As the economic landscape continues to evolve this year, a standoff has emerged between employers and executive-level candidates: employers need talented, flexible executive leaders and those same leaders are looking for stability amidst a changing market. This is especially true when considering factors like elongated private equity hold periods, high interest rates impacting the housing market and shifting professional priorities coming out of the COVID-19 pandemic. As a result, employers are getting creative in their compensation offerings in an effort to attract top talent, whether through increased salaries to mitigate increased relocation and travel expenses, enhanced benefits packages or modified working arrangements.
As the delta between employer and executive wants widens, one solution gaining traction is the utilization of interim executives to address current organizational needs while long-term strategies are being built. And while interim executive services often do provide the immediate relief organizations need, the differing wants of today’s employers and executives also need to be solved for.
How High Interest Rates and the Housing Market Are Impacting the Mobility of Executive-Level Talent
A volatile housing market is playing a key role in the decision-making process for executive-level candidates. Rising interest rates have led to increased mortgage costs, minimizing executives’ willingness to relocate, especially when it involves moving their families and purchasing a new home. These costs, combined with the potential loss from selling an existing property in the current market, add a layer of financial risk for executives considering a career move right now.
Many executives made the decision to move away from their offices and closer to their extended families during the pandemic. And interest rates were supportive of those moves. In 2020, a 30-year fixed mortgage interest rate was 3.1%, dropping to 2.96% in 2021. In 2023, the average 30-year fixed mortgage interest rate jumped to 6.81% and increased to over 7% in May 2024. As more employers began calling people back onsite, it revitalized the concept of super commuting, where professionals travel three or more hours to get to and from work. For some, traveling to work helps maintain their lifestyle and is a better option than relocating.
To address today’s economic barriers to accepting a new job, companies are not just bumping up salaries; they are also exploring creative solutions like offering temporary housing allowances or assistance with real estate transactions. By solving the direct concerns related to the housing market, employers can make the prospect of relocating for a new role more appealing for top executive talent.
How COVID-19 Continues to Impact Executive Priorities When It Comes to Work
S&P Global recently reported that the average private equity hold period for a portfolio company increased to 7.1 years in 2023. This has prompted many executives to stay put until an exit occurs in order to receive their payouts—and it is contributing to the overall lack of movement among executive talent today. In addition, widespread remote work opportunities have allowed executives to settle into new routines and, in some cases, move closer to their extended families. With a renewed focus on work-life balance and increased flexibility, many have struck a level of comfort and balance in their current roles, making them less motivated to disrupt their routines by seeking out new opportunities.
Now, as businesses implement return to office policies or require relocation for new roles, professionals are increasingly taking these factors into consideration. A recent Vaco Talent Pulse Report found that of over 23,000 professionals polled, 96% of respondents prefer a fully remote or hybrid working arrangement. This is causing employers to consider offering roles that incorporate flexibility, including remote work options or flexible schedules to remain competitive, and it is becoming a critical component of the required benefits package to successfully attract and retain high-level talent in today’s market.
But even with a competitive benefits package, executives are increasingly cautious about changing positions. The financial stability and perceived opportunity for growth is strong enough with their current employers that the potential benefits of a new role are overshadowed by these more essential priorities.
How Employers Are Adapting to Attract Top Talent
In response to the standoff in executive mobility, increasing compensation has become a frontline strategy for employers. This approach helps offset the financial implications of moving, particularly in a strained housing market.
But salary hikes alone may not address broader concerns of executive leaders, such as the desire for stability and meaningful work-life balance. While higher pay may initially attract candidates, it is not the guarantee it once was. Employers are now realizing that a competitive salary must be part of a more comprehensive benefits package that addresses executive needs holistically. This includes considerations like long-term incentives, retirement plans and family benefits.
With longer private equity hold periods, executives working for PE-backed organizations are either handcuffed to their current roles, waiting for their payout, or need a heavier equity package to incentivize them to move. Given the current economic and financial landscape, where exits are less guaranteed, employers must question if equity alone will be enough of an incentive for an executive to make a move right now. Instead, employers can consider offering a comprehensive cash compensation package for new executives to get the talent they want. This would include stability in the form of a competitive base salary, short-term incentives, like a signing bonus and/or an end-of-year bonus, and long-term incentives, like profit sharing and/or equity. Understanding how all forms of compensation play together to influence an executive’s decision-making process in the current market is critical when pursuing top talent resistant to make moves right now.
By combining salary enhancements with a robust benefits package, employers are generating more enticing offers for experienced, highly-sought-after executives.
Enhancing Benefits Packages: A Game-Changer for Attracting Executives?
Employers now recognize that an attractive salary is just part of the equation to entice executive leaders, where enhancing their benefits package is becoming a key differentiator in a competitive market. These packages are tailored to address the specific lifestyle and career goals of executive candidates. Elements such as comprehensive health insurance, retirement contributions and performance bonuses are now all but standard and expected.
Companies looking to get a leg up on the competition are going beyond these basics and offering first-of-their-kind sweeteners. A recent Business Insider article highlights the introduction of creative offerings including unlimited paid time off, wellness programs, education allowances, commuting support and even housing assistance.
By emphasizing a holistic approach to employee well-being and career development, these enhanced benefits packages serve as a powerful tool for attracting and retaining executive talent. They signal to prospective leaders that the employer values their overall satisfaction and long-term partnership, which can be a decisive factor in a decision on whether to join a new company or stay with a current employer.
How Interim Executives Can Bridge the Gap
The concept of interim executives is gaining traction as organizations seek immediate leadership solutions, sometimes without the need of a long-term commitment. In fact, CFO Dive recently reported that companies are turning to interim financial leadership more frequently, with requests for interim CFOs increasing by 46% in 2023.
Interim executives act as crucial connectors between current organizational challenges and their future goals, which often include mergers, acquisitions or significant strategic shifts. The benefits of an interim executive are two-fold: companies gain the expertise they need at a crucial time without the pressure of committing to a permanent hire, while executives get to enjoy flexibility and a new variety of challenges. For companies, the use of interim executives allows for continuity in leadership and helps maintain, or build, momentum across critical projects. It’s a strategic move that offers agility in times of transformation or uncertainty, making it an increasingly popular choice in the current economic landscape.
In addition, interim executives serve as impactful mentors to the team by sharing their valuable knowledge and expertise that often goes on to influence the company long after their contract ends. By filling leadership voids quickly and effectively, interim executives ensure that a company can maintain operational efficiency and gain a competitive edge, making them an indispensable solution in today’s fast-paced business environment.
In Closing
The standoff and mutual frustrations between hiring companies and executive-level talent are shaping this year’s headlines. When reflecting back on 2024, this will undoubtedly be a defining theme in executive search and the job market.
As companies adapt and innovate their approach to executive recruitment, the key will be to balance immediate needs with long-term goals, creating an environment where both employers and executives can thrive. By addressing the root causes of the standoff and implementing thoughtful, forward-looking strategies, organizations can bridge the gap and move towards the future—one that is characterized by a mutual sense of stability and a refined take on productivity with measured success.