From the Outside In: Integrating New Senior Talent Successfully

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 executive leads to a lack of confidence from multiple stakeholders. Furthermore, this is occurring at a time when many business analysts and CEOs believe there is a shortage of “ready” leadership talent in the country.

Recent research has also documented reality: executives hired from the outside are more difficult to integrate or more likely to fail than those brought into the upper ranks through internal promotions. Such researchers as Dowell (2002) and Ciampa & Watkins (1999) have laid out the facts and speculated on the reasons.

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 executive’s salary. These figures take into account not only salary, moving, and outplacement fees, but also time for training, dissatisfied customers, employee turnover, and missed business opportunities. It can cost the organization upwards of $700,000 for the failure of an executive who earns $200,000 annually.

Creating even higher stakes is the loss of credibility for the CEO who brings in an executive who fails. And while we cannot put a price tag on employees losing confidence in the company’s most senior leader, research by Watson Wyatt & Company shows a direct correlation between high employee confidence in senior leadership and an  increased shareholder value.

Given such significant risks, MDA Leadership Consulting and Schall Executive Search Partners conducted qualitative research to better understand the factors influencing the ultimate success of a newly hired senior executive. The existing literature documents the problem, but not the causes or solutions. We set out to discover what happens between the decision to hire and the executive’s ultimate success or failure.

Our Research Design

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