye recognizes small and yet important details, such as poisoned praise or hidden criticism.
Time to say goodbye?
Retirement at age 60 is considered normal.
Retirement at age 52 raises questions.
Notice period (4)
Investors prefer it when companies announce management changes with plenty of notice in advance.
The fact that the CFO leaves the position effective immediately sometimes tells enough.
Firmly in the saddle?
Strength grows with time. Protection against push-out forces increases with a long tenure. A long tenure enables a manager to surround himself with supporters.
With a short tenure, the executive chair may be a hot seat.
Share price development (6)
Top executives are measured by a number of things. The performance of a company’s stock is an important indicator.
A poor share price development increases pressure for change. And sometimes a scapegoat or a sacrificial lamb is sought.
Official reason given (7)
The official reason given for the management change should be comprehensible.
If no reason is given or the manager leaves “to pursue other opportunities”, “to spend more time with his family” or “for personal reasons”, questions arise.
Circumstances of the management change (8)
The best time to hand over the reins is when everything is at its peak.
Profit warnings, class action lawsuits or pressure from activist shareholders indicate tough times.
Slick baton change?
Our analysis closes with the succession. It guarantees continuity when a vacant post is filled internally and in an orderly manner.
The fact that a successor is brought in from outside suggests that the board may seek to stimulate change with fresh ideas and new initiatives. When no permanent successor is available or the position is eliminated, it is a sign for push-out forces.
The Push-out Score was featured by The Wall Street Journal, Harvard Business Review, The Times and Bloomberg.
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The Push-out Scoring System™ is an open-source method. “Push-out Score” and “Push-out Scoring System” are trademarks belonging to exechange.
We encourage everyone to use theories and tools associated with the Push-out Score™ freely. We do require that when they are used publicly or for commercial purposes, they are used under license.