Your company is emerging from challenging market conditions and is looking forward to improved profitability when a senior executive announces their resignation. What do you do?
A resignation at director level can disrupt the way the company functions while the process of replacing them can take time. However, if you can understand what makes a senior executive leave, you may be able to take steps to pre-empt their decision.
Lack of career progression
One of the most frequently cited reasons why an executive may leave can also be the hardest for you to address, namely that there is limited opportunity for progression. But there are may be ways for you to offer the executive the challenge that he or she is seeking without upsetting the balance of the company, or throwing existing plans off course.
For example, could you give them operational responsibility for other parts of the company or – if your company has recently taken over another business - could they be given responsibility for the integration of relevant parts of the business?
Alternatively, are there one-off or special projects that would give the executive new challenges? As long you manage this correctly it can be a positive solution for both parties and is unlikely to be viewed as a ‘consolation prize’.
If you can understand what makes a senior executive leave, you may be able to take steps to pre-empt their decision.
Absence of new challenges
Your company may be functioning efficiently and smoothly but if your key executives are bored you may find they start looking elsewhere. Unless your business faces new challenges which the executive’s skills and experience are ideally suited to take on, it may be better for both you and the executive to part company.
Remuneration
Pay and remuneration levels are rarely the main reason why senior executives resign, but they can still be a factor that tips the balance for someone who is feeling unchallenged or undervalued. If it is the sole or primary motivation, you may have some room for manoeuvre if you want to retain the executive. Start by finding out whether he or she:
- expects a higher salary or would accept a lower salary and larger bonus;
- values particular benefits;
- wants a higher level of remuneration and a recognition of the value of their contribution.
If the executive is comfortable taking a higher bonus, one solution might be to offer shares in the company through LTIPs (long term incentive plans), linked to performance objectives.
Lack of clear communication
Clear internal communications are important for any company and can be key to fostering a team spirit. However, if there is no clear communication strategy or if it isn’t well managed, you may find that executives become unsettled. Issues around communications can be relatively straightforward to resolve as long the team you have in place devising the communications strategy and/or implementing it are ready to acknowledge that there is room for improvement.
Company direction
In today’s competitive environment, companies are under pressure to expand into new markets and must regularly evaluate their strategy and direction. However, you may find that, as a result, there is a disconnect between certain members of the management team and the direction the organisation is taking. A senior executive who believes an organisation is drifting or heading into trouble may look elsewhere for an employer he or she can identify with. This can be hard to resolve if the majority of senior management believe in the company’s strategic direction.
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 your key executives.
Brand dilution can happen for several reasons, such as because a company grows and fails to focus on what the brand represents; because it merges with or takes over a rival and fails to manage the integration of the brands successfully or when it creates new company brands which may not inherit the reputation of the established brands.
If the executive cannot buy into the changes or no longer believes in your brand strategy, it may be a sensible time for them to move on. Employers who prepare and put contingency plans in place should at least be able to minimise the disruption caused by a senior member of staff leaving.
