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The stakes are incredibly high today for organizations hiring a new senior executive. Boards and shareholders scrutinize company performance more closely and hold a company’s leadership team more accountable for growth and profitability than ever before. Failure in hiring and assimilating a new leader leads to a lack of confidence from multiple stakeholders. And this is all occurring at a time when many business analysts and CEOs believe there is a shortage of “ready” leadership talent in the country.
Whether candidates are promoted from within or hired from the outside, industry sources estimate that replacing a senior executive can cost between 1.5 and 3.5 times that individual’s salary. These figures consider not only salary, moving, and outplacement fees, but also time for training, dissatisfied customers, employee turnover, and missed business opportunities. It could cost the organization upwards of $700,000 for an executive earning $200,000 annually who fails in his or her role. Creating even higher stakes is the loss of credibility for the CEO who brings in that executive. How can one put a price tag on employees losing confidence in the company’s most senior leader?
Given such significant stakes, MDA Leadership Consulting and Schall Executive Search Partners conducted qualitative research to better understand the factors influencing the ultimate success of newly hired senior executives. Through in-depth interviews with more than 40 prominent CEOs and Presidents, we have gained valuable insight that will benefit organizations as they hire and promote individuals into senior level positions.
While we began with a focus on acquiring talent from the outside, we also discovered a critical fact: the success rates for executives promoted from within were no better than the success rates of those brought in from the outside. In both instances, our CEO interviewees indicated that about one in four does not succeed. What we heard led us to conclude that companies need to devote just as much attention and energy to training and mentoring someone who is promoted internally as they do for an employee hired from the outside. The principles inherent in a successful outcome are virtually the same for both groups.
The Lessons of Failure
In every instance, our interviews yielded stories of
failure and success from the CEO’s
point of view. Nearly every CEO we interviewed could relate at
least one—and sometimes
several—stories of external hires who
failed. At least half of the stories pointed to outright errors in
the selection process itself. He believed the resume, she accepted
the Board member’s recommendation, the
candidate wowed the group on first meeting, or the person had
“all the right
credentials.” The other half of the
stories pointed to oversights during integration, poor cultural
fit, deficiencies in the individual, or barriers established by
senior team members.
The Four Targets for Success
Analyzing failures teaches invaluable lessons, but the
CEOs’ stories of success were even
more enlightening because we discovered that every reported success
included four elements. These
elements—or targets, as
we’ve defined
them—need to be top of mind during
both selection and integration. A senior level
hire’s success depends on his or her
ability to accomplish the following:
Selection and Integration –
Separate and Unequal?
Not surprisingly, the CEOs interviewed took the selection
process quite seriously. Finding the right
person—including influence and people
skills, a high level of drive, strategic orientation, intelligence,
and a team attitude—is a critical step
in the process of bringing in external talent. No one shirked
his or her role in selection. And, in many cases, the CEO took
elaborate steps to make sure the organization was hiring an
“A
player” who could deliver results and
fit the culture. For many, however, selection and hiring were
much more important (especially from a time-allotted perspective)
than the transition process itself. While all could speak to
actions they took in the transition process, only a select few had
defined a deliberate transition process aimed at augmenting the new
executive’s chances for
success.
For many interviewees, the linear model we began with (i.e., first you select, and then transition begins) was exactly how they went about the task. Many CEOs assumed that if they did a great job of selection, then transition would almost take care of itself. But the more we unraveled the elements of success, the more we understood that selection and integration are not separate and certainly need to be equal. At their best, they are overlapping processes. CEOs who experienced successful outcomes all took deliberate (although sometimes unintentional) actions that jump-started transition during selection. And for every executive who failed, either selection or transition—or both—were slighted.
Using the Targets in Blended Selection and
Integration
A CEO, senior team, HR executive, or potential new hire
can use our four targets to dramatically increase the chances of a
successful outcome. Here are some examples of actions our CEOs took
that directly influenced the target in both selection and
integration:
Target: Achieving Business Results
The ultimate outcome of a successful hire is
visible—business goals are achieved or
challenges are met. Obviously, every CEO wants the selection
process to result in hiring someone who has the capacity to
deliver. Search firms expand the candidate pool and help
organizations find the best talent. Internal interviews, reference
checks, and external assessments provide more data about capacity.
