Partner Article

Failed senior appointments causing SMEs losses in growth

Small businesses across the UK are experiencing a loss of growth and opportunities as a result of failed senior appointments, according to a study from executive search and interim management firm, Intramezzo. The report, titled A Board Fit for Purpose, found 90% of Venture Capital (VC) and Corporate Venture Capital (CVC) fund managers have experienced an unsuccessful executive hire, which they cited as costing anywhere between 10% and 60% of lost annual growth in a portfolio company.

In addition, 80% of respondents have always or frequently failed to achieve expected business plan forecasts because of failed appointments, whilst 73% also reported missing commercial milestones. Lesser cited, but no less severe, ramifications include failure to attract further funding (70%), staff leaving (52%) and delayed exit plans (48%).

Georgina Worden, Client Director at Intramezzo, comments: “Senior hires can make or break a business, not only in terms of initial investment support, but also when it comes to reaching business goals or maximising opportunities. If the UK hopes to find the next tech unicorn, organisations must invest in the necessary resources to aid the executive hiring process. Finding the right person to take a company where it needs to go isn’t an easy task, it cannot simply be a question of culture, for example. Mapping a person’s experience and skills against the business’ vision and needs is integral. Thankfully, an increasing amount of organisations are giving talent capital equal weighting to investment capital. These companies are set to thrive in the years ahead and gain a competitive advantage across the market.”

The report surveyed 100 CVC and VC fund managers from around the world and asked for their views on how they make their investment decisions. It found that while organisations do their best to avoid failed appointments, 84% of investors say finding people with entrepreneurial experience, mind-set, and cultural fit is the biggest issue when searching for talent. It also found that over half of respondents (67%) felt that distraction at management level caused by the upheaval associated with failed appointment has frequently led to lost opportunities.

Worden continues: “While considering a candidate’s entrepreneurial history is vital when hiring, it is also important to think about what traits the leadership team needs as a whole. For instance is the CEO’s entrepreneurial passion complemented by the COO’s commitment to the day-to-day running of the business? A lack of just one of these assets could be detrimental to success.”

“The processes used to find senior appointments should be as rigorous as possible and should constantly be reviewed and improved to attract candidates who enhance the team by bringing something different to the business. Setting ambitions high and looking beyond existing networks, geographies and known sectors in order to find those world-class individuals who can make the biggest impact is key. As long as organisations are clear about what good looks like to them, then the risk of failed appointments will be much reduced.”

The full report, A Board Fit For Purpose, can be downloaded here.

This was posted in Bdaily's Members' News section by Georgina Worden .