Home Executive Suite Home? Maybe Not!


December 9, 2008

by Marshall Goldsmith

Job security in the executive suite may be more tenuous than ever. Failed transitions are at all-time high, costing companies millions in expenses and lost opportunities. According to the Center for Creative Leadership, 40% of senior executives put into new positions fail to meet expectations in the first 18 months, and half are gone within three years. Measures being taken to address the problem are largely ineffective. Why are so few companies taking proactive steps to reverse the trend, especially at a time when companies should be trying to get the most out of their talent and watch the bottom line?

Dr. Patricia Wheeler, Managing Partner of the Levin Group, a leadership development consultancy, helps smart people become better leaders. She has worked with senior leaders and their teams for 20 years as a leadership consultant and executive coach. We chatted about a market study she recently completed on the subject and how she works with organizations and individuals for successful outcomes. Edited excerpts of our conversation follow:

Patricia, what did you find in your recent study?

We found that the failure rate for senior leaders, which we defined as those within the top 5% of a company’s leadership ranks, is unacceptably high. It doesn’t make much difference whether a senior leader comes from outside or inside the company.

That’s interesting. How did you compile the findings?

We reached about 150 executives and talent professionals across 18 industries and 11 countries. They answered 18 multiple choice questions online. (The study was sponsored by Alexcel and the Institute of Executive Development.)

Isn’t the safest course for companies to just stick to the people that they know and promote from within?

Not always. This is important for leaders and organizations to understand, because they expect internal transfers to be seamless and require little help. Leaders often feel internal candidates know the culture and it will take less time to bring them up to speed. However, we learned that 20% of senior executives are not successful when they change roles internally.

So, why do executives fail in new roles?

Too many are left to sink or swim. The most common reason is a lack of interpersonal and leadership skills—the often overlooked, nontechnical skills that don’t show up on résumés. We see over and over people become consumed with what the work is rather than how they will do the work. It’s with the human interaction that we’re most likely to have breakdowns. It also takes more time than expected for new leaders to gain traction…more than just a couple of months.

What’s the biggest mistake companies make with regards to transitions and succession planning?

Failing to address issues of leadership and style that new leaders need, and falling for the illusion that good intentions will drive good results.

How can organizations assure a successful outcome?

First, get the hiring right. Make sure there is a good behavioral fit between the individual, the team, and the organizational culture. Think about “transition” during the hiring and interviewing process. Be realistic about how much time it will take for a new executive to get up to speed. Provide the support and resources necessary for both internal and external hires to succeed.

Help people craft a clear road map of the challenges and expectations they face and how they’re going to address differing interpersonal styles and ways of working. Our results suggest that a relatively small amount of time, if invested correctly, will help senior executives assimilate in their new roles. A coach or a savvy HR partner can provide transitioning leaders and their teams with a fresh eye, facilitate communication, and help craft the measurable road map.

What are the costs to businesses of failing to address these issues?

Very significant! Costs can range from a few hundred thousand dollars to over a million. That includes recruiting, sign-on bonuses, and exit packages. Then there are the intangibles, such as alienated employees, customers, and suppliers; a tarnished brand image; and lost momentum. The typical estimate of direct and indirect costs together is at least two times yearly salary, and potentially much more than this, according to Topgrading author Brad Smart. A few misfires like that can cripple a business, especially in today’s economy.

What are organizations doing to address the problem?

Not enough…Most organizations are not providing support that is commensurate with the needs of assimilating a new senior leader. Pre-employment activities and orientation programs are popular, but not very effective. Mentoring is the most effective for external hires. Coaching is the most effective tool, but it is used by only 30% of the organizations we surveyed.

What has the impact of the economy and tight budgets been on coaching and onboarding support?

My clients, including a large number of global organizations, are telling me that resources are scarce and time is of the essence. When they put a person in a new role, it’s more critical than ever that they succeed in that position and not waste time, money, and resources.

What is your approach with new clients?

I first talk with a new leader and their boss or bosses and define the requirements. I meet with the team and determine what they need to know about the new leader and what he or she needs to know about them. In some cases I interview the team even before a new leader comes on board to understand the history, culture, and any issues that must be addressed and resolved. Then I act as a facilitator to foster dialogue and candor between the team and its new leader. I sit down with the new leader and draft ground rules and a road map of what success will look like and how to measure progress going forward.

What is the most important part of the process?

Providing continuity and establishing a level of trust. Good coaching helps provide continuity. It’s in an environment of trust where good work happens seriously and effectively. Building trust, that’s the bottom line.

Thank you! You’ve given us a lot of great information about transitions. How can readers reach you to learn more?

I can be reached at Patricia@TheLevinGroup.com or (404) 377-9408.