Experts say senior team turnover is normal, but AI uncertainty is raising the stakes for CFOs and CHROs
Nearly 60% of CEOs plan to replace a member of their senior leadership team within six months, according to a recent Boston Consulting Group (BCG) survey. Chief financial officers (CFOs) topped the list of roles under review at 16%, followed by chief human resources officers (CHROs), chief operating officers (COOs) and chief marketing officers (CMOs), each at 12%.
The findings raise questions about whether CEOs are preparing their teams for a changing business landscape or whether the uncertainty surrounding that change is making executives more vulnerable.
Julia Dhar, a managing director and partner at BCG in Miami who leads the firm's people and organization practice in North America, sees the results as a sign that CEOs are looking beyond their current leadership needs.
"I don't think it's necessarily a referendum on those individuals," Dhar said. "A helpful way to think about it for this finding is CEOs are saying, 'Is the team that I have now appropriately skilled, ready to meet the needs that the company will have next?'"
Those needs are especially tied to AI transformation, she added.
A leadership shake-up isn't necessarily a warning sign
Donald Hambrick, a professor of management at Pennsylvania State University's Smeal College of Business, said the statistic isn't unusual or alarming.
With senior leadership teams typically comprising six to 10 people, he said, replacing one member in any given six-month stretch would not be unusual. At the same time, geopolitical uncertainty, technological change and AI are putting pressure on companies and potentially prompting CEOs to question whether their teams are equipped to respond.
"The more centrally influential the position is for corporate health and prosperity, at least in the eyes of the CEO, the more that he or she is going to be under fire and a convenient scapegoat," Hambrick said.
That may help explain why CFOs topped the list. Dhar pointed to the pressure on CEOs and CFOs to make sound AI investments while managing the near-term costs of implementation, including token usage and other AI tools.
The relationship between the two executives could become more strained as they navigate those competing demands, she said.
Hambrick also said he doesn't believe replacing a senior leader will necessarily hurt the organization. While departures can create uncertainty and disruption, they can also improve team dynamics if a departing executive has been holding the group back.
"Sometimes it's actually beneficial for the team," he said.
Fit matters, too. An executive's alignment with the CEO's priorities, operating style and the rest of the leadership team can be just as important as individual performance, Hambrick said. A departure, in other words, does not automatically mean someone has failed. Earlier reporting found that incoming CEOs often reassess the CHRO role to test chemistry and trust, not necessarily because of performance.
"It can mean that they're a fine CHRO, but just not here," he said. "There's going to be another place where they will fit."
AI pressure puts CHROs in the spotlight
The findings come as the demands of the CHRO role are changing. Worldwide, CHRO turnover has run above average in the first half of this year, according to Russell Reynolds Associates. Hambrick suggested that issues such as AI and DEI could leave CHROs especially vulnerable.
CEOs he works with are still trying to understand how AI will play out, including how long it will take for the benefits to outweigh the drawbacks and the investments.
Dhar, meanwhile, sees an opportunity for CHROs to demonstrate their strategic value. An IBM study found that a majority of executives expect the CHRO's influence to grow as AI reshapes work. Rather than focusing solely on the skills their organizations may need in the future, she advised leaders to examine how work gets done today and where HR can improve performance.
Her starting point is to understand how the company's business goals depend on workforce performance, including where HR can help acquire talent, develop skills, improve leadership or remove barriers to collaboration.
She also urged CHROs to examine how AI could improve the services HR delivers across the organization, not simply reduce costs.
Another priority is strengthening relationships with technology and finance leaders. Dhar said some CHROs have ceded responsibility for the AI and transformation agenda to technology executives.
"That would be a place to lean in," she said. "That would be a place to say, I need to strengthen my relationship with those colleagues."
For CEOs, reassessing the leadership team can be a responsible response to an evolving strategy, Dhar added. The key is to consider whether the team as a whole has what it needs to lead the business forward, rather than immediately singling out individual executives.
She hopes the BCG findings prompt more constructive conversations between CEOs and their leadership teams, including CHROs.
"I hope that this actually doesn't feel like a scary insight to CHROs, but I hope it feels like a provocative one," Dhar said, "and the provocation being, 'Is it time for us to do a check-in on the health of our relationship with the CEO?'"
