Business cannot afford the existing failure rates that result from newly recruited or promoted executive expectations.
Harvard's Michael Watkins, author of The First 90 Days, has revealed that a staggering 58% of new executives—those hired from the outside—don't succeed in their new position within 18 months. The cost per failure is more than a million dollars.
Companies spend an enormous amount of money recruiting people. Some of these recruited executives can become toxic to the environment. It can take months—or even years—to rebuild an organization after a particularly negative new leadership experience. The higher up the executive, the more costly the "reconstruction" costs. Very high-level negative experiences can definitely damage the company's reputation and stock value.
The solution lies with both the company and the individual.
Individuals: Read whatever you can on this topic and be prepared for the types of problems that come with the turf. Don't delude yourself that you are different or immune from the types of transition issues that have hurt so many other executives. Realize that you are not only going to have one job, you are going to have two jobs: 1) doing your regular work and 2) fitting in with a new company and culture. Realize that it may be very difficult for employees to immediately trust you—and be open in sharing their ideas.
Companies need to make the onboarding transition a top priority. They must accept the natural challenges that occur with this type of change. A company has to realize that the new executive may well need help early in the assignment and it should have the help ready—before it is needed.
Recruiting from the outside is a risky strategy.
The most successful companies develop their own leaders.
The Harvard Business Review states “top performers who join new companies…are unusually slow to adopt fresh approaches to work, primarily because of their past successes, and they are unwilling to fit easily into organizations…”
Furthermore, a recent study of 1,000 U.S. companies showed annual turnover among senior managers jumps dramatically when a new CEO takes the helm, especially when he or she comes from the outside. There’s a 17% turnover with a new CEO appointed from within the firm, as opposed to a 25% turnover among all executives with a new CEO from outside the organization.