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The return of Hardik Pandya to Mumbai Indians and Sam Altman to OpenAI is worth a Netflix series. I wish I could be a fly on some of their boardroom walls to savour the Why and the How! Are Gujarat Titans and the erstwhile OpenAI board entitled to feel it was more like treason?
When was the last time you rehired a senior colleague in desperation or spent top dollar to retain a key talent bent on leaving, and what did you feel like during the process? Betrayal, fear, disgust, and desperation must have topped your feelings over the elation of rehiring or retaining a top talent? I have helped in a few retention and rehiring of senior leaders. But I have not seen any CEO or HR open a champagne bottle. These moments sure bring relief but are never a celebration.
Retention Woes
When we retain leaders who wish to part with expanded roles, inflated titles or worse, throw more money, is it an admission of wrongdoing in the past or recognising the potential of their future impact? It’s hard to tell. But imagine paying 50 per cent more money for the person to do the same job as the whole organisation looks at your decision with disdain. Guess who will be more anxious about the organisation’s performance after the retention is difficult - the leader who decided to stay back or the CEO/board who made this decision?
Moreover, think of the strain on this working relationship. Just yesterday, someone threatened to leave over money/role/strategy to a competitor, and now you are lunching together as though it is business as usual. Board members and CEOs must be ‘trained actors’ to explain or live through these retention acts.
FOMO
What drives marquee VCs/boards to pour money on a few leaders? Mumbai Indians bought Hardik for a handsome fee despite his injury-prone body and opportunistic history; Adam Neumann got $350 million VC funding for his latest venture after the debacle Softbank suffered at WeWork; Indian VCs, too, have repeatedly funded some maverick founders in spite of their floundering past. Is it the Fear of Missing Out (FOMO)?
Return = Trouble?
Most times when CEOs return it signals a crisis at the firm. Last Year, Disney rehired its erstwhile CEO, Bob Iger within two years of his exit as its stocks dropped by 40 per cent under his successor’s watch. UBS returned to its ex-CEO Sergio Ermontti as soon as it took over the distressed Credit Suisse. Boards tend to favour rehiring their long-term loyalists to assure their shareholders of a quick fix. In OpenAI’s case, can we say the fear of losing an ace tech team must have driven the Microsoft board to do a rescue act quickly?
Employees Fealty?
Whenever CEOs were changed in the past, employee preference was hardly considered. However, in OpenAI’s case, for the first time employees’ revolt seemed to weigh in. The threat of losing almost all of the highly skilled AI talent was a precarious situation to ignore. But not all talent may be that precious. Back home, the attrition amongst the top Indian private banks, one of them even exceeding 50 per cent, has been a talking point. Unfortunately, these employees cannot exert pressure on their boards to change their CEOs for the high-pressure jobs at their branches.
Anti-Incumbency
Was anti-incumbency a factor in the recent election results of the five states just polled? It seems that enterprises also have similar preferences to voters. According to Russel Reynolds, in the first three quarters of 2023, 142 of the global listed companies changed their CEOs. Interestingly, 75 per cent of these are external appointments, clearly indicating the desire to bring a change and an outsider’s view. The churn at the top is real, and the boards who think they have a winning CEO may want to hold on to them at any cost.
CEOs on the Move
More than 100 CEOs resigned from NSE-listed firms in India this year, similar to the previous year, indicating the churn and the struggle for boards who prefer continuity. In a year of heavy global headwinds, 1,425 CEOs left their jobs in the US, an increase of 47 per cent over 2022, according to Outplacement firm Challenger, Gray & Christmas Inc. Technology companies saw a 45 per cent increase in CEO turnover over 2022, which is the second highest industry for CEOs attrition. Hence, boards are keen to retain and rehire leaders to bring continuity faster. However, not all rehiring decisions are winners. For example, after Bob Iger’s return this year, Disney’s shares have risen by 6.8 per cent but underperformed the S&P 500, which is up by 18 per cent.
CEO transition invariably causes large leadership movements, bringing more changes to the structure and speed of organisations. Many Indian IT services companies that have changed CEOs in recent years are still recovering or struggling from these leadership changes.
Rehiring and retaining credible leaders are great tools to nurture talent and reassure your employees and shareholders about the continuity mantra. However, how this is communicated and executed can make a massive difference.
Maybe AI will teach us how to do this better, as Humans haven’t shown Intelligence this year on returning and rehiring!
(Kamal Karanth is co-founder of Xpheno, a specialist staffing firm)
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