When a Senior Executive announces their resignation, an organisation is left with a costly task to replace the critical hire, both in terms of financial resources and the productivity lost while the position is filled.
Ideally the firm would have invested in succession planning so the vacancy could be filled seamlessly, either on a short or long-term basis. In reality, although an increasing number of organisations recognise the value of succession planning, it is by no means universally used.
It is imperative to note that there are circumstances in which the retention of an executive who wants to resign is counter-productive. In cases outside those circumstances, if the motivations underlying a resignation are understood then steps may be taken to pre-empt and prevent the loss of key talent.
Reading the signs
Staying one step ahead of a team can be challenging but it is important since, once someone has resolved to leave, it can be almost impossible to persuade them to stay. Even if they are successfully retained, it may not be a smart move, as an executive who has decided that they do not have a future with a company may not be 100% committed.
Assuming the senior executive has valued qualities and it is essential that they are retained, the key to preventing their resignation is in understanding at an early stage their reasons for wanting to resign.
Resignation: the reasons
Senior executives resign for many different reasons and not all are as obvious and clear-cut as they might first appear:
- Limited opportunity for progression
- Absence of new challenges
- Lack of clear communication
- Dilution of company brand
- Change of direction by the company
- Loss of support of board members
Once it is decided whether or not a company is willing to let the executive go, the costs and benefits of trying to retain them can be considered.
Limited opportunity for progression
One of the most frequently cited reasons for the departure of an executive can also be the hardest for a company to address, namely that there is limited opportunity for progression. If, for example, a company makes an external appointment of a new chief financial officer after one of its divisional finance directors has applied for the job, the unsuccessful candidate will know it is likely to be several years before the vacancy arises again.
However, there are some solutions that could provide the executive with the job satisfaction they seek:
- Additional responsibility: The executive could be given operational responsibility for other divisions that report to the finance division.
- Recent acquisitions: If the organisation has recently taken over another business, the executive could assume responsibility for the integration of some of its divisions.
- Special projects: There may be one-off or special projects that would present new challenges. If this is managed correctly a positive solution is created for both executive and employer and is unlikely to be seen as a ‘consolation prize’.
While more responsibility can be given in some cases, there are inevitably situations where it may be impossible to meet the senior executive’s expectations; for example if they seek experience within a PLC, a FTSE 250 or FTSE 100 company or want the opportunity of working for an international organisation.
Challenges complete/ Job done / Challenges exhausted
A company that functions efficiently and smoothly may have one unwelcome problem: key executives may be bored. Without new short or long-term challenges there is the strong possibility that the executive may feel that their work is complete and it is time to move on. If they were hired as a ‘problem solver’, this is unlikely to come as a surprise.
While the business may face new challenges that require attention, this is often a situation where the company and the executive agree that a parting of the ways is the best outcome for both sides.
Although, contrary to popular belief, pay and remuneration levels are not commonly the principal motivation behind a senior executive’s resignation, they can still be a contributing factor for someone who feels unchallenged or undervalued.
To prevent a resignation due to remuneration, an organisation should consider whether the executive expects a higher salary or is prepared to accept a lower salary and larger bonus. There may be other benefits which are more important to the executive in question, or in some cases it is recognition of the value of their contribution which is most important.
If the executive will settle for a higher bonus, an affordable solution to retain them might be to offer shares in the company through LTIPs (long term incentive plans), linked to performance objectives. Robert Walters’ Executive Search division recently consulted an executive who had tendered his resignation on the grounds of insufficient remuneration. The executive was offered LTIPs and chose to stay.
Lack of clear communication
Clear communication is essential to any company and particularly important in fostering morale in the business. If it is not well managed, employees can become unsettled, which in the worst cases can lead to an atmosphere of paranoia. Issues around communication are relatively straightforward to resolve as long as those behind the communications strategy and its implementation are ready to acknowledge that there is room for improvement.
Problems can arise if:
- The value of a senior executive is not communicated to the individual, which may result in them examining their position.
- A senior executive is aware of a problem within the company and has a solution to address it, but there is no proper communication between the senior management. In this case he or she is unlikely to be confident of receiving backing for the solution.
This unsettling environment is unlikely to persuade an executive to stay and if they are not included in key or day-to-day decision making they will not feel part of the senior management, whether or not that was the intended outcome.
Dilution of company brand
While a PR disaster can result in long-term damage to a company’s brand, a gradual dilution of brand values can have a greater impact on the ability to retain key executives.
Brand dilution can happen for several reasons:
- The organisation grows and fails to focus on what the brand represents.
- The organisation merges with or takes over a rival and fails to manage the integration of the brands successfully.
- The organisation creates new company brands which may not inherit the reputation and of the established ones.
A successful senior executive must believe in what his or her business has to offer and the brand that represents it, as brand and reputation go hand in hand with the company’s success. Therefore if a key member of the management team no longer believes in that brand’s values, it may be a sensible time to move on.
In today’s competitive environment companies are under pressure to expand into new markets and must regularly evaluate their strategy and direction. However, that can result in a disconnect between members of the management team and the direction the organisation pursues. A senior executive who believes an organisation is drifting or heading in the wrong direction may look elsewhere for an employer they can identify with. Well known triggers for a change in direction include the appointment of a new chief executive or management team and the dramatic shrinkage or disappearance of the market for the company’s products (Kodak is an obvious example). In this situation a senior executive who is strongly linked with the direction the company had been following may not feel that they are best placed to push change through, especially if they are not convinced that it is needed in the first place.
Loss of support of board members
Losing the support of the company whether through internal or external politics, a change in direction, communication difficulties or the organisation’s level of success is an extremely hard situation to rectify and is particularly prevalent in public listed companies.
Once support has gone it is very hard to regain and even if a senior executive is able to save the situation with a change of direction or method, his or her position will only be sustainable with the backing of the board and the company as a whole. Without it, an organisation is unlikely fight for the senior executive to remain.
Whatever the reason for a senior executive’s resignation it may not be the disaster it might first appear, and most organisations recognise that they cannot expect to retain all their key executives for as long as they need them. Companies that have prepared for this eventuality are likely to emerge unscathed and could even benefit from it. However, they should endeavour to avoid the situation where an executive resigns because he or she was not aware of the opportunities for career progression and pay that existed within the company.
Andrea Ross, Managing Director
Robert Walters Singapore & Malaysia
Robert Walters Plc is one of the world’s largest professional recruitment consultancies with 43 offices in 20 countries. The Singapore office specialises in placing candidates on a permanent or contract basis in the following specialities: accountancy & finance, banking & financial services, engineering, operations, legal, human resources, information technology, sales & marketing, secretarial & support, supply chain, procurement & logistics.www.robertwalters.com.sg