Why Do Newly Hired Executives
Fail Within 18 Months?
by Stacy Nathan
Originally published in Business Insurance
Reprinted with permission.
One million dollars. It’s not a life insurance policy claim — it’s what it can cost an insurance company to replace a newly hired executive who doesn’t make the grade. Failure rates among new executives hired from outside the company are on the rise. As early as 1998, a study by the Center for Creative Leadership found that 40 percent of external hires failed in their new positions within 18 months. Newer data suggest this number may now be as high as a whopping 60-80 percent. Even more troubling is what a failed executive can cost the company – as much as $1 million in direct hiring costs, lost productivity of others in the organization and decreased productivity of the next hire as he or she gets up to speed. In the risk business, it seems the biggest risk may be our own executives.
Why Executives Fail
There are many reasons why new executives fail. Some suffer from a lack of coaching or mentoring. They don’t have a friend or ally they turn to in the early going to help explain how the company really works, as compared to the official company line. Many new executives are afraid to look vulnerable or ask those “embarrassing” or “stupid” questions that employees somehow expect high-level executives to just know from the start. Other times, newly hired executives suffer from culture shock. Intentionally or not, they don’t learn the organizational culture and how to communicate across the various segments of the company. Says Cheryl Zobal, an HR consultant with health care provider VHA, Inc., “We have a lot of very bright people within our organization, but if they’re not careful, it’s the cultural things that can trip them up.”
Many newly hired executives suffer from the unrealistic expectations of higher management. Often organizations find “the right person” and expect them to “hit the ground running.” Yet how can a person “run” without understanding the culture and speaking the language of the organization? Furthermore, some new hires simply have trouble performing the “flying trapeze act.” They’ve successfully mastered lower-level positions in their career and are ready to reach out and grab the higher bar in their new, more challenging role, but they have trouble getting a firm grip.
Doomed From The Start
New hire failure begins in the interview process. Many managers assume interviews reveal the true employee. However, an interview is more like dating or courtship than a snapshot of what life will be like six months into the marriage. What you see is candidates on their best behavior who are careful not to let their weaknesses show. While this gives interviewers a valuable glimpse of how candidates will handle themselves in formal situations like presentations or sales calls, it says nothing about how they’ll act in times of crisis or simply when they’re having a bad day. In other cases, the job requirements may match an employee’s qualifications, but they may not mesh well with what the employee loves to do. As a result, valuable discretionary effort is lost after new hires come on board when they are misplaced within the organization.
What Insurance Companies Can Do
In most cases, an inadequate on-boarding process fails both the individual and the organization. Insurance companies need to take several important steps to make certain new executive hires have every chance to succeed, and in the process, save the company from tremendous losses of money, time, effort, and employee morale.
First, those responsible for hiring in the company — whether it’s a corporate HR officer or the new hire’s supervisor — need to utilize tools like multidimensional personality assessments to help get to know their top candidates long before a job offer is proffered. These kinds of tools help them understand how candidates prefer to work, communicate, plan and make decisions. They also provide insight into numerous other facets of their personality that can help decision-makers determine if the candidate is the right fit for the company. “You’ll quickly see what motivates the employee. Personality assessments give you a manual of how to work most effectively with an individual,” says Chris Calos, VP of Sales with the Principal Financial Group. “It’s like a car manual. ‘If you want to get peak performance, here’s how to take care of me.’ Personality assessments enable us to understand the basic expectations of how people like to operate,” Zobal adds.
Second, employers need to assign new hires a mentor, both to teach the organizational culture and to be responsible for understanding what makes an employee tick. Says Grover Thomas, Chairman of the Board of the Trustmark Companies, “I believe upon reflection that some of our executives might not have failed if we had been able to mentor them. We have to understand where they’re coming from.” By utilizing the employee’s personality assessment, Thomas says, “When the boss sees behavior that doesn’t fit the culture or fit the job, it’s not just a matter of ‘that’s not the way we do it here.’ Instead, she’s able to understand where the employee is coming from and he can do a much better job of mentoring them.” Calos adds, “You go into an organization and for the first six months, everyone is trying to figure out what you’re like, how do you like to be approached, what’s your style. On a piece a paper, a personality assessment allows them to very quickly understand what drives you.”
Mentors can assist their protégés in developing strategies that make the most of their strengths and their unique abilities and fit within the corporate culture. Thomas’ company even sends newly hired senior executives on a two-day executive leadership program, during which they and the CEO to whom they report go over personality profiles of each other and their peers. They analyze “how people interact and what they shouldn’t be surprised by, so when they come back, they feel they know a lot about their boss, and also their peers.”
Third, expectations must be realistic for the new executive. Few new hires are going to be “Superman” or “Wonder Woman”, swooping in and magically solving the company’s problems and meeting its challenges. That’s why the on-boarding process should allow for a period of learning and growth in which even the most talented new employees will need time to learn their new surroundings. Rather than wait for the typical annual review, new hires should be given more frequent feedback to help head off problems before they fester and result in ultimate failure.
Insured Against Failure
The reasons for executive failure are complicated, but fortunately the solutions needn’t be that way. With so much at stake and a proven track record of disappointment, insurance companies can’t afford to continue yesterday’s hiring practices when it comes to on-boarding new executives. Modern techniques like personality assessment and executive mentoring save money. In fact, they’re a million dollar insurance policy against catastrophic employee failure.
About the Author
Stacy Nathan is a Vice President and Executive Consultant for Personalysis Corporation, a management-consulting firm located in Houston, Texas. The Personalysis System is used to implement process change, increase skill development, design organizational strategies and bring about cultural change. For more information, call (713) 784-4421 or visit www.personalysis.com.