Digging for information and taking the time to be sure that the
candidate is more than an impressive resume or a good
recommendation from a Board member makes a difference. Most
individuals at senior levels of an organization come across as
confident, charismatic, accomplished, and influential. Appearances
can be deceiving, as many have discovered.
“Do your
research,” CEOs told us. ..
“A mistake is too costly. Not everyone
who appears able to deliver business results for you really
can!”
So how does this outcome target play out in the integration process? Some CEOs dealt with it deliberately and cleverly. They structured the role so the newly hired executive could deliver on a “quick win” that was visible to everyone in the organization. They used a specific business deliverable to help the new executive prove themselves to others. In contrast, other CEOs gave the new executive explicit instructions not to do anything major for the first three months. They set up a deliberate learning period that was well communicated throughout the organization. At the end of the learning period, once the new executive was familiar with the company’s culture, they met to discuss priorities for him or her. The key—no matter what approach may work best for your company or circumstance—is to include this target in your transition planning.
Target: Gains Acceptance with Other Senior Team
Members
It became evident to us during our research that a new
executive’s chance of success
increased when both the selection and transition processes involved
the new hire, the CEO, and the leadership team. In fact, several of
the CEOs we interviewed redrew our linear model (i.e., first you
select, and then you integrate) by overlapping selection and
transition. And a key to that overlap was their existing senior
team. Who else but those who will be working closely with the new
hire are better equipped to give input toward the hiring decision?
The entire executive team can offer opinions on cultural fit. Even
when someone is being brought in specifically because he or she is
different from everyone else, the CEO should engage the senior team
in the selection activities.
Once hired, the new executive develops relationships with the senior team and vice versa. But who has the accountability for gaining acceptance? The leadership team needs to interact and reach out to the new executive, just as he or she needs to do the same. Strong team relationships don’t just happen through one-sided effort or time alone. A very few (and too few, in our opinion) of the CEOs we interviewed charged the existing team with accountability for the new executive’s initial success. Those who did involve the team expected the team members to tell the truth about the organization, guide the new hire through potential mine fields, provide insights about the culture, teach the person about the company and its customers, and give feedback when missteps occur. As one CEO said, “They don’t get to stand back, observe, and only help after the person has proven herself. I won’t allow it.”
Target: Establishes Credibility and Respect Among
Followers
Establishing credibility was a target outcome we anticipated
hearing about before we launched our research. Indeed, all of the
success stories we heard contained this element. After all, the
true test of whether someone can lead is whether anyone wants to
follow! A great leader has followers. So, what led to success or
failure in gaining credibility? Isn’t
this just a function of time and individual effectiveness?
The answer is “no.” Some CEOs were explicit about giving credibility to the new person, even before he or she walked in the door. For example, making the strategic case for why the new position is needed or why we need to go outside the organization gives credibility a jump-start. The greater the change anticipated, the truer this is. Others articulated how they work to give their own credibility to the individual during integration. They accompany the new person to major events, introduce Board members or customers, and continually communicate about the value that the individual brings to the organization’s strategy.
Target: Delivers Long-Term Contributions
This outcome target came as a surprise to us. Some CEOs told us
about a failure that occurred only after the individual had
achieved some initial success. The statement we heard was,
“He had an Act One but no Act
Two.” Paying attention to this target
during selection means digging deeply enough to know that
the individual has the capacity for other roles or broader
responsibilities beyond the specific one for which he or she is
hired. Paying attention to this target during integration
means giving the individual assignments or exposure to multiple
parts of the business. Using the
organization’s leadership development
resources from the outset can make the difference between having a
one-shot wonder or someone who adds value over the long
term.
The Bottom Line – What
Should the CEO Remember?
You can achieve the four success outcomes if you remember
these points: involve others in the hiring process,
don’t leave the newly hired executive
alone, and don’t take selection or
integration for granted. Just as you would not consider
shortchanging new product development and roll-out, give your new
senior team member the same deliberate attention and support.
Success depends on it!