One of the biggest lessons that I have learned as an executive recruiter is the importance of timing. While it is possible to identify, attract, and hire exceptional leaders at any time of year, there are four trigger events that make executives more likely to leave. These events have a significant impact on recruiting and on retention.
1. A new CEO or a new supervisor
Unless a toxic leader is being replaced, an executive is always more likely to leave after a CEO/supervisor change. A new CEO usually wants to put his or her stamp on an organization. This desire typically leads to changes to the organization’s structure, strategy, and culture. Some executives will be removed or forced out. Others will wonder if they will be next. Of those that remain, some will not like or agree with the changes and the direction of the business.
When there is a CEO change, everyone in the company is impacted, including those who don’t report directly to the CEO. For those who are lower on the org. chart, a change to their supervisor will also make them more likely to leave.
No matter what level someone is at, he is even more likely to bolt if he is passed over for a role. For example, imagine that you are a Vice President of Human Resources, and your boss is your company’s Chief Human Resources Officer. Your boss leaves, and your company brings in a new CHRO from the outside (or promotes one of your peers instead of you). If that happened to you, wouldn’t you start to look elsewhere?
2. A liquidity event or a significant M&A event
An executive is more likely to leave after a liquidity event or a significant M&A event. A liquidity event is a merger, acquisition, initial public offering (IPO), or other event that allows a company’s founders, investors, and key employees to cash out some or all of their ownership shares.
While some executives choose to stay with a company after a liquidity event, many view this event as “the end of the road” with their employer. Once someone has cashed out, he is much more likely to consider working elsewhere, even if he has been very content up until that point.
A significant M&A event that does not result in liquidity can also make someone more likely to leave. For example, maybe an executive is at a company that has made a big acquisition. Similar to a CEO change, this event will likely lead to significant changes to the organization’s structure, strategy, and culture. Again, some executives will be removed or forced out. Others will wonder if they will be next. Of those that remain, some will not like or agree with the changes and direction of the business.
3. A one-year work anniversary
An executive is more likely to leave after reaching a one-year work anniversary. This trigger event is definitely not as significant as a CEO/supervisor change or a liquidity/M&A event. However, there are two main reasons why the one-year anniversary is a key event.
First of all, it doesn’t look good to leave a job less than one year in, especially when you are an executive. However, once you hit the one-year mark, it often seems more acceptable to make a move. Secondly, there are usually financial penalties if you leave a company before completing your twelfth month.
For example, executive compensation packages typically include equity, and there is usually a one-year cliff before any of the equity vests. So, if you leave before your one-year work anniversary, your equity is worth nothing.
As another example, many executive compensation packages include sign-on bonuses. However, you typically have to pay the bonus back to your employer (this is known as a clawback) if you leave before your one-year work anniversary.
4. An annual bonus payout
An executive is more likely to leave after receiving an annual bonus payout. Similar to forfeiting equity if you leave before your one-year work anniversary, leaving before an annual bonus payout means you will leave money on the table.
Many executive compensation packages include significant bonuses that are paid out at the end of a company’s fiscal year. Leaving before that date would require someone to forfeit their entire bonus. For example, when I worked at Heidrick & Struggles (one of the world’s top executive search firms), bonuses were paid out in March every year. Inevitably, some of the firm’s Partners left each year in April or May, i.e. right after getting their annual bonus.
Summary and Final Thoughts
The four trigger events highlighted in this article have a significant impact on recruiting. The best times to try to recruit an executive are after a CEO/supervisor change, after a liquidity/M&A event, after a one-year work anniversary, or after an annual bonus payout. Of course, every company should always be trying to identify, attract, and hire exceptional leaders. However, timing matters, and these trigger events definitely increase your odds of convincing someone to leave their current role.
The trigger events highlighted in this article also have a significant impact on retention. A company’s people are most likely to leave after a CEO/supervisor change, after a liquidity/M&A event, after a one-year work anniversary, or after an annual bonus payout. While your company should always be striving to create an excellent work environment, it’s even more important to do so right after these trigger events- when someone is much more likely to leave for another opportunity.
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About the author: As the Founder of Stronger Talent, Pete Leibman recruits exceptional leaders for innovative sports, fitness, and wellness companies. Throughout his career, Pete has helped clients recruit exceptional leaders at the Board, C-Suite, Senior Vice President, Vice President, General Manager, Managing Director, and Director levels. Pete’s work has been featured on Fox News, CBS Radio, and Fortune.com, and he is the author of two books and over 250 articles on career management, peak performance, and executive recruiting.
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