This is according to a Danish study. Boards and managers should have a plan for what will happen if the top executive is hit by a personal crisis, says the professor behind the study.
Read about management. A divorce can be one of the most stressful things in your adult life. When employees are separated, it is associated with reduced productivity at work, notes the Aarhus business school – Aarhus BSS – on its websites.
But what happens in companies when the leaders separate?
Ingo Kleindienst, a professor in the Department of Business Management at Aarhus BSS at Aarhus University, studied this with assistant professor Tünde Cserpes and former postdoctoral fellow Kaleb Girma Abreha at the same department, as well as his colleagues Denis Schweizer and Juliane Proelss from Concordia University in Canada.
– Senior managers are people too, and they should not be treated as superhuman or invulnerable. Divorces affect people, and we’d like to investigate what that means for the businesses they run, Kleindienst explains on the Aarhus BSS website.
Using figures from Statistics Denmark and Danish accounting statistics, the researchers looked at 9,147 Danish companies and their top management over the period from 2000 to 2012.
The results of the analyzes indicate that it is companies with 10 to 49 employees and companies in high-growth sectors that suffer the most from the divorce of a top manager. In these companies, there was a relative decrease in the rate of return of 21 and 32% on average.
Ingo Kleindienst explains that companies with 10 to 49 employees seem to be hit hard when a leader is divorced, with the leader of such companies often solely responsible for both strategy and operations. There is no one to take over when the leader is temporarily out of action or has a lot to think about in his private life.
In even smaller companies, researchers don’t see the same change in results. Kleindienst believes this is because managers of smaller companies simply need to focus on day-to-day operations in order to get things done.
The case continues during the announcement
The professor encourages all senior managers to come to an agreement with the board of directors or to plan in advance what will happen if the manager should be affected by a personal crisis which could affect the management of the company and therefore also company finances.
The study is published in the journal Management Discovery Academy.
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