Wednesday, 16 January 2008

“Over the hill and far away, top managers are here to stay”

Well, at least Dutch top managers are.

When do top managers generally decide that it is time to move on and “seek other challenges”? Well, one prominent reason is of course that they are about to get the boot (because their firm’s performance is in dire straits). Yet, that appears to not be the only case. Academic research on American executives – among others by Professor Wagner from Michigan State University – has shown that top managers are not only leaving when the performance of their companies is rock bottom (undoubtedly with a good poke by their board if not a kick in the backside) but also when firm performance is relatively high. Wagner speculated that this happens because then they’re hot stuff on the job market and able to find themselves a nice new green pasture.

Now, although this will hardly be anyone (else)’s idea of “fun”, it so happened I had a database available on a couple of hundred Dutch top managers and was curious whether the same might be true for these guys (yes, all of them guys…). And you know what, after a good chunk of statistical analysis it appeared that Dutch top managers also leave when their firm’s performance is at a high. Yet, they’re not walking at all when it’s low…?! Apparently, Dutch top managers don’t get the sack even if their firms are underperforming.
Interestingly though, these top managers not only left when their firm’s performance was relatively high, but when it was also just starting to (rapidly) decrease. I guess it is all about picking your moment; what better time to get out than when you’re just “over the hill”, and your house of cards is about to come tumbling down!


fran said...

great blog Freek, I really enjoy it.
But please change the title, it's too humble. These are not random rantings. In fact they are quite interesting rantings.

Freek said...

Hi Fran. Thanks. It is not often that people tell me I am too humble! :-) I would conjecture that "random" and "interesting" are hardly mutually exclusive though!

Antony said...

Hi Freek, very good to read your interesting thoughts! Do you actually think the same is true for German topmanagers?

Freek said...

Antony: I am not aware of research of this kind focusing specifically on German top managers. However, since the German institutional system is much more comparable to the Dutch than to the Anglo-Saxon model I would be surprised if it were very different.

Sildenafil Citrate said...

I had never thought about the possible reasons that top managers decide to seek other challenges and I have to say what you said it totally makes sense!