Companies today realise the importance of having a crisis plan. From natural disasters to financial missteps, the global corporate world understands how emergencies impact the bottom line. According to the results of last month’s PI Worldwide survey, 53 percent of respondents feel their organisation is not prepared to deal with a sudden departure of a member of the senior management team.
Even as evidence indicates that at least some degree of change in the C-suite is commonplace, turnovers at the top have clear repercussions on a company —both short- and long-term, positive and negative. Besides the impact on shareholders and the company’s public reputation, any change in leadership can be disruptive to the various dimensions of an organisation, such as employee morale, organisational culture, and financial performance.
Organisations invest substantial resources in getting the right key senior leaders into the right roles and setting them up for long term success. When it does not work out, regardless of the circumstances, the impact is significant. Direct and indirect costs of replacing a CEO vary widely. One research study pinpoints the cost of replacing a top-level manager at about 150 percent their base salary (Phillips, Reisman, Friedman, Galinsky). According to The Right Leader: Selecting Executives Who Fit by Nat Stoddard and Claire Wyckoff, the average replacement figure for a CEO after just 18 months ranges from $12 million for small-cap firms to $52 million for large ones.
Why do Leaders Fail?
In an article written for the American Management Association, Nancy Martini explores why leaders fail. Nancy points to cultural misalignment, overpromotion and/or a failure to evolve as the core reasons for failure.
Planning for Success
A well-validated behavioural or personality assessment can be an invaluable tool for succession planning. It gives you an insight into how a leader’s drive, decision-making style, ability to take on risk and more will meet the current and future challenges of the company.
Learn More about How Leaders Fail; How to Predict Success in the Search for a Successor; and the process of Planning – Contact us Today