HR Can Increase the Odds of a New Executive's Success

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Your company is in need of a senior level executive. As an HR leader, you've been instrumental in securing a list of high potential candidates internal candidates as well as those recommended by your search firm. You've made sure that those on the short list have had their resumes thoroughly vetted and that they've been through appropriate assessment.

After receiving feedback from his executive team, the CEO makes his choice. You work with the CEO to develop a compensation package and the offer is made. The talented, experienced candidate accepts. She comes on board and begins her successful career with your company. All you have to do is have one of your subordinates sign her up for her benefits package and you're out of the picture. Right?

Wrong. Very expensively wrong.

MDA Consulting Group and Schall Executive Search Partners conducted more than 40 in-depth interviews with CEOs and company presidents to gain insight into why new executives succeed or fail. The conclusion: A significant proportion of the failed executives could have succeeded if the company had paid as much attention to integration and assimilation as they did to selection.

The High Cost of Failure
Failure happens all too often-25 to 50 percent of new senior hires fail to achieve success in their new organization, according to industry studies. But whether the failure rate is one-fourth or one-half, it's unacceptably high and unacceptably expensive.

The cost was definitely in the millions of dollars that's how many CEOs described their company's cost for an executive failing in the first year on the job. CEOs also commented on the price in lost credibility paid by those involved in the hiring: the senior sponsor, the search firm, and HR executives.

The accepted rule of thumb for quantifying the expense is two to three times the executive's salary. This method of estimating factors in only hard costs, such as the fees for the search firm, assessment, training, relocation, salary, and severance packages. Estimates that take into consideration soft costs (administrative support, office space) and opportunity costs (lost business, damaged relationships with suppliers) start climbing into the stratosphere of 28 times the executive's salary.

As a practical matter, "we don't even think about the soft costs, said one vice president of HR, because it's too painful. But CEOs do, at least at the intuitive level: Put it this way, said one interviewee, "the brand had been making several million a year. During his [the failed executive's] first year, it lost several million."

The Trend Toward Onboarding Coaching
As companies work to minimize the damaging costs of such mis-hires, some are beginning to pay consulting firms upwards of $20,000 for a new breed of executive coaching, dubbed "onboarding" or "assimilation" coaching according to The Wall Street Journal.

While onboarding coaching can help, it still places the burden for assimilation squarely on the shoulders of the new hire, with the support of an advisor for six weeks to six months. But the CEO research conducted by MDA/Schall indicates that the odds of the new executive succeeding increase greatly with proactive involvement by the CEO, members of the executive team, and HR managers.

Research Reveals the Critical Importance of Integration
MDA/Schall's qualitative research was designed to identify factors influencing the success of a senior executive hire. It's estimated that half of those who failed were simply the wrong choice: a mismatch in skills or cultural values that wasn't revealed during the selection process. And it's no surprise that there is room for improvement in many companies' selection processes. But the other half-10 to 25 percent of all executive hires-failed because integration into the organization failed. When executives succeeded, integration was often an inseparable part of the process. When executives failed, it was most likely chalked up to a poor hire. Rarely was it recognized that the integration process itself was critical to the success of the individual.

The Missing Link-HR Involvement
As part of the research project, CEOs were asked to describe critical incidents and actions involving new executive success. Some of them described relying on senior HR management during selection, both formally (working with search and assessment firms) and informally (during senior staff meetings and candidate interviews). But HR was almost invisible during stories about integration and assimilation. It was as if HR management believed it had finished its job when the selection process was done. And why not? If the integration phase is largely ignored and left to the devices of the new hire, it's not surprising that little attention is paid to a new hire once the offer has been finalized, benefits reviewed, and computer and phone training conducted.

But that should be just the beginning. HR, the senior team, and the CEO can do much more to jumpstart the success of a new executive-and isn't it worth the effort, considering the investment that's already been made in selecting the candidate and the high costs associated with a derailed executive?

