What prompts senior execs to resign?
When a senior executive resigns, you must first establish how detrimental this really is for the company’s future. The senior management team is intrinsic to the identity and running of a business, but changes at the top can sometimes be beneficial. At the same time, attempting to retain an executive who has a strong desire to leave is generally counter-productive.
However, if a senior executive has valued qualities and persuading him or her to stay would not compromise his or her commitment to the company, a business may encourage them to reconsider their initial decision.
Establishing the primary motivations behind the resignation is not only a crucial part of this process; it can also help to prevent similar instances occurring again in future.
Our research team found a number of different reasons why an individual may resign and not all of them are obvious and clear-cut.
Although this is not an exhaustive list, these include:
- Progression opportunities
- New challenges
- Remuneration
- Importance of communication
- Company direction
- Dilution of company brand
- Company support
- Personal circumstances
Lack of progression opportunities
From our experience, opportunities for self development and progression, rather than money, are often the key factor behind a senior executive’s decision to move on.
Inevitably, successful individuals get to a point where they feel ready to embrace a bigger role with a larger remit and greater accountability. Commonly, businesses assign these executives responsibility for extra divisions, recent acquisitions or unique ‘one-off’ or special projects in an attempt to satisfy their ambitions.
However, some executives may have grander ideas. Instead, they may be looking for a move to a larger company, which operates internationally, or to progress to a more senior position with increased responsibility. We have noticed that gaining plc experience and then working for a FTSE 250 and possibly FTSE 100 company, is important to many senior executives. While businesses can offer promotions and more responsibility, it can be difficult for them to meet such high ambitions.
Not enough challenges
A company that functions efficiently and smoothly may have one unwelcome problem: key executives may grow disillusioned with doing the same tasks day-in-day out. Without new short or long-term challenges, there is a strong possibility that an executive may seek new challenges outside of the business. This is a fairly predictable scenario if the executive was initially hired as a ‘problem solver’. When there really are no clear new challenges available, companies and senior executives often agree that parting ways is the best outcome for both sides in these situations.
Poor remuneration
Senior executives sometimes cite unsatisfactory remuneration as the prime motivation for moving on. The first challenge for the business is to establish that the reason is genuine as it is often used as a smokescreen for the other issues discussed here.
If it is, organisations can take a number of approaches – depending on the executive’s individual preferences – to boost overall compensation packages without impacting the company’s day-to-day budget.
Executives may be prepared to accept a package incorporating a lower basic salary with potential for a much larger performance related bonus. In some cases, improved share options or long-term incentive plans (LTIPs) linked to performance objectives may also appeal. As an example, Robert Walters’ Executive Search division recently spoke to an executive who decided to stay with his existing employer after being offered an equity package that he had not anticipated would be available.
The importance of communication
Clear and consistent communication between the senior management team ensures senior executives are fully involved within a business. Without this, they are likely to feel excluded, undervalued and lack the confidence to make suggestions to company management. Poor communication can also cause feelings of insecurity and paranoia about their position within the business, all of which can lead top level managers to consider moving on.
By involving them in key decision making from day one and valuing their opinions, employers are more likely to make senior executives feel part of the senior management team and businesses are more likely to retain them.
Establish your direction
In an increasingly competitive marketplace, businesses are under constant pressure to re-evaluate their strategy and direction. This can create problems for senior management.
Over time, executives may become detached from the route that the organisation is heading in, while those that are prepared to run with the change may find the rest of the business associates them with the ‘old’ direction.
However, lack of action may cause other executives to believe that the organisation is drifting. If there is little desire from the rest of the company for change, senior managers without the power to make decisive change are likely to become frustrated.
Either way, it's difficult for executives with differing beliefs to the rest of the company to justify remaining with the business. In these circumstances, effective communication between executives and management can ensure both sides are fully aware of the facts before either makes a rash decision.
Keep your brand values consistent
To be successful, senior management must believe in the fundamental brand values of the business. As companies and their brands evolve over time, executives need to buy into this change. However, some may be unable or unwilling to do this. For example, a senior executive may have little belief in a new product or service or may not have the appetite required to rebuild a diminished brand. Although it depends on the exact circumstances of the situation, this may be a sensible time to part ways.
Loss of company support
A senior executive that loses the support of the company - be it through internal or external politics, change in company direction, communication difficulties or underperformance of the company - will find regaining it difficult. Even if he or she is able to develop a solution for the bigger problem, they will be unable to push this through without the full and committed backing of the Board and company as a whole. Losing company support is a particularly common problem for senior executives at public listed companies, which need to take shareholder opinion into account.
Personal circumstances
Personal circumstances can be the primary motivation for a senior executive to consider leaving his or her position. As an example, Robert Walters’ Executive Search division has helped senior managers who have decided against moves as part of wider company relocation, both within the United Kingdom and also abroad. Recently, we have seen a number of firms, including a FTSE 500 internet firm, relocate to Switzerland and many senior staff have been reluctant to follow.
Similarly, we have helped executives find new positions who wanted a shorter commute or to spend less time travelling as part of their role, with family commitments often pivotal to the decision. In the right circumstances, businesses have allowed executives to carry out a suitable portion of their working week from home in order to retain them. Long or short-term illness can also be a difficult barrier to overcome. In these circumstances, some businesses have employed affected executives in smaller advisory roles so that they continue to benefit from their expertise and experience, while at the same time reducing personal commitment.
Wake up to change
The success of a senior executive is aligned with the wider success of a company – depending on circumstances, their resignation may or may not therefore be welcomed by the business. If it is not, senior management should carefully consider the cause of resignation and explore the options available. Where appropriate, improved remuneration packages, greater opportunities for career progression and demonstrating a reasonable understanding for individual personal circumstances can all persuade executives to stay.
Where senior managers are not prepared to reconsider, the business does not need to suffer. Most organisations are realistic to know that the best executives are ambitious and are likely to seek new challenges in time. Employers that prepare for these circumstances and put contingency plans in place are unlikely to experience too much disruption when senior staff leaves.
However, while businesses should think long and hard before making rash decisions, a parting of ways may sometimes be in the best interest of both parties. For example, if an executive does not believe in or agree with a company’s change in direction or branding strategy or has lost the support of the organisation, a new appointment may be more willing and better suited to driving the business forward.