The Business Case for Executive Recruiting - dummies

The Business Case for Executive Recruiting

By David E. Perry, Mark J. Haluska

According to a study by BTS Group and the Economist Intelligence Unit called “Cracking the Code: The Secrets of Successful Strategy Execution,” companies with great leaders significantly outperform their peers. Great leadership is also a prerequisite for strong employee engagement. That’s a big deal, say David MacLeod and Nita Clarke, authors of a report called “Engaging for Success: Enhancing Performance through Employee Engagement.” Here’s why:

  • Companies with low engagement scores earn an operating income 32.7 percent lower than companies with more engaged employees.
  • Companies with a highly engaged workforce experience a 19.2 percent growth in operating income over a 12-month period.

A study by the Corporate Leadership Council called “Driving Performance and Retention through Employee Engagement” revealed similar findings — most notably that companies with engaged employees grow profits as much as three times faster than competitors with a nonengaged workforce. And a 2013 report by Gallup, “State of the Global Workplace,” finds that engaged workplaces

are engines of job creation around the world. Companies with highly engaged workforces outperform their peers by 147 percent in earnings per share so it should come as no surprise that the companies with the most engaged employees have excellent leadership.

The point here is that hiring the right executives can reap tremendous benefits. And yet, all too often, it’s the wrong executive who gets hired. No one knows this better than Kevin Kelly, CEO of one of the world’s best-known executive search firms. Kelly’s firm studied 20,000 executive searches and discovered, as he informed the Financial Times, that “Forty percent of executives hired at the senior level are pushed out, fail, or quit within 18 months.” This, he says, is expensive in terms of both the costs associated with hiring the individual and lost revenue. It’s also, says Kelly, “damaging to morale.”

Others paint an even darker picture. For example, according to one study by the Corporate Executive Board, 50 percent to 70 percent of executives “fail within the first 18 months of promotion into an executive role, either from within or coming from outside the organization.” Of those, the study revealed, “about 3 percent fail spectacularly, while 50 percent quietly struggle.”

In a word, “Yikes!”