TOP MANAGEMENT TURNOVER AND CEO SUCCESSION: AN INVESTIGATION OF THE EFFECTS OF TURNOVER ON PERFORMANCE

Idalene F. Kesner and Dan R. Dalton

Journal of Management Studies, 1994, vol. 31, issue 5, 701-713

Abstract: One strategic action which is often taken by firms in need of a turnaround is to bring in a new chief executive officer (CEO). Many observers argue, however, that having done this the new CEO must replace large numbers of top managers in order to effect a change in the firm's interactions and subsequent performance. Critics of this perspective insist that just the opposite is true. Substantial levels of turnover may only serve to further disrupt the organization decreasing performance still more. This controversy is addressed in the following study using a sample of 84 firms all of which experienced CEO succession during the year 1980. Analyses rely on a three‐year‐period pre‐succession and three‐year period post‐succession. Three hypotheses are proposed. First, poor performance prior to CEO succession leads to greater turnover afterward. Second, that turnover is curvilinearly related to performance after the succession. And, finally, that successor type (i.e. whether the CEO was an inside or outside candidate) is related to the level of turnover in upper level management positions in the post‐succession period. the results from tests of these hypotheses are presented, and the implications of these findings are discussed.

Date: 1994
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