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executive talent market overview

The Executive Talent Shortage     The executive talent market is experiencing a negative shock to supply.  This is driven primarily by demographics.  The mean retirement age has declined from 67 in 1950 to 62 in 2007.  The first of the Baby Boom generation turned 62 and began to retire in 2008.  McKinsey estimates that the number of future executives, the cohort aged 35-44, will decline 16% from its 2000 peak to its nadir in 2016.  All this adds up to considerably less executives in the employment market.  The Aspen Institute estimates that there will be a shortage of 14 Million skilled workers by 2020.  Of these, Equity Corps conservatively estimates that more than 200,000 will be C(x)Os of independent companies.

We acknowledge that the demand for executives will rise and fall with the overall economy.  Nonetheless, the trend indicates continued high demand at the C(x)O level over the long term.  This will be especially of top performing executives. 

Executive Free Agency     The shortage of executive talent notwithstanding, executive tenures have been declining.

  • Decline in Fortune 1000 Executive Tenure = 40% since 2002

  • Mean Executive Tenure = 34 Months

  • Mean CFO Tenure = 28 Months

Meanwhile, the cycle time for executive searches has not changed significantly.  Bottom Line - The number of empty C(x)O chairs is increasing.  C(x)O positions are turning over at an accelerating rate.  Open C(x)O positions are not getting filled any faster.

The Executive Job Cycle

Sources: CFO.com, Heidrick & Struggles, Execunet

These changes have profound implications for professional operating executives.  Since 1985, the executive job cycle has compressed 61%, from 99 months to 39 months.  This means operating executives are looking for jobs 2.5 times as frequently, and that they are spending 23% of their professional lives in search of their next career engagement, up from 9% in 1985. 

The most talented of Baby Boomer executives will have a choice as to whether they continue to work or not.  In a world where tenure is compressing, turn-over is frequent, and searches remain lengthy, many will simply opt out.  These executives will make this choice not because they don't want to work.  They will opt out simply because the effort and hassle involved in continuing to work becomes greater than the reward.

The Impact on Independent Companies     Independent companies are poised to bear the brunt of the executive talent shortage.  The principal reason is failure to treat company leadership and succession as issues of critical strategic importance.

In 1998, McKinsey published The War for Talent, which has spurred significant growth in corporate spending on talent acquisition and management systems, largely by the large companies that are McKinsey’s primary constituents.  McKinsey reports in a December 2007 update study that companies ranked competition for talent number one in importance among global business trends for the next five years.

This is in stark contrast to the laissez faire approach of many independent businesses, as evidenced in the recently released 2007 Mass Mutual American Family Business Survey.  Although Owner-CEOs are rapidly approaching retirement, 80% have neither successor nor succession plan.  These same companies ranked finding qualified talent third among important challenges. 


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