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I work in the healthcare executive search arena and have the opportunity to recruit outstanding executive leadership for the country’s leading healthcare organizations. Outside of work, I am an avid sports fan, especially those big games when championships are on the line. Despite my best efforts to separate work and pleasure, my brain draws parallels that connect these two arenas, which is what happened on Monday night, April 7.

Perhaps you watched the final minutes of the Memphis/Kansas game. Despite having a nine-point lead with two minutes remaining, Memphis failed to close the game. They could have — and should have — won. But, something happened in the final two minutes that led to a Kansas victory.

ESPN analysts immediately speculated. They concluded that the collapse was attributable to poor coaching, a failure among players to execute or Memphis’ failure to communicate their plan effectively.

Then it hit me.

I saw the parallel between the championship game and the healthcare executive search arena. Just as Memphis let down their guard during the final two minutes and lost, I have seen an executive prematurely let his guard down following completion of the recruiting process.

Remember: Business plan execution is what matters; retention is critical to overall success. The first 12 months are when newly hired executives will voluntarily or involuntarily leave your organization due to a poor fit, strategic assessment or inability to execute. A newly hired executive leaving within the first 12 months — a costly financial move — is called a “mis-hire.”

Bradford Smart, PhD, author of “Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People,” concludes, “With an average base salary of $114,000, the average total cost associated with a ‘typical’ mis-hire is $2,709,000” — about 24 times the employee’s base compensation.

Losing the national championship in the final two minutes will stick with the players throughout their lifetimes. In business, costing your company or your shareholders millions of dollars can ruin your career.

If you’re trying to rationalize these amounts, consider the following: you recruited the employee at considerable expense; managed and assisted through their learning curve; and, adding insult to injury, you paid a severance to stop the pain. Plus, you incur the “hard” recruiting costs for the replacement employee and absorb additional costs during the ramp-up of the new leader.



Three Steps to Develop a Winning Retention Strategy:

1. Define and Measure: You control what you measure, and neglecting the 12-month retention calculation is a mistake. Many organizations measure hiring cycle time, number of open positions, diversity of candidates, internal versus external hires and more, but they fail to measure what truly drives business, retaining critical leaders. Based on more than 13 years of healthcare executive search experience, I believe the cost of a mis-hire to be close to 24 times the base salary. For discussion’s sake, however, let’s agree that the numbers are inflated, and we will take the numbers down to a mere 25 percent, which means that you’re still looking at a $1.2 million cost for the mis-hire of a $200,000 salaried executive! My experience shows two things: first, most companies do not have a retention strategy, and, secondly, a company’s mis-hire costs can be materially reduced.

2. Involve C-Suite and Board: The business and financial risks of executive mis-hires and misalignment can be as threatening to the viability of an organization as an operations failure or a major data security breach. Once you know your retention performance and costs, you will be able to define issues and develop communication and strategies for optimal success.

In their Harvard Business Review article, “Growing Talent as If Your Business Depended on It,” Jeffrey M. Cohn, Rakesh Khurana and Laura Reeves argue that corporate boards have traditionally underestimated the value of a robust leadership development and executive succession planning system in risk management. They suggest that steady attrition in talent leaves companies vulnerable to making poor decisions in any number of commonplace business scenarios such as an acquisition or sharpened competition.

3. Execute: Managing the individual’s integration into your company for the first 100 days will provide a strong foundation toward achieving long-term objectives. Ensuring success requires defining both a 100-day and 12-month plan, communicating regularly in the beginning weeks and knocking down obstacles to plan execution. Following the first 100 days, monthly and quarterly communication throughout the first 12 months further develops relationships, provides clear strategic direction and reinforces cross-functional interaction.

While baseball, football, basketball and other sports are a great escape from work, we often find parallels between sports and work. Retention strategies will have a direct impact throughout your organization. Defining a retention process, measuring the process and weaving it within the framework of operations will deliver results. The 2008 NCAA Men’s Basketball Championship Game shows us that in both sports and work, it is important to keep your guard up and play through the entire process before you celebrate victory.





Paul Frankenberg is president, CEO and principal in Nashville-based Kraft Search Associates, a leading healthcare retained executive search firm. www.kraftsearch.com



May 2008

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