Where are Chicago firms finding C-suite hires?

September 1, 2015 | Crain's Chicago

By Ally Marotti

Chicago-based companies are hiring C-suite executives outside their ranks far more often than their national peers this year, according to a recent report.

CristKolder Associates, a search firm that focuses on C-suite, board of directors and succession searches, has released its annual Volatility Report that tracks personnel changes in Chicago's top 100 public companies (drawn from Crain's list) from Jan. 1 through Aug. 1 of this year. For national comparison, the report examined turnover among C-suite executives at Fortune 500 and Standard & Poor's 500 companies.

According to the report, 22.2 percent of CEO hires among Chicago companies came from the outside, compared with 12.7 percent among companies nationwide. Chicago hires of chief financial officers have followed the same trend, with 45.5 percent being external, compared with 33.3 percent among national companies.

“It is an anomaly,” said Josh Crist, managing director of Downers Grove-based CristKolder Associates. “Chicago has been traditionally steady with national trends.”

Many factors could play into the changes this year, Crist said, but one that stands out is the drop in tenancy among C-suite executives. Constantine Alexandrakis, managing director of Chicago recruiting firm Russell Reynolds Associates, agrees.

Changes among Securities and Exchange Commission requirements and new regulations from the Dodd-Frank Act, a consumer protection law passed in 2010 as a response to the Great Recession, have put more pressure on executives recently, Alexandrakis said. That pressure increases turnover—among CFOs in particular—stealing time they used to spend priming a successor.

LESS TIME ON THE BENCH

Historically, an employee “was given five, 10 years to develop and become the next CFO,” Alexandrakis said. “Nowadays, when the median turnover is three years, there's not enough time for that CFO to develop his or her successor, so that creates a gap inside that pushes (the company) to look outside.”

Chicago companies have become bolder since the downturn, unafraid to pilfer employees from completely different industries if they think that's where the best talent is, said Jim Schroeder, partner at DHR International. He has seen more Chicago companies use external talent searches as an intelligence-gathering tool in recent years, to learn about their competitors and to gauge where the benchmark of talent should be.

He also sees indications that local firms lack the talent they need among their ranks. Schroeder said this partially could be because of the general dwindling of C-suite level talent everywhere, which triggers more changes in the way companies find new hires.

“There has been a seismic shift of talent in the past two years where candidates are now driving the process,” he said.

And Schroeder notes a direct correlation between unemployment and the talent pool. "As the unemployment rate has gone down, the supply of talent is dropping," he said.

As mergers and acquisitions announced earlier this year—such as the Hospira purchase and Kraft-Heinz merger—continue to play out, Crist said he expects external recruiting traffic to stay high for at least the next 12 months in Chicago.

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