Box, Hortonworks, Marketo, OpenText, SAP: What does it mean when executives leave?

Write this down. Not all management changes represent performance problems, personality clashes, lack of faith in CEOs…you get the idea.

Executives who are happy with their jobs, and with the trajectory of the companies that employ them, sometimes move on because they are presented with opportunities to take their track records of success to new ventures.

Consider Whitney Bouck who left EMC Documentum to become Box’s senior vice president of marketing. After six momentous years at Box, she moved again to become COO of HelloSign.

There’s also Steve Lucas who left SAP, as its president for enterprise platform and analytics, to become Marketo’s CEO.

And Quentin Clark who left Microsoft to become SAP’s CTO and has now joined Dropbox as it nears its IPO.

These were good career moves for each of these executives and good hires for their employers.

Moreover, the smooth transitions in each of these cases serve as testimony as to how well each of these organizations are run, as well as to the depth of their benches. A fond tear may have been shed when each of these individuals left but the companies themselves did not miss a beat.

Regime change

“CEOs tend to feel more comfortable with hires they already know,” so says Noah Wasserman, a former Harvard professor who now heads the University of Southern California’s Founders Central Initiative. His research showed that some CEOs recruit as much as 50 percent of their teams from their networks. What happens to the executives who are already in place?

Most don’t clear the decks at once, as John Cahill did when he took over as CEO of Kraft Foods. Instead they get to know the incumbents to see if there is a “fit,” much as we have seen Lucas do at Marketo.

Since taking the top job last November, he has brought in Greg Wolfe as COO, the two had worked together at Business Objects, a company that SAP acquired. He also recruited Eric Johnson, another SAP veteran as his Chief Sales Officer.

To bring this many people in executives, who were probably doing a perfectly good job to deliver on the prior CEO’s vision, had to leave or be let go. Not only that, but it is also likely that one or two who Lucas valued, left regardless.

It’s perfectly understandable that executives from the prior management regime would eventually leave so that they could work for someone who “chose” them vs being someone that their current CEO inherited.

Moreover, if you look at the CVs of Lucas’ team, most of them probably know each other so well that they communicate in shorthand and have instinctual insight into how their ideas and actions will be received. Risk taking is also less risky because there’s a track record of good decisions in place.

So while some might label C-Suite changes, like the ones at Marketo, a “shake-up” or imply that there’s trouble, just the opposite is likely to be true.

Acquisition = Elimination of duplicates, but it’s not all bad

When OpenText acquired the company that most of know as Documentum, CEO Mark Barrenechea didn’t bring any of its C-level executives along. Some took this to mean that he intended to milk Documentum for its recurring revenue and had no intention on continuing to build on the product at all. They were wrong.

The reality is that OpenText already had a great management team and that there weren’t any vacancies available. At the same time, nearly all of the executives landed new leadership roles. Rohit Gai is president of RSA, John O’Melia is SVP Worldwide Services and Customer Success at Seal Software, Chris McLaughlin is CMO at Nuxeo…we could keep going. The point is, everyone won.

Bad choices in the executive suite

Yet sometimes changes in the C-Suite are cause for concern. Consider Hortonworks’ revolving door. It has been a public company for less than three years and it has had two presidents (the seat was vacant from August 2016- January 2017 and now it is vacant again) and three CMOs. It has also lost at least seven executives at the vice president level this year.

While it is prudent, from a business perspective, to cut your losses when things aren’t working, at some point management, including the board, has to consider whether there’s a hiring problem. After all, with this kind of track record, it is worth considering whether it is the people doing the hiring that are the problem, not the people the executives being hired.

Contempt prior to investigation

It’s easy to jump to conclusions. To paint management changes as chaotic disasters, CEOs as ogres, the departed as refugees…and sometimes they are true. But more often not, there is sound reasoning behind the decisions that companies and individuals make, and they are almost always well thought through. So while disruption sometimes occurs, it’s generally the kind that leads to growth.