The contracts may be a reason businesses seem to be losing the power to innovate and to develop successful long-term strategies.
The prevalence of golden handshake contracts for key staff is often responsible for them seeming to close their minds to new, sometimes disturbing, ideas and approaches. Presuming that they have tenure, they play it too safe; or, feeling that they have only a short time to prove themselves - with virtually guaranteed substantial pay-off potential - they can make ill-considered changes and follow high-risk strategies without due diligence.
To prosper, organisations must be flexible and able, if appropriate, to reconfigure on an annual, monthly or even weekly basis. Too many chief executives and directors are proving a last frontier to change. They prevent their organisations from adapting quickly enough to keep pace with the market place and quell innovation that might provide them with leadership in future. Rolling contracts tend to discourage flexibility of thought and deed in management.
The need for adaptability is underlined by changes in organisations themselves. The most successful have much in common with movie-making companies, facing a management challenge each time a film is made. From the inception of an idea, they must build a team of extraordinary complexity and a wide variety of competencies to make the film a reality. As soon as it is finished, the team disperses, except for perhaps a small nucleus.
Adopting similar strategies, the good ones have re-engineered and scaled down staff accordingly and filled in with expert contract workers for particular projects or needs. Reflecting this change, the role of management has developed from managing people you own to managing people you don't and is more akin to organising and motivating a team of independent contractors.
Perhaps the time has come, not for fixed-age cut-offs, but for all chief executives of any age to go at the end of a fixed-term contract of, say, five to seven years.
Chief or senior executives would not be able to resign. They would have to face the possibility of living through and correcting any early mistakes and could be removed, with contract and compensation packages geared accordingly.
However, a dismissal must be seen to be a dismissal and resignation must be a resignation.
Fixed contracts would create a better and more honest business environment that would allow balanced culture change. They would also encourage fast, adaptable management teams willing to use the skills and ideas of innovators, high- flyers and others as appropriate.
Organisations would benefit from having chief executives who are more willing, and have the time, to take properly evaluated and researched risks for long- and short-term competitive advantage. This would minimise the risk of potential burn-out, unchallengeable internal alliances, inappropriate structures and outmoded processes all too often associated with a long-term chief executive - and pave the way for new blood, fresh ideas and new approaches.
The author is an executive mentor and coach who co-founded GHN Management ConsultantsReuse content