By Gregory L. Hoernschemeyer, CLU | Senior Vice President, Registered Representative, HORAN Wealth
What Does It Really Cost to Lose a Key Executive?
When a top leader leaves your business, it doesn't just leave a vacancy—it creates a ripple effect across productivity, culture, and growth.
You may already be thinking about the obvious costs: recruiter fees, legal agreements, and interview time. But what many business owners miss are the hidden costs that quietly accumulate—and often exceed the visible ones by a wide margin.
In fact, U.S. companies lose roughly $1 trillion each year due to voluntary turnover of employees across all levels (Gallup, 2019). And executive turnover is at the top of that scale.
All in all, the costs of losing and then replacing a top talent executive can cost anywhere from 200% to 400% of their annual salary, based on findings from the Society of Human Resource Management (SHRM) & Center for American Progress (NFP Inaugural Executive Benefits Study, 2023). That means for an executive earning an annual salary of $500,000, the cost to your business would be $1-2M.
Let's take a closer look at what that really means for your business—and how to prevent it.
The Obvious Costs You Can See
Some costs are easy to identify and track:
- Executive search firm fees
- Legal fees for contracts, severance, and compliance
- Background checks, advertising, and assessments
- Internal time spent interviewing and onboarding
Unfortunately, that's only the beginning. Those direct costs account for only 20% of the total costs. Another 80% of these costs come from the less obvious but far more damaging costs listed below—ones that can quietly eat into your margins and momentum (Mezrah Consulting, 2020).
The Hidden Costs Are Much Higher
The majority of your costs of losing and then replacing an executive are less directly obvious, but they are hurting your bottom line all the same.
- Onboarding and Ramp-Up Time: It can take 12 months for a new executive to reach the full productivity of the person they replaced (Gallup, 2021).
- Loss of Continuity and Institutional Knowledge: Projects may slow. Key client relationships can weaken. Institutional expertise walks out the door.
- Cultural Disruption and Morale Issues: When a respected leader leaves, others take notice. It often leads to questions, disengagement, or even more turnover.
- Customer Experience Risk: New leaders take time to understand your systems, teams, and client expectations. In the meantime, service consistency can slip.
- Long-Term Training Investment: Over time, a business typically invests 10% to 20% of an employee's salary annually in training and development (PeopleKeep, 2024).
Which brings you to the total cost of replacing an executive at 200% to 400% of their annual salary (NFP Inaugural Executive Benefits Study, 2023).
Why Great Leaders Are Your Best Investment
High-performing executives aren't just good at their jobs—they multiply the performance of the entire organization. Which means to maximize your sales and profit, you want to retain your top employees.
Strong leadership leads to:
- Better decision-making
- Faster problem-solving
- Stronger customer relationships
- Higher employee engagement
- More scalable, sustainable growth
According to Gallup, teams with engaged leadership experience 18% greater productivity and 23% higher profitability (Gallup, 2024).
Retaining top leaders isn't just about stability—it's a direct driver of ROI.
Build a Plan That Goes Beyond Compensation
If you're serious about protecting your business and building long-term value, you need more than salary and benefits. You need a strategic plan that addresses the full lifecycle of your key executives:
- Recruit people who match your values and vision
- Reward them with tailored, high-impact incentives
- Retain them with long-term alignment and security
- Retire them with a thoughtful transition strategy that protects your legacy
That's where Private Wealth at HORAN Wealth comes in.
Why Private Wealth at HORAN Wealth?
For over 75 years, HORAN Wealth has helped successful business owners do more than manage money. We've helped them build companies with staying power by putting the right people in the right roles and keeping them there.
We bring together experience in executive compensation, insurance, retirement planning, and business succession to deliver a strategy that protects your talent—and your enterprise value.
Our Four Pillars of Executive Talent Planning
1. Executive Benefits: We design customized executive benefit plans that selectively reward top performers. Solutions include:
- Deferred Compensation
- Supplemental Executive Retirement Plans (SERPs)
- 401(k) Mirror Plans
- Executive Bonus Plans
2. Business Continuation: We help prepare your company to absorb unexpected change through:
- Buy-Sell Agreements
- Key Person Indemnity
- Split Dollar Plans
- Disability Buy-Out Insurance
- Key Person Disability Plan
3. Income Replacement: We protect the income and retirement security of your top leaders through:
- Executive Disability Insurance
- Retirement Plan Contribution Protection
- Long-Term Care Plans
4. Wealth Building & Transfer: We work with your executive team on strategies that support personal financial goals, estate planning, and multi-generational wealth transfer.
The Bottom Line
Losing a key executive is more than an HR issue—it's a strategic risk that can cost your business millions and slow your growth. But with the right approach, it's also preventable.
At Private Wealth at HORAN Wealth, we help you build the team—and the legacy—that can carry your business forward for generations.
Let's Talk About Your Executive Strategy
If you're ready to build a smarter plan to recruit, reward, retain, and retire your top performers, we're here to help.
📩 Talk with your Private Wealth advisor or reach out to us directly at GregH@horanwealth.com.
With our Private Wealth services at HORAN Wealth, we help high and ultra-high-net-worth investors, businesses, and families navigate their wealth journey to live abundantly and build a legacy for generations.
About Gregory L. Hoernschemeyer: Gregory L. Hoernschemeyer, CLU®, Senior Vice President, is both your personal advocate and an insurance consultant for individuals and businesses. Greg helps you successfully navigate the complex world of life, disability, and long-term care insurance products. He brings a fresh perspective and knowledgeable discipline to a subject matter that many view with apprehension, to provide better care and greater security. Greg views his client relationships as partnerships that create lasting value and that secure a brighter financial future for you, your loved ones, and your business.
HORAN Wealth is the marketing name of HORAN Securities, Inc. ("HSI") and HORAN Capital Advisors, LLC ("HCA"). Securities Offered Through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. HORAN Wealth Management ("HWM") is the investment advisory firm. HCA is an affiliated investment advisory firm.
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