- Retaining executives in the company are critical to the success of business startups.
- A startup’s success in its first few years in the business is directly linked to the success of their executive retention plans.
- Business startups need to understand the basics of executive retention to create a successful retention plan for their own executives.
Starting a startup business is a very challenging endeavor. The harsh reality is that less than half of the businesses survive in the first five years.
Getting past the birthing pains of a business startup means that you need to hire the right executives to help your business grow. The right leaders will help maintain the organization’s culture and make it more conducive for collaboration, growth, and innovation.
The Challenge of Retaining Good Executives
Retaining good executives, however, is not an easy feat. Executive turnover can drain the strength of your startup business. It can even take away your company’s competitive advantage in the industry.
Research by Gilmore (2010) shows that nearly half of all newly hired executives are not hesitant to leave their positions within three years. The estimated cost of losing a mid-level manager is estimated at 1.5 times the annual salary while the estimated cost of replacing an executive manager is 3 to 5 times the annual salary.
Studies (Gilmore, 2010) show that one of the main reasons why executives leave is that there is a poor cultural fit between the executive and the organization. This lack of cultural fit also involves a misalignment between company values and that of their own. Other factors include the compensation package and the executive’s growth and development.
A startup’s success in its first few years in the business is directly linked to the success of their executive retention plans. If a startup’s executive retention plans are not successful, the loss of their executives will tend to diminish the company’s industry knowledge and resilience for the future. Thus, making it harder to compete with the faced-paced marketplace.
The Basics of Executive Retention
Executives who are satisfied with their position in your business startup will more likely stay in your company to help your business grow. To make that happen, companies need to understand the key components of executive retention before they start crafting their own executive retention plans:
Understand why your employees leave.
There is no substitute for the information you can gain in your own organization by merely figuring out why people leave. Consider conducting exit interviews. You can also have a three-month post-departure follow up by an independent firm to confirm the primary reasons for the executive’s departure.
Understand why your employees stay.
Gaining the perspectives of your own executives on why they choose to remain in the organization can provide valuable insight for your executive retention plan. Conducting focus group discussions for your senior executives will be a great start to springboard the creation of your retention plan.
Understand your organization’s job satisfaction level.
Job satisfaction is the primary reason why people stay in their current job. A periodic survey on the general satisfaction level of employees should be conducted to provide a basic understanding of the employee’s perspective. These organizational climate surveys will help you learn the trends and measure the impact of your programs and management.
Understand your industry competitiveness in compensation.
Your best executives are the ones that you should nurture and retain. This is why you need to make sure that even your business startup can keep up with the competitive compensation package of the industry,
Do something about it.
Your organization needs to be able to talk the talk and walk the walk. You need to develop, execute, and refine your executive retention plans based on your understanding of the needs of your employees. Addressing the main reasons on why your executives leave and creating a plan to prevent the same thing from happening in the future is essential to retain future employees.
According to the HR Exchange Network, creating executive retention plans for startups are derived from key management principles – Challenge, Communication, and Compensation:
Challenge: Creates a stimulating environment for executives.
1. Vision and Goal Setting
Executives want to be part of the big picture. They want to be in a position where they can make a significant difference with the company. It’s important to accurately communicate the startup’s vision and mission to your executives. Make sure that their performance goals are tied to the company’s mission. It will make their achievements more connected and valued in the company once these goals are realized.
2. Expectations of Executive Excellence
Great executives thrive in an environment that not only recognizes excellence but expects it from everyone in the organization. Learn to create a culture that will make your company a magnet for top performing employees. Your organization should earn a reputation for nurturing high-level performance by expecting executive excellence.
3. Creative License
A challenging environment for executives will offer not just the satisfaction of reaching tough goals but also finding newer and more efficient ways to reach them. Give your executives the power to come up with their own creative management style that will help motivate your employees and challenge them to exceed expectations.
Communication: Needs to be second nature to ensure the company’s success and retain its executives.
Having a good discussion with your executives is essential for empowerment and team building. Executives want their inputs to be heard, and a two-way dialogue between members of your organization’s executive management committee will allow new ideas and innovation to flourish in the company.
2. Positive Reinforcement
Positive reinforcement is known to encourage repeated desirable performance. One of the main reasons why people leave their jobs is because of a lack of recognition. Like many other employees, executives also want to be recognized for doing a good job. There are cases when honest praise is better than a raise. Giving financial incentives are important, but sometimes a pat on the back is also effective.
A good executive contributes a lot to the team – their education, experience, creativity, and energy. They need to work in an environment where they can fully utilize their talents, skills, and creativity. You need to show them the ropes around the company and at the same time, give them room to adapt and make the necessary changes that will help execute the company’s vision.
4. Involvement in Decision Making
Top executives need to be involved. They stay in companies where their voices are heard, especially when it comes to decision-making. You need to learn how to value the insights and opinions of your executives.
Compensation: Money does not necessarily secure an executive’s loyalty; a good compensation program does.
1. On Par with Industry Norms
A business startup may not have the capacity to exceed market standards on the salary of their executives. However, you can make your compensation package more competitive by having a better long-term plan on executive compensation and bonuses. To attract top executives and keep the current ones, motivators need to remain on par with industry standards such as salary and long-term incentives.
2. Long-term Bonds
An excellent compensation program also uses long-term financial bonds that will make it expensive for executives to leave before you want them to. Construct an attractive incentive package that will reward loyalty and longevity for your executives.
3. Performance Rewards
An excellent compensation package also rewards exceptional programs generously. If an executive exceeds high expectations, giving them appropriate performance rewards will help establish a good long-term relationship. Remember to provide top-notch performance rewards to your executives. It’s either you do it right, or you don’t do it at all.
Let us help your company find top-notch executives that will help grow your business.
Executive retention plans need to be part of an executive’s overall development plan to help ensure the success of your business in the future. Curran Daly and Associates are here to help you craft the best retention propositions for your executive hires. As one of the top recruitment agencies in Vietnam, we can help startup companies find the best executives for the right role, in the most efficient timeframe possible.
Executive Retention: Getting the Basics RIght (2019). Wyndmill.com. Retrieved 10 May 2019, from http://www.wyndmill.com/wp-content/uploads/2018/05/Executive-Retention.pdf
Executive Talent Retention: How to Recruiter-Proof Your Company. (2010). HR Exchange Network. Retrieved 17 May 2019, from https://www.hrexchangenetwork.com/hr-talent-management/articles/executive-talent-retention-how-to-recruiter-proof
Gilmore, D. C., & Turner, M. (2010). Improving Executive Recruitment and Retention. Psychologist-Manager Journal (Taylor & Francis Ltd), 13(2), 125–128. https://doi.org.ezproxy.upd.edu.ph/10.1080/10887151003776612
Malyshev, M. (2015). Getting over the hump. Smart Business Chicago, 12(4), 7. Retrieved from http://search.ebscohost.com.ezproxy.upd.edu.ph/login.aspx?direct=true&db=bsu&AN=103741970&site=ehost-live