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Career : Why New Executives Fail
Edward Ferris is Managing Partner, Charlesmore Partners International, a rapidly growing management consulting firm with a single focus: to help CEOs and their top management teams develop the organization to deliver their strategy. Previously Mr. Ferris owned and managed a management consulting firm specializing in business and organizational strategy and held executive Human Resources positions at ABB, General Signal Corporation and British Telecom with responsibilities spanning some 44 countries on six continents.
He graduated from Manchester University in England, and holds two Postgraduate Diplomas in Human Resources. He is also a Graduate of the Institute of Personnel Management in London, England. He is a past member of Work in America’s Productivity Forum Advisory Board and is a frequent speaker and writer on human resource matters. He lives in Doylestown, Pennsylvania with his wife and two daughters.
Edward can be reached at email@example.com
Sixty four percent of new executives hired from the outside won’t make it in their current jobs. So says one recent study of executive transition. Forty percent will fail within the first 18 months, reports another. What seems to be causing the derailment of these leaders ? Are there patterns ? Why should your organization care ? And, more importantly, what can it do to ensure the success of the newest members of its leadership team ?
What Price Executive Failure ?
What is the true cost to your company when a new leader fails ? Is the cost the $200,000 you pay to the Executive Search firm ? Or the $100,000 it costs in relocation ? Or the hard-to-quantify cost of business and organizational disruption and missed opportunity ?
Some years ago Bob Allen, the CEO of AT&T, had concluded that his successor should come from outside of the company. He recruited four candidates – most notably President John Walter – but none worked out. Walter left after less than a year, his wounds salved with a $25M payoff.
Michael Ovitz received a $100M pay-off for his mere drive-by stint at Disney. Shareholders of Coca-Cola lost billons in stock market during Doug Ivester’s 2-year tenure as CEO. Carly Fiorina at Hewlett Packard and Robert Nardelli at Home Depot are two prominent recent examples.
Enormous costs. Major impact. Huge discontinuities. Wasted investment. The process of executive transition has such tremendous ramifications; we clearly need to understand why such situations happen so regularly, and how companies and executives can minimize the risk of derailment.
What Price Success ?
The opposite is also true. Successful executive onboarding practices can significantly aid the transition process, position new executives for success, increase the alignment between the individual and company, accelerate the learning, assimilation and performance curves, and prevent executive turnover. Speed to performance and effectiveness of early fit can really fuel the level of ROI anticipated when executive recruitment is originally contemplated and cost evaluated.
One organization created such a successful executive onboarding process that they decided to “retrofit” all 200+ vice president level and above leaders, realizing that the new hires often had a greater understanding and grounding in the business than longer-tenured colleagues.
And the trend towards bringing in executive talent from the outside continues to increase, despite the heavy acquisition costs and the potentiality and frequency of derailment.
In the first 10 months of last year, 38 of the nation’s 200 largest corporations replaced their chief executives, up from 23 the prior year. One analyst estimates that up to 70% of executives will change companies over the next three years.
We are at the confluence of an era predicted in McKinsey’s ”War for Talent”, in which there is a clear dearth of leadership capability and increasingly unforgiving executive boards demanding rapid results. The stakes have never been higher, and the failure rate is probably at an all time peak.
Why New Executives Fail
Our research demonstrates two major contributing factors :-
Durk Jager’s 17 months at the helm of Proctor and Gamble is a very prominent case in point. Jager was not new to P&G, but he was an “outsider”, having spent much of his career overseas. On his departure, the Wall Street Journal quoted John E. Pepper, a retired P&G chief executive who was reinstalled as chairman upon Jager’s departure, "We undertook too much change too fast”. Alan G. Lafley, who replaced Jager as CEO, and has since led a major transformation of the company, said at the time, “P&G will return to our ( more ) conservative ( practices )". Cultural and stylistic “oil and water” were clearly preconditions to this executive skid.
What Goes Wrong ?
There are many ( often interconnected and compounding ) reasons that cause the derailment of new executives. Here are some of them :-
The earliest missteps are the most damaging. One commentator suggested in Fortune magazine recently that much of the damage is done in the first week.
Indeed root cause analysis can often trace failure to before the start date – oversold capabilities, mis-assessed blind spots and competency gaps, desperation to hire, misunderstood role and results expectations. Sometimes the thrill of the chase creates the seduction of the moth to the flame.
Rather than arriving into a new job and “nailing it”, many executives end up getting nailed. Oftentimes such outcomes are preventable. But to do so requires a clear understanding of how effective executive onboarding can make a difference, and the readiness to build a systemic solution.
© Copyright 2008 Edward Ferris / Charlesmore Partners International