Four Targets for Success
MDA/Schall's research found that the new executive's success depends on whether he or she can:

1. Achieve business results
2. Gain acceptance with other senior team members (i.e., cultural fit)
3. Establish credibility and respect among followers
4. Deliver long-term contributions to the organization

Throughout the selection and integration process, these four success factors constitute a target-not only for the new hire, but also for the CEO and everyone in the organization who will be affected the new executive's success or failure. How you aim and hit the bulls-eye will depend on your company, its culture, the business environment in which you operate, and each person's individual role.

Here are some key ways in which HR can increase the odds of the new executive's success.

Before the selection process begins:

• Establish yourself as a partner in the process, positioning your expertise as a process consultant and sounding board. Dave Larkin, former CEO of Honeywell Canada, ensured that a senior HR person was present for a focus group that discussed problems with the division and defined expectations for the new executive they planned to hire. Another time, Larkin used an HR executive as "another set of eyes and ears, to help make sure people were saying what they meant."
  
  Chuck Edward, an HR executive at Cigna Behavioral Health, suggests that HR not pre-screen applicants and then present them to the CEO. "You and the CEO are partners, customers of the executive search firm. Talk collectively with the search firm on a weekly basis; work with the president to narrow down the list and decide who to bring in." If you are submitting candidates for approval and something goes wrong, Edward says, "it's too easy to point the finger at you."
  
  Your expertise can prevent the company from hiring a charismatic but under-qualified candidate, which is a well-documented phenomenon. You can perceive and bring to light any conflict the senior team is not willing to acknowledge, so that it can be resolved. Some CEOs are great people managers; some are not. Give your CEO process steps that will help ensure success.
  
• Is there a felt need, a sense of urgency? Or is the executive being brought on board to make broad changes to which, at best, the rank and file are indifferent? Determine whether the need for the executive's position is felt throughout the organization. Outsiders are often brought in to create sweeping organizational change. At one company, frustration had been growing for a year because the resident IT manager-a good guy whom everyone liked-wasn't moving fast enough to enable them to conduct business on the Web. He was spending too much and not meeting timelines. His replacement-the new executive charged with turning the situation around-found open doors and ready cooperation.
  
  At another company, only the CEO and a few senior executives saw an obvious need for a new merger-and-acquisitions process. The talented, high-powered executive they brought in fought company indifference, clever sabotage, and open resistance for a year without senior level support. "After all," the thought was, "she shouldn't need help. She's being paid to deal with the tough ones." Finally, in frustration, she left-leaving an impossible task unfinished.
  
  If you see a disconnect in the expectations in your company, start tooling up for change management now.
  
• Develop a selection and transition process that involves key players as much as possible. Their buy-in is critical. Make sure that clear, specific feedback is attached to every step, and that you respect and respond to feedback. "Credibility [in HR and the selection process] is formed when you take their feedback seriously," says Edward.

Business Results
The research indicates that candidates who succeed follow one of these two clearly articulated and communicated paths:

1. they achieve a "quick win"
   OR (and this is equally successful)
2. they are expected to make no major decisions for a specific period of several months, after which they set priorities and go on to achieve them.

Ambiguity leads to disaster. Based on your culture and situation, the CEO needs to pick one path and then communicate, communicate, communicate. Communication is all too often the point where the process breaks down. Then good work-and good people-are wasted. HR can help ensure that these activities happen.

• Communicate expectations to the new executive. Advise your CEO that the new executive must know exactly what is expected and by when. A CEO in a "big-win" company told the new IT manager, "In six weeks, I want a plan for how you're going to get e-business functioning around here: what you can do, what you can't, and what support you'll need to do it." The plan was ready for the CEO's review in 30 days.
  
  An executive in an "orientation period" complains that high-powered people are too impatient: they go for the big win before they know the culture and fall flat on their faces. He counsels them to "take time to be new. Listen. Learn. Look for small wins. Give as much credit to others as you can. In the course of the next three months, we'll establish your charter and you'll be positioned to achieve it."
• Communicate to the company.  Everyone who will be affected by the new executive-from the most senior level to the most junior-needs to know what's expected, when it's been achieved, and how it affects them personally. Obviously HR is only one player in the communication process. But HR can take a proactive role in defining the messages and remind all the players that communication messages need to be reinforced multiple times and come from multiple channels for it to be heard. 

