Middle East top firms’ CEOs change, highest in the world.
The local media reported early this week that the Middle East CEO’s change highest ever rates in the world were in 2016, a report of Strategy&, PwC’s strategy consulting business said. 21% of the 62 largest corporations in the region saw a new CEO. that is more than in any of the previous 16 years.
This trend was found to be above the global average of 17% of the largest 2500 public companies, as highlighted in the CEO Success Study of Strategy&. Also 84% of the appointees are from outside the company and this is according to the study to the result of above average CEO transition rates of Saudi Arabia. Per-Ola Karlsson, partner with Strategy& explains :
“This growing trend is mostly due to recent political and economic movements, including a recent change in the country’s leadership and ongoing oil price volatility, which has led to a shift in how Saudi Arabian leaders think about, approach and successfully execute the new agenda of the country and where several private sector CEOs have taken on Ministerial or other senior roles in the government.”
58% of all CEOs in the Middle East have been outside hires, up from 33% in the previous four year period. PO Karlsson commented: “These high succession rates, coupled with a need to improve regional corporates’ leadership development practices, limit companies’ ability to fully develop internal leaders to their full potential, enabling them to effectively take on the CEO role.”
Over the past several years more big companies have been deliberately choosing their new CEO from outside of the company as part of a planned succession, an indication that hiring an outsider has become more of an intentional leadership choice than a necessity.
- Outsiders accounted for 22% of all CEOs brought in via a planned succession between 2012 and 2015, up from 14% in the previous period of 2004 to 2007
- Almost three-quarters of all outsider CEOs were brought in during planned successions during that same period, up from 43% in 2004 through 2007
The majority of companies have continued to promote insiders to the CEO position and Strategy& team think this will remain the preferred succession-planning practice with 77% insiders as opposed to 23% outsiders in 2015.
“Hiring an executive from outside a company to serve as chief executive officer used to be seen as a last resort,” said PO Karlsson.
“That is not the case anymore with the disruptive market-related changes that companies are facing today. While an internal CEO candidate may have an excellent record of achieving the business goals the company has pursued in the past, boards are recognizing that this candidate may lack the skills needed to lead the company through the changes necessary to win in the future,” he added.
