Did you know that just under half of all executives in a new job fail? Stephen Harvard Davis, a leading authority on job transition and the author of business best-seller Why do 40% of Executives Fail?, explains what this lost opportunity, costs, making his case for why HR should care.
If a business process was only 60% effective, management would probably make huge efforts to improve the situation. So, why do the statistics for executive failure remain so unacceptably high?
Research shows that around forty per cent of all executives in a new job fail. Direct costs can account for two and a half times the salary. However, the hidden costs can be far higher. Further research estimates that the lost opportunity costs of executive failure can be as high as twenty four times the base salary, according to Brad Smart, Topgrading, 1999, p50, Prentice Hall Press.
The question to ask is, “How many executive failures could your organisation suffer before the bottom-line was being seriously affected”? What projects would have to be put on hold or sales initiatives cancelled?
From over seven years of working with executive failure I know that the situation can be significantly improved. Businesses can introduce transition processes providing a significant increase in executive success and a positive affect on financial results.
The first step is to ensure that the company recruits the executive with the best chance of success. Yet despite psychometric tests and interviews, assessment centres too often find the candidate that is selected doesn’t reflect the business situation that needs managing.
For instance:
- Selecting an executive with significant experience of business “start-ups” to manage a well-run and productive business.
- Appointing a change catalyst without explaining that strong aspects of culture that need to be retained.
- Appointing an executive to “turn around” the business in a short time period when in fact “restructure”, with greater time allowance, would be a better approach.
After appointment:
The first task is to identify what the business situation actually is. What is expected to happen in the short, medium and long-term? What would constitute success and how and when will such success be measured?
To reduce the risk of failure further, information should be sought to establish the preferred management style of the boss. How the boss prefers to take decisions and what types of decisions must be referred upwards and what decisions the new executive can make independently. Such information needs to be given to the new hire as soon as possible after appointment.
