The cost of failed executive hires is tremendous. This is NOT limited to just CXOs and SVPs – same goes with VP and Director levels. It is surprising how many mid-cap and large conglomerates retained big-named search firms without realizing that with the exception of a few principals that manage the business and no longer recruit, most of the recruiters for these big firms are a revolving door. They flow in and out according to economic times. Boards should look towards smaller well-established retained executive search firms who have experts that have been working there for a dozen years or more and have a solid history of recruiting in your niche industry.
The cost of failed executive hires is not only damaging – it can prove to be fatal. First are the costs related to the executive compensation, benefits, and severance package, as well as indirect cost such as travel, poor strategy and poor business plan execution, lost market share, lack of direction for the rest of the staff, and lack of trust in the Board of Directors. I see it all the time where I not only need to find a replacement CEO, CTO, CFO, or SVP, but also one that has turnaround experience and is willing to come into a situation that is not ideal for immediate success.
Several times over my career in Executive Search I find myself working with a candidate who believes they are an ideal fit for a retained search assignment I am conducting. My retained search work is “performance based” NOT contingency based, which means that when a client has paid a deposit for my time and effort, I am expected to get the job done.For an executive search consultant, getting the job done means nothing short of bringing forward high-impact “business changing” candidates to our clients. These are the “A Players“. Not only must they have the required experience, expertise, and a proven track record of success, but he/she must prove to me that they can meet the challenges of the position, meet or exceed my client’s expectations, and make a “direct positive impact” on my client’s business.
Most fail to understand the impact on the cost of failed executive hires is. The truth is that by and large, about 55% of all employees at any given company are in fact “C” Players. They can do the job they were hired to do; they show up for work on time, do the job they were assigned, and are loyal to their managers. However, they lack the entrepreneurship risk taking mentality, the “take charge” attitude, and the take no prisoners’ mindset required to make an impact on the marketplace. In addition, they are easily replaced by outsourcing at a lower cost as well as artificial intelligence, software automation, and robotics. And the latter three can run 24/7 without sick days, benefits, training, and their performance is most often anything but mediocrity.
Avoiding the Cost of Failed Executive Hires
While for many positions it is acceptable until technology advancements eliminate many “C” players, companies will continue to hire them for many roles. At functional leadership and key engineering, sales, and operations the cost of failed executive hires can be fatal. Many VPs and Directors will look to “B” players, which based on my 20 years experience in executive recruiting, are roughly up to 30% of all employees at any given company. They outperform “C” players any day of the week and possess the intuitiveness and hunger to succeed that makes them valuable to their employer. They have a track record of success, albeit in their department but rarely make a definitive impact on the company’s overall performance in the marketplace or the business strategy.So what really is an “A” player? The misconception is that “A players” only exist at the executive level. That is purely a myth. Most “A players” were born that way or evolved into it in childhood, teenage, or young adult years. These unique individuals comprise the Top 14% of the global workforce. They are easily recognized early on. In their youth, they were leaders and entrepreneurs – whether having the most lawns to cut, starting a community newspaper, excelling in Junior Achievement or inventing a product or service company that was acquired by a bigger fish.
These “A players” are not always leaders as their ideas, thought processing, and inventiveness make them excellent engineers. Same goes with RSMs and MAMs who can blow out the quotas as an individual, but if you try to move them into leadership levels they fail. The strategic thinker and the ability to “sell their ideas” type of “A players with superb interpersonal communications and conflict resolution skills are in fact the type of functional leader or senior corporate executive that is a “game changers” not only within a client’s vertical market, but have had similar success in other vertical markets within that industry or in a different industry altogether. They have a responsibility to the owners (founders, investors, and stockholders).
Cost of Failed Executive Hires is due to a poor Talent Acquisition Process
A Forbes article by a Silicon Valley CEO reveals that the cost of failed executive hires is estimated to be more than $500,000 or 2.5 times salary. And that does NOT include organizational, opportunity, productivity, and transitional costs for the new executive. As an Officer or Board member, you must ask yourself, why would you risk letting mediocre executives hires to occur?The same can be said of a VP of Engineering who needs principal level systems software engineer for that matter. You may save yourself a few dollars in the short run recruiting someone with your existing recruiting process, but the long term effects in the cost of failed executive hires may cost YOU and YOUR STOCKHOLDERS much more than 2.5 times salary or a recruitment search fee.
How to Alleviate the Cost of Failed Executive Hires
NextGen Global Executive Search not only reduces the cost of failed executive hires, we virtually eliminate them. The award-winning Leadership Vault search method, developed over 30 years, is a the recruitment platform utilized by our executive search consultants that properly measures the potential candidates we identify by psychometrics to determine a strong match to role fit and team fit, document KPIs and the depth of candidates’ industry relationships, and provide a custom onboarding program that includes new hire self-development planning and a mentoring / coaching program that is easy to realize with little investment of time. Backed by an industry leading 12 to 36 months replacement guarantee, the common feedback is the hire we placed met or exceeded their objectives. Looking to fill a key functional leadership or senior executive role in your company? Reach out and see the difference engaging an Executive Retained Search will make to the quality of candidates you will interview. We don’t get paid in full until you are 100% satisfied.