Public Management
Should we care about executive vacancies?
Executive vacancies occur across sectors in varied degrees and may have negative organizational effects
Ricardo Bello-Gomez and Amanda Rutherford(*)
After an executive leader — be it a CEO, a president, or a director general — leaves her post, organizations occasionally keep the position vacant or appoint an interim leader while deciding on who to name as the permanent replacement. The length and frequency of these vacancies vary substantially, but no organization is entirely immune to such gaps in leadership.
Consider the recent cases of Renault and TikTok among others in the private sector or, in the public sector, acting officials leading the U.S. Department of Homeland Security since April 2019. Executive vacancy can occur in local governments, state and federal agencies, and even international organizations. Yet, often there is little attention given to the phenomenon of executive vacancies outside of single cases in a particular organization. Is this type of executive vacancy an issue worth considering, or are such cases rare outliers?
Where do executive vacancies occur?
Recent research we conducted with colleagues Jeryl Mumpower and Marlisa Griffin suggests executive vacancies occur at different rates across the public, private, and non-profit sectors. We studied executive vacancies between 1993 and 2013 in 48 US federal departments and agencies, Fortune 100 companies, organizations ranked in the Nonprofit Times Top 100, and institutions of higher education ranked in the 2016 U.S. News and World Report top 100 list.
We found that executive vacancy occurred to some extent across all sectors as pictured in Figure 1 below. Roughly half of for-profit firms, non-profit organizations, and universities in our sample experienced at least one executive vacancy across our twenty-one-year time period. Yet, about half of the private firms in our sample did not face any executive vacancy in this period.
Meanwhile, federal agencies experienced three to four executive vacancies, on average, between 1993 and 2013. Moreover, vacancies lasted longer in the public sector. The median federal agency in our data had an executive vacancy during five percent of the 21-year period. Even though the average for-profit firm and non-profit organization did not experience any period of executive vacancy (median vacant time of 0%), the top quarter of our sample exhibits vacancy times between 8% and 25% for non-profits and 0% to 12% for for-profit firms across our twenty-one year time period.
Do executive vacancies matter?
Little research has been conducted to determine the extent of consequences that occur due to an executive vacancy. Currently, the lack of permanent leadership is generally believed have a range of deleterious effects. Potential consequences can include but are not limited to:
· Lower perceptions of stability: Cases of long lasting vacant or interim leadership positions can be interpreted by some stakeholder groups as a lack of internal stability. Such perceptions may cause these groups to avoid or lessen their collaboration with the organization.
· Restricted managerial capacity: In many cases, interim leaders do not have the same range of decision-making power permanent executives possess. This means interim leaders will be less likely, on average, to promote substantial strategic changes that could boost innovation and increase market share.
· Trickle-down vacancies: The trickle-down effect relates both to the tendency of lower level managers to temporarily fill vacancies at higher levels of the organization and the increased likelihood that filling existing vacancies in lower organizational levels will be put on hold until a new executive is selected.
· Declining performance: Higher levels of vacancies, less innovation, and lower perceptions of an organization are generally expected to impede performance. Additionally, employees may anticipate changes in strategies that will come with a new leader such that motivation to achieve goals from the past leader is lowered.
What can we learn about why executive vacancies happen?
We expect that the causes of executive vacancy are multifaceted. For the case of U.S. federal positions appointed by the president and approved by the Senate, recent studies have studied the strategic use of vacancies by the president and the role of agency’s and senate committee chairs’ ideology in vacancy length. However, these insights are hardly generalizable to other contexts. In ongoing research comparing 160 public and private non-profit US universities, we point to significant differences in the likelihood of executive vacancies between these two types of universities even after accounting for a variety of organizational characteristics (size, performance, the composition of the study body) and the amount of lead time a university has to replace a president once she announces her intention to leave. This is often the result of several characteristics that are particular to the public sector, yet such issues may also be problematic in the private or non-profit sectors. These include:
· Higher demand for accountability: Procedural safeguards to assure transparency to the public, investors, and other stakeholders might delay the process of search and selection of a new leader. These safeguards include sunshine laws, minimum time for job postings, or requirements for interviewing a certain number of executive candidates.
· Multiple and more heterogeneous stakeholders: More groups involved in the process of appointing a new leader can mean more perspectives are represented in the decision making process. This can also lead to longer periods of time required to reach agreements on ideal leadership profiles, vet potential candidates, and finalize a contract for a permanent hire.
· Value placed on succession planning: The way in which organizations approach succession planning is likely to shape what structures are in place when an executive leader steps down or is forced out. Succession planning can also be linked to organizational capacity and resources; many non-profits, for example, perceive that succession planning is simply not the most important task facing their organization.
Organizational leaders should consider the potential effects of executive vacancy as part of their strategic planning processes. Even though many organizations may be able to avoid an executive vacancy for a substantial time, such vacancies occur across a wide spectrum of organizations, meaning no organization is without some level of risk of experiencing vacancy. Proper succession planning, the provision of adequate organizational resources, and the prioritization of leadership searches can reduce the likelihood and/or the length of an executive vacancy.
Finally, while an ideal balance between transparency and efficiency is hard to determine for many organizations, the proper consideration of both factors can yield a healthy equilibrium in specific cases and ensure stakeholder engagement in a smooth and successful leadership transition.
(*)Ricardo Bello-Gomez is Assistant Professor of public administration at Texas Tech University. Amanda Rutherford is Associate Professor at the O’Neill School, Indiana University
