Mr. Big, Don't Get Too Cozy
By Geoffrey Colvin

(FORTUNE Magazine) – The CEO churn rate is going through the roof, and the rest of us had better pay attention.

You've seen it happening in bits and pieces, but look at the whole picture: So far this year the CEOs of dozens of major companies, from Alcan to Zale, have left suddenly, unexpectedly, often after only a brief tenure, with no long-term successor announced. Of course many of the "resignations" were simply firings by the board. Long-suffering PR people try desperately to spin the story, but generally the best they can do goes like this: Mr. Formerly Big has announced his resignation as CEO; management will be handled by an office of the chairman headed by an 87-year-old director while a successor is sought; Mr. Big cannot be reached for comment.

It isn't supposed to end that way.

Sometimes the previous CEO comes back, as Ken Lay did at Enron, Larry Bossidy did at Honeywell, Eric Benhamou did at Palm, and Robert DiNicola did at Zale--all this year. More often the company names only an interim successor or no successor at all. That's what Alcan Aluminium, Bausch & Lomb, BT (British Telecom), Charter Communications, Guaranty Financial, and Vlasic--among many others--did. Teligent has done it twice so far this year. What's really embarrassing--it happened to a few months ago--is when you announce that the CEO has quit suddenly and you have no idea who the next CEO will be, and the stock jumps.

Why should we care about all this? Because it means that our bosses are really stressed out, and when that happens, you know who's going to feel it. Specifically, large forces grinding away at CEOs are being transmitted to the rest of us. We need to brace ourselves for them.

--It's getting harder to act faster than you're being acted upon. Speed is one of the great themes of our time, and the big lesson is that you're like a sailboat: Unless you're moving faster than the water around you, you can't control your direction. And the water is moving faster every day. Your competitors, customers, suppliers, and capital providers have continuous, global, real-time information about virtually everything that affects your business, and they act on it quickly. On Wall Street, new information is enormously valuable for about 30 seconds; after that it isn't worth a dime.

That's the kind of world in which a CEO can depart after a year or less in the job (like William R. Loomis Jr. at Lazard, Jeff Skilling at Enron, and Beryl Raff at Zale, among others this year). If it's happening to the chief, it will soon be happening to the rest of us; at many companies it already is. At one of our Fortune 500 Forums, a CEO asked Bossidy how to help employees deal with the ever-increasing speed and pressure. Bossidy said he had no answer, but he wasn't about to become less demanding.

--Total accountability is coming to everyone. Accountability makes people uncomfortable because it means that employees get fired if they don't deliver. That policy may seem hard to argue with, but many companies developed hugely complex cultures and procedures to soften its edges, and the edges were usually softest around the CEO. But now that CEOs see their underperforming brothers and sisters getting shoved aside like a tepid latte, the age of mercy is rapidly ending.

The new calculus is, If your sorry performance is going to get me taken out, then I'm taking you out before it can happen. That attitude spreads from the top of an organization to the bottom in an eyeblink. And in truth, what's wrong with it? Anyone basing his career on blind loyalty, as plenty of people are still doing, will soon be a museum exhibit.

--Execution is what it's all about. The main reason CEOs fail is not mistakes in strategy or finance but simple inability to execute--to get done what they wanted to get done. Of course the bottom-line reason CEOs aren't executing is usually that the board made a bad choice. A lot of those CEOs should never have been in those jobs in the first place. But in many cases the problems surface when the CEOs don't choose great executors as direct reports. A big part of executing a plan is choosing the right people to do the real work of carrying it out. Judging someone's ability to execute isn't easy to do from a distance. You need to know their plans in detail and monitor their progress frequently. Yes, the process can be drudgery, but the effect is powerful. And this is another practice that spreads like kudzu once the CEO starts doing it.

With a recession on, I don't know anyone who expects the CEO churn rate to decline. But you won't have to check the numbers to know which way it's moving. You'll feel it.