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Most CEOs know what they think could cost them their job. They watch the growth target every week, push for cost cuts when the numbers slip, and prepare hard for every board meeting.
The threats that tend to end a CEO's tenure get far less attention. A chief executive's odds of leaving a large company rise 24% after activist investors go after it, according to management consulting firm BCG's recent study of leadership departures, and the odds rise again once the company starts losing more people than it hires. Yet CEOs rank activists dead last among their concerns, and fewer than four in 10 are worried that their employees are growing unhappy.
Neither thing appears in a quarterly report until it's serious. Activists only move in when the stock sells for much less than the business is worth, and unhappy employees keep showing up and doing the minimum long before they quit.
CEOs need shareholders on side before a slump
Activists usually go after companies that have stumbled. They see a cheap stock and buy in to push for changes. A run of bad calls on operations or spending can leave shares trailing rivals' and make the company an easy target, according to BCG's Gregory Rice.
But most CEOs don't spend their days thinking about activists. BCG's Jody Foldesy says that's sensible. A CEO's job is to carry out the plan and control what they can. Many chief executives start paying attention only once results slip. By then, the stock may already look cheap enough to draw an activist campaign.
Watching for those signs takes the kind of time that most CEOs never set aside. CEOs give nearly half their working hours to problems they expect to settle within a year, according to PwC's latest survey of more than 4,400 chief executives, and only about a sixth to anything five or more years away. The chief executives most worried about their company's survival spend even more of their week on the short term.
Rice tells CEOs to get to know their biggest shareholders as well as they know their customers and to start talking to them while the business is doing fine. Investors with long time horizons tend to stand by a company's plan through a rough quarter, giving a CEO room to finish what he or she started. They also have more patience than short-term holders when results disappoint.
Unhappy employees rarely show up in CEO reports
A CEO needs employees behind the company's plan as much as investors, and most employees aren't there. Only one in five feel involved in and enthusiastic about their jobs, according to Gallup's annual global survey. The share has dropped two years in a row and is at its lowest level since 2020. Most of the rest put in the hours without putting in much effort.
But many of them stay put anyway. In the U.S. and Canada, fewer than half of employees say it's a good time to find a job, down from 70% in 2019, according to Gallup. A weak job market keeps unhappy people at their desks and hides how many want out. BCG warns that they tend to leave once hiring picks up, and the CEO's odds of leaving climb with them.
The reports a CEO reads rarely show how many people are ready to go. CEOs in BCG's survey rank their workforce as the second most stressful group they deal with — after the board — but most of what they hear comes from the few employees loud enough to get through. Managers tend to filter and soften bad news before it reaches the top, says BCG's Judith Wallenstein, leaving a CEO with no way to tell whether the loudest complaints speak for anyone else.
Wallenstein suggests asking a long-tenured employee two or three levels below the C-suite how people really feel about leadership. The best person for it is respected and doesn't have much of an ego. BCG also recommends small listening sessions and town halls where nobody screens the questions. Answering even a question about cafeteria prices tells employees the CEO wants to hear from them.
CEOs will keep watching the growth target and costs every week, and they should. But they also need to book the town hall and the shareholder meeting before anything else on the week's calendar. Those two meetings are where a CEO finds out about an activist or a wave of resignations while there's still time to do something about it.