CEOs are getting younger
but employees don't trust them

March 5 2003 - Today's CEOs are a different breed from 10, or even five, years ago - and their jobs are tougher than ever. This is the conclusion of the 2003 "Route to the Top" study of Fortune 700 CEOs conducted by Spencer Stuart from multiple data sources. It appears in the March edition of Chief Executive magazine.

"The trigger is pulled earlier on CEOs who are not performing, which has increased turnover at the top and opened opportunities for younger executives to take command," observed Tom Neff, U.S. chairman of Spencer Stuart, the global executive search firm specializing in recruiting CEOs and corporate directors.

"As companies are hiring younger CEOs, partly because they have the physical and mental stamina for the job, they're also looking for executives with sufficient experience. That's the key tradeoff everybody is having to make - youth vs. experience," said William J. Holstein, editor-in-chief of Chief Executive magazine

According to the study nearly 20% of all Fortune 700 CEOs have held their current position for one year or less. 19% of the Fortune 700 CEOs are under the age of 50 - up from 17% in 2001 and 2000. Meanwhile, 54% of CEOs are in their 50s, down from 55% last year. Since 1980, the base year for comparison in the Spencer Stuart study, more than half the CEOs of Fortune 100 companies were in their 60s, whereas today barely a quarter of Fortune 100 CEOs are in that age group.

The study notes that shortened tenures of CEOs are making succession planning more difficult but increasingly important. "It's harder and harder to hold onto your No. 2 because everybody ... is looking to see if he or she is ready to be number one somewhere else," said Dayton Ogden, co-chairman of Spencer Stuart.

The study also reported that the most common educational backgrounds for CEOs were engineering and business administration. 36% now having an MBA degree - up from 34% in 2001 - and only 11% of CEOs went to Ivy League schools.

Employee trust is at a low level

Watson Wyatt's WorkUSA 2002 survey - conducted last year - showed that just 39% of employees trusted senior leaders at U.S. companies. The 2002 survey included responses from 12,750 workers at all job levels and in all major industries.

The survey also reported a five-point drop between 2000 and 2002 in both the percentage of workers (45%) who said they had confidence in the job being done by senior management and the percentage of employees (63%) who believed that their companies conducted business with honesty and integrity.

"Falling levels of employee trust are a major threat to future corporate competitiveness," said Ilene Gochman, Ph.D., Watson Wyatt's national practice leader for organization measurement and author of the survey. "Unless Corporate America can resolve the crisis of confidence among its employees, it has little hope of restoring the trust and confidence of investors that is so crucial in these economic times."

Trust and the Impact on the Bottom Line

Left untouched, low employee trust levels will exact a high financial price, Gochman warns. "Employee trust levels and corporate performance are closely linked. In fact, our survey found that the rate of three-year total returns to shareholders is almost three times higher at companies with high trust levels than at companies with low trust levels," she said.

Companies need to increase efforts in several areas, including assessment, communication and effectively managing business change in order to restore trust and confidence.

"With fewer than half of employees expressing confidence in senior management, no company has been left untouched by the fallout from recent turmoil in the business environment. By assessing just how far trust levels have fallen at their specific organizations, companies can gain insight into the depth of the problem among their workers and establish a baseline against which to measure the success of their efforts to restore trust," Gochman said.

According to Ciancutti and Steding (2000:ix):

"Trust is more than a highly esteemed human value. Along with technology and innovation, it is one of the most powerful forces driving business today." They go on to say:

"We are a society in search of trust. The less we find it, the nore precious it becomes. An organization in which people earn one another's trust, and that commands trust from the public, has a competitive advantage. It can draw from the best people, inspire customer loyalty, reach out successfully to new markets, and provide more innovative products and services."

Moreover, they claim that trust can be created intentionally in an organization.

See also: Top Talent and Passionate Employees