Perspective #03 Executive failure is often diagnosed too late

The hidden system that decides who survives — and who gets blamed.

Senior executive exits are often explained in personal terms. The language of failure tends to settle quickly around one individual: the wrong hire, the wrong style, the wrong judgement, the wrong fit. That reading is sometimes justified, but it is often incomplete. Executive failure usually emerges at the point where individual behaviour, organisational tolerance, board expectations and performance pressure collide. By the time one person becomes the visible problem, the underlying strain has often been building for some time.

Research on executive hiring supports part of this picture. Leadership IQ reported that a large share of new hires who fail do so for behavioural rather than technical reasons, including poor coachability, low emotional intelligence and motivational problems (Leadership IQ, 2006). That matters because it shifts attention away from CV logic alone. Senior leaders do not usually fail because they lack baseline competence. They fail when their way of operating becomes costly in a specific organisational environment.

The wider market context has made this more fragile. Executive tenure across developed markets has been under pressure for years, shaped by investor expectations, faster performance cycles, governance volatility and lower tolerance for visible drift. The time available to build trust is often shorter than the time required to build it properly. That changes the operating conditions of leadership. A leader may be technically capable and still lose position if the organisation’s demand for reassurance, speed or symbolic accountability outruns its willingness to absorb tension.

Employee data adds another layer of distortion. Internal surveys often report high levels of satisfaction, sometimes above 80 per cent. That can create an impression of stability and managerial success. At the same time, Gallup’s long-running global data has remained far less reassuring. Across more than 100 countries and over 100,000 employees, only around one-fifth to one-quarter of workers globally describe themselves as actively engaged, with European figures lower still, around 14 per cent in recent reporting (Gallup, 2023). The gap between internal satisfaction results and broader engagement data deserves careful reading.

Part of that gap is methodological. Part of it is behavioural. Employees do not answer every survey as detached observers. They answer within a real relationship to hierarchy, anonymity, fatigue and perceived consequence. Some will choose the safe answer. Some will use moderate language where direct criticism would be more accurate. Some will disengage quietly while continuing to produce formally acceptable responses. That means satisfaction data can tell an organisation something useful, but it cannot be treated as a transparent reading of trust, commitment or organisational health.

This matters because leadership decisions are often made on these imperfect signals. If the board or executive team governs on formal positivity alone, it may miss the conditions under which disengagement, loss of confidence or reputational weakening are already advancing beneath the surface. The problem is not that the data says nothing. The problem is that it often says less than decision-makers think it says.

The financial cost of executive failure is substantial and relatively easy to describe. Harvard Business Review has estimated that replacing a failed senior hire can cost two to three times annual salary once recruitment, severance and lost performance are included (Harvard Business Review, 2019). The deeper organisational cost is harder to measure and often more important. Strategies stall. Cross-functional trust weakens. Projects lose continuity. Investor confidence can be affected if turnover starts to signal instability rather than planned change.

That is why a high-profile departure rarely functions as a private personnel matter. When a senior finance leader leaves after a short tenure, the market does not see only a resignation. It also reads the event as information about internal coherence, board confidence and governance quality. The interpretation affects credibility even before the reasons are fully known. In that sense, leadership turnover is both an operational event and a public signal.

Organisations often try to learn from these moments retrospectively. Exit interviews are one of the most common tools used for that purpose. In principle, they should help identify patterns, weak points and preventable losses. In practice, their value is uneven. Departing employees are rarely in an ideal position for full candour. Some want to leave cleanly. Some are tired of repeating themselves. Some assume nothing will change. Some do not trust the process enough to be fully specific. SHRM has noted that relatively few organisations analyse exit interview data systematically enough for it to function as a serious diagnostic tool (SHRM, 2023).

That leaves many firms relying on hindsight rituals rather than early diagnosis. They can explain what has already happened, but they often do little to identify where credibility, fit and trust are eroding before turnover occurs.

This is where behavioural and credibility analysis becomes more useful. Its value is not that it predicts every failure. No serious method can do that. Its value is earlier detection of the conditions under which failure becomes more likely: misaligned expectations, narrowing trust, weak behavioural fit, communication patterns that reduce influence, or leadership styles that become brittle under pressure. These are often visible before the formal crisis arrives.

The practical question for organisations is therefore not only who failed. It is what the system had already stopped seeing, what signals were softened or ignored, and how long the diagnosis arrived after the damage had already begun.

Sources

Leadership IQ (2006). Why New Hires Fail. Washington, D.C.: Leadership IQ.

Russell Reynolds Associates (2023). The CFO Exodus: Exploring Financial Officer Turnover in Europe (2020–2023).

Heidrick & Struggles (2022). Board Monitor Europe 2022.

Gallup (2023). State of the Global Workplace Report.

Harvard Business Review (2019). The High Cost of a Bad Hire.

Society for Human Resource Management (2023). Exit Interviews Toolkit.

OECD (2024). Employment Outlook – Executive Tenure Trends.

Adidas AG (2024). Annual Report 2024 – ESRS S1 Own Workforce (pp. 279–280).