Executive Search: Get it Right the First Time

There is a statistic that sees a lot of use in the executive search business: “40% of executives hired outside fail in the first 18 months.” The number varies. I’ve seen it as high as 64%. Whatever it ends up at, the message is that installing a new leader – we’re talking C-level here – is a very fraught business.

Replacing a leader is a costly process. Not getting it right – watching all that time and money walk out of the door prematurely – is brutally expensive. Estimates vary between multiples of thousands and millions. When CEO John Walter left AT&T after less than a year, he took with him $25M. It took $100M and a shareholder lawsuit for Disney to get rid of Michael Ovitz after 454 days.

Most of the time, this “fail ratio” is cited in defense of “onboarding”, the practice of assigning a coaching program to help the newcomer adapt and begin contributing to the bottom line as quickly as possible.

Makes sense. Most of the members of Cornerstone International Group around the world offer onboarding with a high-level executive search program.

Discounting the token onboarding – “here’s your computer and the coffee’s down the hall” – job-specific coaching is shown to slash the risk of failure. Our colleagues at PrimeGenesis, an onboarding specialist firm, claim reductions from 40% failure at 18 months to 5% or less. So, as an insurance policy, it’s a good buy.

Do it right, not over

But there is another way. As a wise old carpenter once told me, do it right, not over. In other words, take extra care and effort to get the right person to start with. And this is where the headhunting business sharply divides between the drive-by “contingent searchers” and the “retained executive search” community.

If you are unsure of the difference, download our e-book “Retained or Contingency?” Reader’s Digest version: Contingency works for lower-level hires; Retained is essential for executive hires.

This an effect of process. The contingency searcher seeks out anyone who is qualified. The retained searcher only wants the one person who is the best qualified. The time spent by each on your behalf is proportionately different.

Pareto’s rule reversed

Larry Shoemaker, the President of Cornerstone International Group, made the key point in a previous comment on the Pareto Principle, or the 80/20 rule.

The old recruiting model, he wrote, depended 80% on finding the right candidates, and 20% on everything else.

Today, it takes only 20% of the time to find well qualified people. It takes the other 80% to determine which one will be successful in the future in the specific organization relative to its culture, strategy and purpose.

Qualifying an incoming leader is an intricate process unique to the hiring organization. Education, skill sets and experience are reduced to table stakes. Cultural fit has been shown to be biggest single factor in determining the contribution of a new executive

In the next post, we’ll look at ways of making this critical assessment.

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