Have you ever wondered how a new executive builds his/her reputation? We recently inquired of a friend how the new President of her nonprofit organization was doing. She responded with “Not well!”, and further shared three observations: 1) He did not appear to be concentrating on critical matters; 2) He was questioning the executive team’s activities versus empowering them; and 3) He handed out a book entitled “The Five Dysfunctions of a Team”. Her last observation made us curious, and we asked her if she had read the book which outlines a popular team-building model. She admitted she had not, but the title of the book left the team feeling that the new President saw them as “dysfunctional”. The growing perceptions of this President within the organization further deepened our belief that everything counts as a new leader onboards in his/her executive role.
Losses Associated with New Leader Turnover
Research indicates that 40% of new leaders fail in the first 18 months on the job. The percentage is significantly higher (64%) for leaders entering a company without prior industry experience. Add to that the financial loss associated with turnover, decreased employee productivity, and the reduced credibility of the leadership team in the eyes of others, and you have a recipe for disaster!
It is estimated that the financial cost of exiting a new executive within 18 months of hire is roughly three times the leader’s first-year salary. This cost is much higher when lost productivity is added. Each new executive hire brings new strategic intention and reorganizes and redirects the activities of team members. When an executive position turns over in a short period, team productivity is greatly impacted and the credibility of the leadership team is tarnished. Employees who witness regular turnover of senior managers frequently adopt a wait and see position when a new leader is hired and resist changing direction until they are sure the new executive will “stick” in the role.
Even if the new leader stays, he may never reach his full potential within the organization if onboarded poorly. While a number of factors may contribute to this (i.e., lack of role clarity, failure of the organization to deal with resistance to new leadership, lack of executive management support for change, etc.), it is primarily due to the inability of the executive to manage the perceptions of others within the company during the first 3-6 months of hire. Unfortunately, human beings are biased and, once they have formed an initial impression, will spend the rest of their time looking for data to support their first impression.
Why New Leaders Fail
In “The New Leader’s 100-Day Action Plan”, George Bradt identified seven landmines associated with executive onboarding.
- Organization – Lack of a winning strategy or ability to implement strategy
- Role – Stakeholder expectations, stated objectives and resources are not well aligned
- Personal – Role and culture do not play to the individual’s strengths; Gaps exist related to fit and motivation
- Relationship – Not building key relationships up, across and down within the organization
- Learning – Failure to build an understanding of the organization’s customers, collaborators, capabilities, competitors and conditions
- Delivery – Failure to build a high-performing team or deliver results fast enough
- Adjustment – Inability to see or react to situational changes
In Career Partners International, Twin Cities (CPI Twin Cities) work with transitioning leaders over the years, we have identified four primary “must-haves” in order to ensure onboarding success.
- There must be agreement among stakeholders regarding the leader’s role in the organization and how success in the role will be determined.
- The new leader must come to understand and assimilate into the culture of the organization in order to gain support for change.
- New leaders must know what to do from the time they accept the job to six months into the new role in order to be successful.
- New executives must be able to manage the perceptions of others. This requires the ability to request and act on ongoing feedback and to manage their own leadership behavior, including behavior that can surface under pressure.
Calculating the ROI of Using an Onboarding Coach
Given the cost of leadership turnover in the first 18 months, many organizations are realizing the value of hiring an external onboarding process coach. Tim Morin of WJM Associates, Inc. calculates the ROI of an investment in coaching as the monetary benefit achieved minus coaching costs multiplied by 100 and divided by the cost of coaching.
Consider the following example:
You hired a new leader at a starting salary of $175,000 whom you let go after 12 months. The monetary cost of this turnover could be calculated as $525,000 (three times the first year salary). Had you hired an effective onboarding process coach at $10,000, and you subtracted the cost of the employee’s time for coaching (roughly $2,200), your return on investment would have been over 4,000%.