The Leadership Carousel Continues

The Great Resignation / The Big Quit / The Great Reshuffle continues. TheStreet.com defined this as “ is an ongoing phenomenon involving employees voluntarily leaving their jobs in unprecedented numbers”. Yes, ongoing. 

According to an Indeed survey of US workers who had switched jobs at least twice since the start of the pandemic, 92% said the pandemic made them feel life is too short to stay in a job they weren’t passionate about. Forbes cited the MIT Sloan Management Review research based on 34 million US workers stating that employees are checking out “because of broader issues related to the culture of the company, the decision-making or priorities of management, and the unpredictability of worker schedules”.

Even I am now in my second job since 2020, and like most of us this decision was made based on a happiness factor, not title or money. 

Across the past 3 years, a consistent pattern took shape as I continually heard from both active and passive executives about their priority for finding employers that share the same values. They aren’t looking for a title. Of course, many were also looking for a compensation increase. In my opinion there were two sequential drivers behind this compensation issue – one, they had been loyal and with the same company for years and were receiving below market compensation, or two, they were hearing how much their colleagues were getting elsewhere, so a bit of FOMO. I advised candidates to be careful what they ask for. You don’t want to be LIFO (last in first out) and the most expensive. Some of the salaries offered across 2021 and 2022 were well above market. We now see layoffs as a result given the same skill can be replaced at a lower cost.

What am I seeing now? Since Q3 of 2022 there has definitely been a slowing in executive hiring, but it’s not slow. It corresponds more with the volume we saw in 2019. Likewise, compensation is somewhat returning to ranges of 2019. Individuals are also less active and recognize that there is layoff risk everywhere, so stay still for now.

Given my focus on professional services, I thought to do a quick check via LinkedIn to research the level of potential for continued executive movements of those that have been looking for the place they want to call home since 2020. The top 25 IT Services and BPO companies have hired almost 3000 individuals at the VP level and above since June of 2020. Of those 967 currently have Open to Work turned on. This is clearly not ideal. But according to research conducted before the pandemic by McKinsey, Heidrick & Struggles, Leadership IQ, Harvard Business Review and the Center for Creative Leadership the failure rate of executive hires averages 45%. Failure being defined as the executive resigned, performed significantly below expectations or was asked to leave within 18 months.

The cost to replace someone at this level can be 3 to 30 times the salary of the individual. Take a look at this piece (and the referenced research) by our CEO, Richard Moore https://www.mercuriurval.com/en-us/institute/insights/what-is-the-real-cost-of-failed-leader-recruitment/) .

Think about it – you have the fee you paid a search firm originally, plus another fee to replace this individual. This results in 50% - 66% of the persons annual salary. You also have a loss of the time invested in the onboarding of this executive. Regardless of an NDA and other agreements, intellectual property does migrate in the brains of individuals. So does competitive intelligence. This failed hire may also result in revenue loss. If the executive was hired to be an integral piece of the launch of a new business, new geography, or otherwise, you now have an opportunity loss and a delayed timeline. If you, as the employer, are exiting the individual you are probably measuring additional impacts of this failed hire – people and productivity losses and possible brand value negative impact. And then of course, you get to pay this failed leader a severance package.

The interview process the past 3 years has been different, to say the least. In 2020 and 2021 the majority of these were completed via video conference with the inability to read many non-verbal queues. Interviews also were executed in an escalated time frame. What was once a 60 - 90 day process was then at times as little as 4 weeks. Professional Services thrives in good times and in bad so the hiring in this industry led all others across those roughly 18 months of chaos. Solid decision making went out the window on both sides; the candidate and the hiring organization. Unfortunately people made decisions without enough data nor the time to truly evaluate a decision of this magnitude. This has resulted in executive hires departing quickly. Now we are seeing  employers begin to exit many of the hires made during this time frame. They made a bad hire, have given themselves 18 – 36 months to measure this lack of success and are now starting confidential searches to replace them.

As we walk forward in the wake of the Great Reshuffle, the leadership carousel continues, and this is where Mercuri Urval is posed to partner in driving impactful results. Our proprietary and data-driven methodology, Leader Selection Science®, consistently demonstrates that 93.6% of our recommended hires since 2019 are meeting or exceeding expectations at 18 months. This was one of the key differentiators that drove my decision to join MU. Our Leadership Assessment is not only deployed during Executive Search, but also to evaluate shortlisted candidates when the search is executed through other avenues. The MU Leadership Assessment is ISO 10667-2 certified for Assessment Services, and we are the only global firm search firm to have attained this. 

In this new way of doing business with less headcount, you cannot afford for leaders to be less in terms of their skills, fit and ability to drive transformation forward. I look forward to reading your comments.

1 Salvucci, J. (2023). What Is the Great Resignation? Definition, Causes & Impact. TheStreet.com

2 Indeed-commissioned survey, conducted by Kickstand Communications, where n=1,005 people who live and work full-time in the United States and have voluntarily resigned from at least two different jobs since the onset of the COVID-19 pandemic in March 2020. They had also worked for at least one year at their pre-pandemic job.

3 Meister, J. (2022).The Great Resignation Becomes The Great ReShuffle: What Employers Can Do To Retain Workers. Forbes.com