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Customer-related executive leadership turnover and firm performance: A dilemma of firm-level human resource contingencies

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  • Vaid, Shashank
  • Ahearne, Michael
  • Honig, Benson
  • Krause, Ryan

Abstract

This research takes an Upper Echelon (UE) disruption-adaptation perspective to understand influence of customer-related executive leadership turnover (CrELT) on firm performance. The authors draw on customer-related executive exits at U.S. public firms between 2004 and 2016. CrELT measures presence (or absence) of annual turnover of one or more executives, accounting for changes (due to exits) to customer-related organization’s formal representation in the top management. We show that CrELT hurts firm performance as it disrupts the functioning of customer-related positions that hurts buyer–seller relationships. We find that CrELT’s association with firm performance is worsened in firm-level environments characterized by voluntary peer exits but is attenuated in firms with greater degree of debt to assets ratio. All else equal, relative to no such turnover, CrELT, in a given firm-year hurts firm performance as the drop in ROA may range from −0.02% to −0.19%. For a firm in S&P Global, with an annual net income of $3.024 billion in 2021, CrELT should result in a loss of over $28 million.

Suggested Citation

  • Vaid, Shashank & Ahearne, Michael & Honig, Benson & Krause, Ryan, 2023. "Customer-related executive leadership turnover and firm performance: A dilemma of firm-level human resource contingencies," Journal of Business Research, Elsevier, vol. 159(C).
    • Handle: RePEc:eee:jbrese:v:159:y:2023:i:c:s0148296323001170
    DOI: 10.1016/j.jbusres.2023.113759
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