Management: The Job-Jumping Syndrome

When Motorola’s executive vice president, C. Lester Hogan, quit last month to become president of rival Fairchild Camera & Instrument, he took seven colleagues along with him. Besides suffering a prompt drop in the price of its stock, Motorola began worrying that the mass exodus would mean a loss of trade secrets. Last week it acted. Filing suit in U.S. District Court in Phoenix, Motorola Inc. asked damages against Hogan, his associates and Fairchild, also sought to enjoin Fairchild from hiring away any more of its men.

Job jumping raises obvious questions, especially when competitors are involved. Though the practice is far from new, it is on a decided increase at the highest management levels. Michigan State University Professor Eugene E. Jennings, an expert on executive mobility, estimates that, apart from family-dominated companies, one-fifth of today’s corporate presidents have been with their present firms for less than three years. Last year New England Mutual Life Insurance hired Abram T. Collier away from John Hancock as its new president. Gillette lost Stuart Hensley, now chairman of Warner-Lambert Pharmaceutical. Wayne Hoffman quit New York Central and stepped aboard as chairman of Flying Tiger Line. This week David C. Scott, formerly executive vice president of Colt Industries, takes over as president of ailing Allis-Chalmers Manufacturing Co.

Voracious Appetites. One reason for the surge in switches is that corporations are growing bigger and faster than ever before. International Telephone & Telegraph has been expanding so rapidly that it has not had time to develop enough of its own executives. Under Chairman Harold Geneen, himself hired away from Raytheon, ITT has taken on some 500 men from other firms in the past eight years. Besides creating voracious appetites for instant manpower, corporate bigness tends to dilute employee loyalty, with the result that executives are more willing to listen to new job offers. What makes them even more susceptible is the fact that so much of the growth has been occurring through mergers. Says F. L. Mannix, an executive recruiter in Wellesley, Mass.: “Suddenly there are two people for one job. A man sees the handwriting on the wall and decides to move on.”

Most top executives who switch to new companies agree with Robert Anderson, a 22-year Chrysler veteran who became president of North American Rockwell’s commercial-products division last February. He calls his move “more a question of opportunity than of money.” Opportunity, of course, usually beckons most strongly to those who consider themselves stymied in No. 2 jobs. A notable example is Litton Industries. With Chairman Charles B. (“Tex”) Thornton, 55, and President Roy Ash, 49, showing no signs of yielding control, Litton has spawned a host of chief executives for other companies, including such “Lidos” (for Litton Industries dropouts) as Western Union’s Russell McFall and City Investing Co.’s George Scharffenberger.

As such shifts become more common, many companies are taking extra pains to keep their executives happy. To protect its executives from high taxes on immediate income, U.S. Plywood-Champion Papers, for one, has taken to offering them deferred compensation. One of the best at holding onto its executives is General Motors, which is forever shifting them into new jobs. But not even the best can avoid losing an occasional man, as evidenced when Executive Vice President Semon E. (“Bunky”) Knudsen, passed over for G.M.’s presidency, quit last winter to become president of Ford Motor Co.

Men of Stature. G.M. could hardly be happy about losing a top man like Knudsen, just as Motorola was understandably distressed about losing Hogan. Yet, whatever the merits of Motorola’s suit against Fairchild, the danger of executives carrying corporate secrets to a rival is generally not as great as it seems. Despite the secrecy fetish that Detroit makes about new models, almost everyone admits that automakers usually know all about one another’s most guarded projects. It is often the same way in other industries. Says Michigan State’s Jennings: “A secret is only a secret for a year or so anyway. And top executives seldom know intimate technological secrets.”

Sometimes the biggest losers in the game of corporate musical chairs are those companies doing the hiring. By finding room at the top for outsiders, they risk discomfiting homegrown executives who are passed over in the process. Says Los Angeles Management Consultant Thomas J. Johnston: “Much depends on who you bring in. If the man has stature that everybody recognizes, you have no problem.”

Most companies, obviously, are looking for men of stature. In any case, the danger of dissension in the ranks seldom seems great enough to warrant calling off the search. Executives who find themselves passed over always have the option of switching employers themselves. For companies hurt by such job jumping, there is always consolation in the fact that the practice can cut both ways. A case in point is Chicago-based Bell & Howell, whose executive vice president, William Roberts, left in 1961, to become president of Ampex Corp., taking several colleagues along with him. Casting about for vice presidents earlier this year, Bell & Howell went to Ampex and hired back two of its former men. Ampex’s Roberts, now 53, is hardly in a position to complain.