Are you extracting real value from your senior executives?

Dr Wolfgang Walter, Dr Niren Thanky &amp, Caroline Vanovermeire

Heidrick &amp, Struggles

Dr Wolfgang Walter, Dr Niren Thanky &amp, Caroline Vanovermeire of Heidrick &amp, Struggles discuss the importance of retaining senior executives at your organisation once they have joined the company.

Recruiting or promoting a promising executive is a challenging opportunity for both the individual and the company, and this could not be truer in the pharma industry. It represents the chance for the executive to develop new skills and make an impact on the business and for the company to bring in the new talent and capabilities it needs in order to deliver on strategic promises.

It’s a pity then that, all too frequently in the pressure to find the right candidate, the importance of a successful on-boarding and integration process is forgotten. Companies often fail to identify the opportunity to create the conditions that will maximise the chances that the new executive will fulfil his or her potential. The problem is both significant and widespread, with research suggesting that up to 40% of newly-placed or promoted executives fail to deliver their promised objectives and abandon their new roles after as little as 18 months.

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“…up to 40% of newly-placed or promoted executives fail to deliver their promised objectives and abandon their new roles after as little as 18 months.”

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A large proportion of firms either make no provision for or are simply continuing with an outdated on-boarding process which focuses on welcoming the executive to the organisation rather than helping them understand the challenges they face and the culture they need to learn to operate effectively within. People are leaving too soon, even if they do stay, their efficiency could be increased. The current situation is not acceptable, but somehow there is an agreement that it’s ok.

Organisations need to create an environment which provides the best possible chances of performance for their senior executives: to fail to explain to them the unspoken rules of a new position is to set them up for failure, which is costly with regards to reputation and the expense of hiring another executive. We estimate the cost of failure is between three and five times the annual compensation of these newly-placed or promoted executives. The loss of value is even greater when we consider that strategies and plans go unimplemented as a result of this widespread failure to on-board effectively.

New methods to integrate senior executives

Fortunately, forward-thinking corporations are recognising the unique opportunity that effective on-boarding provides in terms of the creation of the necessary conditions for success, thereby minimising the chances of failure. Companies such as Coca-Cola, Ford, Bank of America and Vodafone, for example, have taken steps to actively support top executives and minimise attrition within the first few years of tenure. These companies have recognised that starting at a new company or in a new role, although exciting, can present the executive with a plethora of confusing and often unspoken rules set within the context of an unfamiliar landscape of internal politics, all of which does little to facilitate a smooth transition. Even today’s most successful global corporations can operate in tribal ways – with struggling to find one’s way at times seen as a rite of passage before an individual deserve to gain acceptance in a new position.

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“The more forward-thinking companies have recognised that instability can create high churn rates amongst senior executives…”

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The more forward-thinking companies have recognised that instability can create high churn rates amongst senior executives and that this impacts overall performance, creating significant leadership risk for the whole organisation. They recognise, too, that it’s not just about minimising the leadership risk of a hiring failure but also creating the conditions for success. And it’s about sustainability and corporate responsibility, too. Don’t use a process which kills 40% of your senior executives, it’s unsustainable.

The cost benefit

It is widely agreed that the cost of getting senior placements wrong can be enormous. A commitment to the successful integration of hires and newly-promoted executives means that the candidate will be highly motivated from day one.

“In the pressure to find the right candidate, the importance of successful integration is sometimes forgotten…candidates are given 30 days to settle in, with the expectation that by day 31 everything has to function. This can be an expectation that is almost impossible to meet.”

Global Head of HR, Multinational Corporation.

Organisations need to support senior executives as they grapple with what is expected of them, enabling them to build up an internal network which will allow them to operate effectively, and to get to grips with a new role or organisational culture. There may not be such a thing as a lifetime guarantee for senior leadership within your company, but with the right tools you can reduce the risk of senior executives leaving within the first two years by as much as 60%.

Conclusion

Organisations frequently hire talent externally from ‘successful companies’ with different business and innovation models in the belief that these individuals will replicate success in their own organisations. Recent research indicates that star employees appear to be heavily dependent on their former firms’ general and proprietary resources, organisational cultures, networks, and colleagues. However, there are exceptions, such as ‘stars’ that move with their teams and stars who switch to better firms. Female stars also perform better after changing jobs than their male counterparts do. Frequently, this approach works, however, sometimes the cultural fit between company and candidate is sub-optimal. Nevertheless, organisations can help mitigate the risk of senior executive failure by understanding the non-portable human capital factors that make their employees successful, thus reducing the time it takes for an executive to adapt emotionally and intellectually to a new environment.

Heidrick-and-Struggles

About the authors:

Dr Wolfgang Walter

Dr Wolfgang Walter is a Senior Partner based in the Düsseldorf Office, Germany. His professional involvement with Heidrick &amp, Struggles started in 1990 as a Consultant based in the Düsseldorf office. In 1992, he was promoted to Principal, in 1997 to Partner and in 1998 to Senior Partner. Since the beginning of 2002 Wolfgang has been Managing Partner for professional development services which include individual coaching with a special focus on executive on-boarding and executive team development for Central Europe. In addition he coaches Board Members and Managing Directors.

Dr Niren Thanky

Dr Niren Thanky is a Principal in Heidrick &amp, Struggles’ London office and is a member of the global Life Sciences &amp, Leadership Consulting Practices. Niren has successfully completed a number of international executive search, consulting and assessment for development engagements for clients in the energy, pharmaceutical, biotechnology, medical device, diagnostic and healthcare services sectors.

Caroline Vanovermeire

Caroline Vanovermeire is a Principal in Heidrick &amp, Struggles’ London office and is a member of the global Leadership Consulting practice. Caroline has expertise in solving leadership challenges and critical business issues facing domestic and international organisations, having partnered extensively with firms across a wide range of industries in Europe, Asia and the United States. She has a strong track record in strategic and operational talent management. Her style is pragmatic and driven by the desire to add value to businesses and the people involved.

Dave Tullet is the Director of the Leadership Innovation Centre at Heidrick &amp, Struggles and assisted with article.

How can organisations create the optimum environment for the performance of their senior executives?