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Old September 4th, 2008, 09:40 AM
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Post Credit crunch makes CEOs' career shaky

Most senior corporate folks are moving to non-IT sectors. And now there is a credit crunch for folks at the very top. Read on


Credit crunch makes CEOs' career shaky

Date: Friday, August 29, 2008

Bangalore: The economic slowdown has elicited some notable reactions from the top managerial level people with the CEOs admitting the negative impact on them. A poll of over 1,000 business leaders gathered at the London International Leadership Summit 2008 found 36 percent of them believing that jobs will be lost, with 10 percent suggesting senior management could be made redundant. Moreover, according to another study CEOs were 50 percent more likely to get axed a year or two into an industry slowdown.

The underperformance by the high paid CEOs can be another factor of concern as it hampers the companies' progress. As per a study, the CEOs with a good pay becomes more conscious of his image and publicity rather than on the shares and stores which readily slows down. Ashwani Goel, CEO of Intecons Software, says, "With the expectations fulfilled, top paid CEOs will tend to be less active." The researchers, Dirk Jenter, an assistant professor at the Stanford Graduate School of Business and Fadi Kanaan of MIT, found that the CEOs who got canned during a downturn tended to be deadbeat underperformers. However, a survey by Booz & Company found that the CEOs are being shown the door for poor performance, though the average rate may account for nearly three percent. Hence this make way for regression in the company to meet with the growing market pressure, which tends to take its toll through reducing cost as the prime measure. This cost reduction is made possible with nearly half, 47 percent, of bosses cutting back on pay rises and 49 percent also cutting back on large bonuses.

Deterring growth in the system makes it more important for the companies to take a careful step, as Finning International, CEO and President Mike Waites says, "The short-term challenge is to deliver on the plan in a time of uncertainty. The core business is there for us so it's executing in times of uncertainty. Longer term is how we keep the growth coming." Tackling the economic crunch, top leaders in the companies suffer redundancy, as the uncertainty in the market system has made it difficult for the firms to experiment on techniques. According to a survey by the leaders in London International Leadership Summit 2008, gloomy economic outlook has left 51 percent of bosses finding it tough to keep staff motivated, with a third reluctant to employ people who have high expectations of rewards or rapid promotion.

However, the companies have begun noticing this demotivating factor of the workforce and hence have realized that it can also affect productivity. So, as the poll in the Leadership Summit finds out, there are plans of the firms to keep their staff motivated by offering flexible working hours rather than increasing their salary, with nearly a quarter having tried to pep up morale by organizing work social events.

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