Why Leaders Leave: Culture Lessons from Financial Services Firms

By Michael F. Milad, Ph.D., Levi Segal and Ellice Johnson

November 2023

Authors

The stakes are high when a new senior leader is selected. For the company, the process represents a major investment of time and resources. For the newly hired executive, joining a new organization represents an opportunity to advance their career and professional development. These transitions can be challenging for both parties; and many executives struggle to find their footing and leave the role, even when they are internal appointments.

To dig deeper into the reasons why leaders leave and what can be done to enhance the odds of new leaders sticking, we studied the experience of seven financial services companies and nearly two dozen current and former industry executives who joined or left one of the firms within the previous five years. We analyzed the cultural styles of the companies and the individual styles of executives. We then interviewed executives about their transition and reasons for leaving or staying. We identified some interesting themes.

At the individual level: Executives were more likely to leave organizations when they felt there were limited opportunities to learn and grow or when their style didn’t align with the organizational culture. The greater the lack of alignment, the more likely the executive was to depart when there was little effort to acknowledge and bridge the gap.
At the organizational level: Organizations that were more flexible, learning-oriented and open to change were overall more likely to retain executives, even when executives’ styles differed from the culture.

Interviews revealed a link between culture and growth opportunities. At companies with less flexible cultures, executives said they felt constrained and less able to grow and have an impact. One executive explained, “The company was change averse, which made it extremely difficult for me to do my job. I was unable to attain appropriate results because of the company’s unwillingness to adapt.”

Research finds that teams are better off when individuals with unique perspectives and styles are added and able to influence established ways of thinking. Especially when leaders are consciously trying to shift prevailing mindsets and ways of working, bringing on people who don’t fit the mold can help move the organization in the new direction. However, to get the most of these diverse perspectives, companies and individual leaders must take steps to ensure a smooth transition and provide ongoing development opportunities.

Organizations: take a hard look at the culture

Leaders who want to hire and retain the best talent should examine their culture and not assume that the culture of the past will engage and motivate people for the challenges of the future. Peter Drucker once said, “the greatest danger in times of turbulence is not the turbulence; it’s to act with yesterday’s logic.” Culture must be cultivated and managed. Even if some degree of control and compliance is required, companies that are able to cultivate a more flexible, adaptive culture will be best able to retain the people they invest in recruiting. They should do the following:

Ensure culture is aligned with strategy to build a high-performing organization. The right culture can capture the imagination and energy of people in the organization and ignite their potential, so it’s important that the culture supports — rather than works against — the objectives and requirements of the business. Given the pace of change today, most organizations need to increase their flexibility and openness to change to achieve their aims. Financial services companies in our study that were more open to change and more willing to embrace differences had greater retention compared to those where executives were more likely to leave. More flexible organizations tend to be more open, exploring and learning, and there is an emphasis on collaboration, relationship building and growth.
Model and support cultural flexibility. The CEO and other top leaders can help shift to a more open and agile culture by consciously modeling and influencing the behaviors they want to see, for example, encouraging debate, seeking out diverse perspectives, being inclusive and rewarding new ways of working. They can support the onboarding of new leaders, helping them understand the characteristics of the current culture, and provide a clearer roadmap for future growth and learning opportunities.
Reinforce cultural flexibility through organizational design. To accelerate the shift to a more flexible culture, a company’s structures, systems and processes need to support the change. Performance management, training and organizational structures all should support greater agility.

Executives: take control of your onboarding

Leaders also need to be flexible and open as they transition into their new role. Their self-awareness and cultural adaptability — the ability to recognize culture traits and adapt to a style that’s different from their own — will be essential to making an impact in a new environment. The leaders we interviewed said building relationships, being open and curious, understanding one’s own unique contributions, and delivering results have been most important to building a strong platform for long-term success. Here is their advice:

Build relationships. Take the time to have coffee chats, meet with people outside of and within your department to establish relationships and build trust; learn about the job from different perspectives.
Study the company culture. Set up informational interviews or ask questions during your own interview about the company’s culture. What values do leaders espouse? How do people describe the culture? What are the traits of the most successful leaders? Consider the ways your style does and doesn’t align with what you have heard.
Be open and curious, have a learning mindset. Ask a lot of questions, be curious and don’t be too quick to judge.
Understand how your skills fit in. Consider whether the company will be a good fit longer term based on how your skills support the current and future direction of the business.
Deliver results. Financial services firms are always competitive and performance driven. Have a results orientation and go in ready to get things done.

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Financial services firms — and many other kinds of companies — often recruit leaders who bring different skills, perspective and experience, sometimes with the goal of driving organizational change or increasing innovation. To increase the odds that these new leaders will be successful, organizations will support the onboarding and ongoing development of the new leader and executives will pay attention to culture as part of their transition.