Doing Right by Your Leaders - Why an Investment in Executive Transition Support is just as Important as your Executive Search Strategy

Executive search is a multi-billion-dollar business; in 2020 the global industry was estimated to be worth 18 billion euros, eight billion euros more than in 2012 ¹. Indeed, the top five global firms have become so ubiquitous they even have their own acronym- SHREK (Spencer Stuart, Heidrick & Struggles, Russell Reynolds, Egon Zehnder and Korn Ferry).

The business case for using a specialist leadership head-hunter is compelling: ensuring you have the right executives in the right seats is critical for any organisation. No surprise then, that the service comes at a premium- an industry intelligence firm estimates that “Leading global retained search firms rarely accept searches for fees of less than USD $100,000” ²

However, when it comes to an executive leaving a business, the same level of investment is often lacking- senior leaders are often provided with either a cash severance package, or a standard outplacement service. In both cases, the offering provided doesn’t reveal the full range of career options available to them, raising the risk of individuals making uninformed decisions as they don’t know what they don’t know.

Executives are different - their leadership and industry experience make them attractive as board members and to private equity and venture capital companies. They may wish to start their own business, go into consulting, or run a franchise. Portfolio careers- a working style encompassing multiple income streams, alongside volunteering or philanthropy- are becoming increasingly popular ³

When it comes to the time for a senior individual to depart your business, an investment in supporting their transition is an investment in your employer brand, reputation in the market and your employee engagement.

Want more quantifiable metrics? Witness the drop in share price of 2.8% for a media conglomerate’s unexpected announcement of their CEO’s stepping down ahead of their planned exit date. Research from FTI Consulting shows that during a CEO transition “investors are twice as likely to sell shares than buy them” making the need to ensure executive transitions are as smooth as possible a business imperative at the board level.⁴

A well-managed senior transition is good risk management; a company’s leadership sets the culture across an organisation and creates a company’s brand. Your leaders have developed strong relationships with internal colleagues, external market analysts, business partners and the media- these connections will outlast their tenure at your firm. Supporting their offboarding ensures you protect your brand and relationships, helping you acquire and retain the talent required for future business success.

Executive tenure is in decline- the median incumbency for a CEO at a S&P 500 company dropped from six to five years between 2013 to 2017 ⁵, while a 2018 PWC study showed that APAC CEOs were less likely than their North American or Western Europe counterparts to hold longer tenure ⁶. This was most pronounced in Australia, where a 2021 Kearney study found that three quarters of executives transition within five years ⁷. The study compared CEO exits across two five-year tranches- 2011 – 2016, and 2016 – 2021, with a key finding that the number of involuntary exits increased by 27% across the two periods, as well as the number of involuntary exits for non-financial / ESG reasons increased fourfold.

As many leaders adjust to leading teams virtually and accelerated change programs, there has never been a better time to ensure you have the right support in place for your most senior, connected, and visible employees. Providing your executives with a safe platform- with advisory resources to consider their aspirations and next steps- is a best practice with substantial return on investment. 

LHH’s ICEO (International Centre for Executive Options) is a boutique practice within a globally distinct business, exclusively dedicated to the success of exiting and retiring senior executives. It has enabled the transitions of leaders of organisations from the Fortune 500 to start-ups and has the global reach to support relocations of expatriates returning home or looking for their next challenge.

Your Leader will have a dedicated Peer Advisor who has operated at a senior level and can relate to their unique needs. They will be able to speak to individuals who have set up their own businesses, pursued an active retirement or can provide insight into a new industry.

They will have access to a bespoke team of specialists in areas including branding, compensation, private equity, board service and executive search, alongside in-depth assessments, and access to dedicated, customised research to help them make their next move.

Investing in your executives at the offboarding stage creates engaged alumni and company advocates that will accrue to your benefit. Departing executives generally retain significant influence with important internal and external stakeholder communities, and supporting them appropriately adds value many times over when it comes to attracting and retaining talent.

[1] Executive search industry: market size 2020 | Statista
[2] How to Determine What an Executive Search Will Cost | The Good Search (tgsus.com)
[3] The Rise of Portfolio Careers, and Why | Ezra (helloezra.com)
[4] https://www.fticonsulting.com/~/media/Files/us-files/insights/reports/ceo-transitions-and-the-risk-to-enterprise-value-study.pdf
[5] CEO Tenure Rates (harvard.edu)
[6] https://www.pwc.com/gx/en/news-room/press-releases/2019/ceo-turnover-record-high.html#:~:text=The%20study%2C%20which%20analyzed%20CEO,over%20the%20time%20period%20analyzed
[7] Lessons from forced CEO exits (afr.com)