Acceptance is a Two-Way Street
A mismatch between the new executive and the company's culture is painful and wasteful for everyone. "Tissue rejection," David Murphy, president of Red Wing Shoes, called it.

"Organizations can be unkind to new people," John Murray, president of Plato Learning put it more mildly. Acceptance is a two way street - the organization accepting the candidate and the candidate thriving within the organization. You can plant seeds of acceptance during the selection process.

• Make interviews productive. Companies frequently have a candidate interview individually with the executives who will become his or her peers. Often participants use this time to get to know one another, assessing comfort level more than anything else. Certainly the executive team must be comfortable working together, but both interviewee and interviewer can also use this time for discussing specific areas, such as management approach, take on the industry, and environments in which the candidate has previously thrived, the results achieved, barriers overcome, or the cultures of previous employers. HR can suggest topics, raise specific questions, and design the feedback process, so that information and impressions are gathered and used.
• Is this the right culture for this candidate? Your new hire's success will depend on his or her ability to work within this company's culture. An excellent assignment for the interviewee is to assess and report on how decisions get made and how that compares to his or her previous employers. Six months into the job, you don't want to hear what one of our CEOs heard: "This place is a pressure cooker. At my old company, if you made the numbers most of the time, that was fine. We were just a small part of a big conglomerate. But you guys are on my tail every month. I'm leaving."
• What aren't we asking? What isn't the candidate talking about? Look for the holes in your own process. One company was so excited about hiring an industry insider in a highly specialized industry that it completely overlooked his inexperience in running a large business unit. He said all the right things about product, brand, and industry. He didn't talk about what he didn't know, and no one asked.
• Advise the CEO to insist on candor from the executive team. If the candidate is seen as the "chosen one" of the CEO or a board member, people will tend to soften harsh truths. But the candidate needs to hear honest information about the challenges of the situation, and the CEO needs honest feedback on the candidate's potential to meet those challenges. 

Helping the New Executive Establish Credibility-the CEO and HR
To succeed, the new executive needs credibility with superiors, peers, and followers. The executive will establish that credibility personally, of course, by setting expectations and then delivering what was promised. But the executive needs the organization's support as well.

• The CEO's role in establishing credibility is essential, practical, and symbolic. E-mail and telephone introductions are useful, but the senior sponsor who physically shows up lends powerful credibility to the new executive. The CEO who takes a hands-off approach to the new hire is undermining his or her chances for success, especially if the latter's charter is broad organizational change.
  
  The messages from the CEO or senior sponsor to the organization should be:
  • We're really excited about this new person because she brings this experience or these capabilities
  • Here's what we expect of him
  • You will be held accountable for giving her the support she needs to be successful
  • His success will benefit us all in these specific ways
    
    
• HR's role in establishing credibility means taking an active role in the integration.
  • Know who is likely to help or hinder her as she establishes herself within the organization, especially with direct reports. Brief the new executive on her team's players-their strengths, weaknesses, passions, and pet peeves.<.li>
  • HR can take responsibility for setting up meetings between the new executive and key people, such as other executives and his team. HR can provide facilitation at group meetings.

Long-Term Contribution
 "He had a great Act One, but no Act Two," is how one of our interviewees described the phenomenon of the executive who can't sustain success. While the CEO and executive team are focusing their short-term reasons for hiring the new executive, HR can define roles in which the new hire might move in the future. HR can also work with the new hire on his or her leadership development.

While you're contributing to the long-term success of the individual new hire, you're also maximizing the organization's long-term return on its investment in human resources.

For a full report on the research and its results, contact Shelly Rushmeyer at +1-612-259-4242 or srushmeyer@mdaconsultinggroup.com and request our white paper From The Outside In: Integrating New Senior Talent Successfully.