Leadership Churn: What it is and How to Avoid It

Hiring executives comes with naturally higher stakes, with larger salaries, greater visibility, and more significant business impacts all on the line. As 40 percent of executives hired at the senior level are pushed out, fail, or quit within 18 months of their start date, retaining successful executives and avoiding leadership churn is something all organizations should aim for

What is Leadership churn?

The number of senior team members who leave an organization over a given period of time

• Calculated using a simple “churn rate” formula: (Leaders who leave / Total new leaders) X 100 = Leadership Churn Rate
• While the goal is to keep your churn rate as low as possible, it’s important to remember that this number doesn’t always tell the whole story.

Hidden Costs of Leadership Churn

The cost to replace an employee is approximately six to nine months of that individual’s annual salary

• When it comes to replacing someone with an executive’s salary these costs can be staggering
• There are also a number of hidden costs associated with leadership churn

It all Starts with Onboarding

Develop a comprehensive onboarding plan with proven best practices and technology that enables new leaders to start working toward their business goals from day one

• Focus on three key areas: the organizational, the technical, and the social aspects of your business
• Organizational: Show new hires how the logistics of the company function
• Technical: Clear goals and expectations for the new hire
• Social: Connect new hires with people from different teams and varying seniority levels

Wasted time

When an employee at the leadership level leaves, a business must account for the cost of the time spent in recruiting, interviewing, hiring, and onboarding.

• If your business doesn’t allocate sufficient resources to the onboarding process, there’s an increased chance the new executive will exit the company – wasting time spent on the inefficient onboarding program

Reducing Leadership Churn with Technology

Advances in technology mean you can boost your onboarding success while reducing time and effort spent

• Transformative technologies like ThoughtExchange streamline the onboarding process
• By having a standardized framework, setting clear expectations, and using technology to your advantage your organization can reduce leadership churn and increase profit

Decreased productivity

No matter how talented a new hire is, nobody can reach maximum productivity on their first day of the job.

• According to Harvard Business School, mid-level managers need at least six months to reach their breakeven point (BEP) – or the point where the company is earning back the time and money invested in hiring the individual.

Lower employee morale

Unsuccessful transitions result in 15 percent lower performance by employees reporting to the individual, with lower-level employees 20 percent more likely to be disengaged or leave the organization.

• A high leadership churn rate means that the executive team is composed of individuals who are consistently less-experienced with the intricacies of the business.

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