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The 4 Biggest Mistakes New Executives Make One study found a 50 percent chance that new executives will leave the organization within the first 18 months. Here are four of the biggest reasons why.

By Keith Johnstone

entrepreneur daily

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Finding and hiring proven, talented executives who can lead your company into the future is a difficult task. These individuals' success or failure not only impacts revenue and profits, but a company's organizational morale and health. Consider:

  • A PwC study tracked the succession plans of the world's largest 2,500 public companies from 2000 to 2014 and found that forced CEO turnover cost shareholders an average $1.8 billion.
  • When Barnes & Noble fired CEO Ronald Boire last August, after he spent less than a year on the job, the company's stock price plummeted 13 percent.

Related: 4 Blunders That Can Damage Your Executive Presence

Despite the understanding that boards, investors and private owners likely have of the consequences of poor executive-hiring decisions, the turnover for new executives is still occurring at a startling rate.

In fact, the Harvard Business Review noted a 50 percent chance that new executives will leave the organization within the first 18 months. While there are a variety of reasons for this, including poor cultural fit, unrealistic performance expectations and poor job design, new executives share much of the blame.

Over the last decade, our recruiting company has learned that a large percentage of executive turnover is due to new executives making four common mistakes. Here they are, and some ideas on how to mitigate them:

Underestimating institutionnal knowledge

When a senior leader is hired, he or she often feels pressure to enact changes and make a personal mark immediately. The Harvard Business Review described a newly hired Fortune 100 vice president of corporate training who, in his first meeting, outlined a radical change. Unbeknownst to this new hire, the same idea had been proposed by his predecessor and had already been shot down by senior leadership.

Acting too quickly is common for externally hired CEOs. McKinsey & Company found this to be the case when it analyzed large swaths of data, including a survey of 600 CEOs who'd left S&P 500 companies. The consulting giant found that externally hired CEOs it looked at were 18 percent more likely to conduct organizational redesigns than their internally hired peers.

To avoid making such mistakes, new executives should begin by asking, "What needs to get done?" instead of, "Here is what I want to do." Soliciting feedback from senior executives who have years of institutional knowledge will only increase a new exec's chances of success.

Related: 10 Costly Mistakes Business Leaders Make on Twitter

Failing to over-communicate the company vision and mission

Having a clear mission statement and vision is a universally recognized requirement for a company's success. And that statement can actually be short and simple: Pinterest, for instance, uses less than 20 words for its billion-dollar company: "Help people discover things they love and inspire them to go do those things in real life."

A mission statement can also be a personal one for the executive himself (or herself). HBR studied 200 global CEOs,and found that having a sense of purpose -- and being able to instill it in others -- is a quality consistently found in the best-performing CEOs. When a new executive comes on board, it's important that he or she over-communicate a personal vision and mission. Reason: It directly correlates to engagement and success.

As P&G CEO Alan G. Lafley once stated, "Excruciating repetition and clarity are important: Employees have so many things going on in the operation of their daily business that they don't always take the time to stop, think and internalize."

Engagement, of course, is a crucial factor: Gallup analyzed 49,928 business units across 49 different industries and found that when their employees viewed their contribution to the organization more broadly, there were positive, measurable results: They were more likely to stay, to take proactive steps to create a safe environment, to have higher productivity and to connect with customers to the benefit of the organization.

Interviewed on the same topic, McKinsey consultant Carolyn Aiken noted that, "People will go to extraordinary lengths for causes they believe in."

Many successful executives also credit having their personal mission statements as a guiding principle for their success. For example, Denise Morrison, CEO of Campbell Soup Company, has quoted her own mission statement as: "To serve as a leader, live a balanced life and apply ethical principles to make a significant difference."

Expanding on her statement, in an interview, Morrison said, "The personal mission statement was important for me because I believe that you can't lead others unless you have a strong sense of who you are and what you stand for."

Creating a culture of fear, through reckless firings

When a new executive assumes power, anxiety can take root among employees wondering if their livelihood is secure. Granted, there are going to be scenarios where firing and laying people off is necessary, but it is critical for new executives to handle this delicately -- measure twice and cut once, so to speak.

So, if you're that new executive and have heard that a certain employee is a liability, be wise enough to observe him or her in action first-hand before asking them for a resignation.

In short, a culture of fear has been proven to hurt overall company profits. A study by BMC Public Health found that healthcare expenditures at high-pressure companies studied were nearly 50 percent greater than at other organizations. In fact, the American Psychological Association estimates that more than $500 billion is wasted due to workplace stress.

While there are always going to be moments when you will need to light a fire in someone, new executives who demand excellence without unnecessarily instilling fear will have a better chance at success.

Making poor hiring decisions

All great executives know how to delegate and build a team of trusted advisors. For new executives, the ability to hire a great team will make or break their ability to succeed. Don Fisher, the late founder and CEO of The Gap, said that even after several decades of hiring, he made the right hiring decisions only half of the time.

Just as intriguing was his statement about his knowing whether a hire was a good (or bad) decision within two weeks of that person starting the job. Fisher added that he urged swift action when the fit wasn't right.

The CEO was hardly unique in this respect: Glassdoor has noted that a staggering 95 percent of executives surveyed have admitted to making bad hires every year. With less than 5 percent unemployment out there today, current candidates in the market may be less talented overall, making executives' hiring task even harder to get right. So, investing in a state-of-the-art recruiting process that is structured and rigorous is critical.

Related: The Biggest Culture Mistakes These 6 Business Leaders Made and How They Bounced Back

In today's rapidly changing economy, it's increasingly difficult for newly appointed senior executives to succeed. By understanding the most common reasons for failure, new executives and the companies that hire them can mitigate these risks and increase their chances of success.

Keith Johnstone

Head of Marketing, Peak Sales Recruiting

Keith Johnstone is the head of marketing at Peak Sales Recruiting, a B2B sales recruiting company, launched in 2006.  Johnstone leads all marketing activities and has successfully grown revenue and lead-volume every quarter. He's played a key role in driving Peak Sales Recruiting to become known in its industry for its success rate of 50 percent above the industry average. The company works with a wide range of clients, including boutique, mid-size and world-class companies, including P&G, Gartner, Deloitte, Merck, Taser and others. 


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