Business is most often competent at addressing financial and legal measurement because to a large degree these aspects are tangible. Formulae can be applied and levels of risk determined. Yet, when it comes to understanding, managing and minimising the risk associated with executive appointments through effective approaches and processes, businesses have a dismal track record.
US-based human resources consulting firm, Drake Beam Morin, says that in the 1990s, one-third of CEOs at the 450 largest US companies lasted three years or less, while one in four companies went through three or more CEOs in 10 years. It also estimates that up to 66% of CEOs and COOs lack the soft skills required to lead effectively.
Fortune magazine reports that at the turn of the century, up to 40% of newly appointed executives across industry sectors were either leaving or failing within six to 18 months. The cost and impact of this are immeasurable.
However, the failure rate need not be this high if companies discharge their duty correctly with executive appointments. This can be done by following these essential steps:
* First, conduct a thorough and extensive due diligence on your prospective service provider and clearly establish the metrics, methodology and processes your service provider uses.
* Enter into a formal service level agreement and establish meaningful benchmarks against which candidates can be measured.
* Remember that in establishing benchmarks, hard skills and experience are only one component; there must also be a focus on issues of culture, behaviour, values and attitude, and how these align with the strategic direction of the company. Do not make the mistake of letting corporate culture take care of itself.
* Ensure that the role in question is congruent with the personal aspirations, goals and objectives of the candidate.
* Ensure there is a manageable and proportional level of challenge and stretch in the role. The appointee should be forced to either enhance or extend their existing portfolio of skills, competencies and capabilities, such that they will increase their capacity to influence, impact and add value to the business. This will in turn ensure an ongoing sense of accomplishment with passion and enthusiasm for the business. This results in projected energy that cascades downwards into the organisation, is transferred to employees and ultimately to the customer base. This provides an additional facet of competitive advantage.
The failure rate need not be this high if companies discharge their duty correctly with executive appointments.
Bryan Hattingh, CEO, leadership solutions group Cycan
All of these points presuppose that the fundamental decision criteria have been established from the client`s and the appointee`s perspective.
While it may be difficult to quantify the cost of making the wrong appointment at executive level, consider the impact on your company in terms of:
* The appointee`s salary - and perhaps severance fee;
* The opportunity cost to the business;
* The negative impact on the intellectual capital base;
* The potential for damage to customer relationships and business flow; and
* The executive search fee.
This list of issues and negative consequences should be enough to galvanise the heart of any responsible executive!
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