Unable to retain high-cost CXOs, companies look at ‘mutual separation’

Companies across sectors are increasingly finalising “mutual separation” agreements for top C-suite executives who were hired on lucrative packages but are no longer considered essential to new growth strategies. Exits are being planned with lead times of 12-18 months at large companies. Startups, too, are offering a mutually acceptable exit runway to ease out CXOs and CXO-1 talent.

While exit deals are struck at the topmost level in utmost secrecy, outgoing executives are given a negotiated package with all benefits but without key responsibilities, said industry insiders. These executives are reassigned from key projects and released at a short notice when the executive is up for an assignment.

“These are different times where the employer and employee do not want to burn bridges. Many a time the talent is good, just not a right fit for the organisation. Pay packets are huge, so organisations can’t afford to ignore that aspect too. Mostly, organisations show empathy in letting the talent have a dignified exit. Talent being scarce, they do land up at some other place,”” said the VC of a consumer goods company.A senior executive at a top conglomerate’s consumer division was given 6 months to find another role. “He landed a good job at a global social media entity and is doing well. He wasn’t a good fit in our entity, but it has worked well for all of us,” said the CEO requesting anonymity.

Leadership consultants said there is a 4-fold rise in senior talent who are employed at one company (not from the laid-off pool) but are available to join another within 2-4 weeks. Many are in salary bracket of ₹80 lakh-₹2 crore.

“In the past 6-8 months, we have seen a 4X jump in the number of senior candidates who can join at a very short notice period of 2-4 weeks. Many of them are from IT services or startup sectors, while there are many from the traditional sector companies,” said Anshuman Das, CEO, Longhouse Consulting.

He attributes the current scenario to multiple reasons such as availability of internal candidates at much lower cost, role redundancy of one-time “heavy-hitters”, and new slower growth strategies.

R Suresh, CEO at Insist Consulting said, “These are very senior talent, but may not be relevant in the changed scheme of things. But large companies would not want to lay them off abruptly as they carry the intelligence and competitive strategies of the firm.”

“Many people hired at IT services companies a couple of years ago at big pay packages may not be needed anymore,” added Mayank Kumar, cofounder, Upgrad. Nitin Bhatt, partner and technology sector leader, EY, said often it is difficult for companies to help fulfil the aspirations of such senior people, whereas outside the organisation there is scope for vertical growth.