The costly truth about executive transition failure

And the actions you can take to prevent and recover from it

It’s a nightmare of Titanic proportions. You’ve invested in recruiting a new member of the executive team. The transition appears smooth at first and your new hire is confident. Full steam ahead!

Then a few cracks start to appear. Other executives are leaving. Key clients fall away, employee engagement drops, and there’s a growing lack of trust. Employee morale and productivity are at an all-time low due to communication issues and failure to look beneath surface level at challenges.

Meanwhile, your new executive is floundering. Their distress flares are released too late. Instead of hitting the ground running, they’ve hit an iceberg, with a sickening crunch.

The good news is that, despite leadership transition failure being common and costly to organisations and individuals, strategies exist for steering far clear of this scenario.

Plus, there are recovery actions you can take to navigate back on course if you find yourself in difficult waters.

Image: Anterovium, Canva.com

What are the costs to organisations of poor transition?

Appointment costs for a leadership executive average at 2-3 times their remuneration package. But did you know that transition failure generally occurs within the first 18 months? And that it has overall estimated costs of 10 times the executive’s annual salary according to the ‘Harvard Business Review’ 2017? This includes replacement and lost opportunity costs. Ouch!

So, what are some of the implications across the organisation?

Productivity Dips

Dips in individual and team productivity as the new executive gets up to speed, can lead to a halt in progress against strategic goals. Not to mention reduced efficiency across the organisation. These dips are often more pronounced when the executive is new to the organisation as well as the role.

Plus, an absence of direction leads to reduced engagement from the team. According to McKinsey 2018, in a difficult leadership transition, “… the performance of their direct reports is 15 per cent lower than it would be with high-performing leaders. The direct reports are also 20 per cent more likely to be disengaged or to leave the organisation.”

Opportunity costs

Poor leadership transition diverts resources and attention away from other important initiatives. This can result in reduced organisational growth, a strategic slump, or missed client opportunities.

The human toll

Equally importantly, troubled transitions take a significant toll on stress levels and self-confidence, leading to burnout for your executive.

Hired to be the new gun who will disrupt the status quo, performance expectations match the salary package. But their initial hubris has disappeared. Now, due to lack of sleep and a hesitancy to ask for help, it’s their own feathers that are ruffled.

Derailers occur, such as overreliance on familiar but irrelevant approaches, focusing on the wrong goals, or failing to read the political environment.

Moreover, a struggling leader may display low trust in their team, inducing the same in return and creating a devastating impact on culture.

Reputational & legal risks

Internal and external stakeholders are at risk of disconnecting when a new leader takes over. Failure to engage with stakeholders can lead to weakened relationships, negative perceptions and lost business.

A lack of psychological safety felt by the new executive, claims of bullying in a low trust environment, or a costly severance package if the situation is unrecoverable, are all possibilities.

How to avoid the costs of poor transitions

Simply stated, poorly executed leadership transitions have many negative consequences. But it doesn’t have to be that way.

Ultimately, it wasn’t just an iceberg that sank the Titanic and resulted in unnecessary loss. It was a combination of many factors. Poor leadership, lack of foresight and an underestimation of what lies beneath the surface. It was over-confidence, unpreparedness and delayed communication. Sound familiar?

So, how can you flip the script and have peace of mind that your new executive has the support they need for success? Quite simply…prepare. Apply strategies such as transition coaching for senior hires and have measures in place to spot early distress signals.

Transition failure generally occurs within the first 18 months and has overall estimated costs of 10 times the executive’s annual salary

Harvard Business Review, 2017

Provide your executive with the tools to avoid past derailers. Help them understand their stakeholders and build trust with their team. Facilitate goal alignment, provide clarity, expect and prepare for obstacles. Plan for success and have the necessary support available when things get rough.

Investing in a well-structured onboarding and transition process pays dividends and sets your new executive up for a brilliant future with your organisation.

For more information on how Lucent Transition Days can support your new senior hire to successfully navigate their role, or help to recover a struggling transition, book a call or email us via the links below.

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