Kruger’s exit shows executives have to know when time is up
The departure of Nicolaas Kruger from MMI holds an important lesson for executives: know when it is your time to go or ask those you trust to tell you.
There is an unfortunate misconception that occasionally takes hold of company men and women, which is that once they have landed a big role, usually as a chief of something or other, they will forever be the right person for that role.
But the reality is that companies and the environments in which they operate change.
This is even more true in a digital age in which change is swift and often sweeping. And so it is inevitable that the management teams needed to steer companies along a successful path will need to change too.
It is tempting to argue that individuals, like companies, can move with the times, updating their skills and adapting their leadership styles. But it is less likely once they have been at a company, and particularly at the top of a company, for long.
Kruger started his career at Momentum as an actuarial assistant in July 1991, when the company was selling all its policies through brokers and years before the internet was a ubiquitous feature of insurance distribution. He climbed the ranks, becoming chief actuary in 1997, finance chief in 2007, CEO in 2009 and, finally, group CEO of MMI, the outcome of Momentum’s merger with Metropolitan, in 2010.
That is 26 years within the group, nine of those as CEO.
A study published in the Harvard Business Review that measured the strength of firmemployee relationships and firm-customer relationships against CEO tenure among 365 US companies from 2000 to 2010 found that the optimal tenure length of a CEO was just 4.8 years. The study also measured the magnitude and volatility of share returns. Boards needed to be aware that “long-tenured CEOs may be skilled at employee relations but less adept at responding to the marketplace … boards should structure incentive plans to draw heavily on consumer and market metrics in the late stages of their top executives’ terms”, the researchers found.
To be sure, Kruger has made an immense contribution at the helm of MMI, most notably overseeing the successful merger of two great insurance businesses.
But the underperformance of its retail units in recent years, the simultaneous departure of two of its executives in June 2016 and weak underwriting results suggest that his time was up. Naturally, the group’s lacklustre financial performance and disappointing shareholder returns cannot be laid squarely at the feet of Kruger, former CEO of Momentum Retail Etienne de Waal or any other individual for that matter. But they point to the fact that a fresh pair of hands had been needed for some time.
“Individuals have certain style aptitudes when it comes to leadership. While some can adapt to an organisation’s evolution, it is more likely that the organisation acquires a different style of leadership,” Debbie Goodman-Bhyat, CEO of executive search firm Jack Hammer, says.
“It is healthy and appropriate for companies to have leadership changes over time,” she says.
Shareholders certainly felt that way, prompting those holding 32% of the shares represented at MMI’s most recent annual general meeting to vote against its executive pay policy.
Goodman-Bhyat emphasises the importance of regular feedback for executives, many of whom have their heads buried in the daily grind and very little time to reflect, even on their own performance. In this respect the board and Kruger’s fellow executives could perhaps have done more.