Why Compensation Alone Does Not Retain Executives
The instinct when a valued executive signals they might leave is to offer more money. A salary increase, a larger bonus, additional equity. While compensation must be competitive, research consistently shows that it is not the primary driver of executive retention. We see this reality reflected in the data.
According to a January 2026 report by Russell Reynolds, global CEO turnover reached record highs in 2025, rising 16% from the previous year. In the Colombian market, this trend is exacerbated by the 2025 Labor Reform (Law 2466), which has increased the complexity and cost of bringing in new leadership talent.
Our experience confirms that top reasons executives leave are lack of growth opportunity, poor relationship with the board or CEO, and misalignment with organisational direction. The financial impact is severe. Replacing a C-suite executive costs approximately 213% of their annual salary when you factor in executive search fees, onboarding, and lost strategic momentum.
In the Colombian and Latin American executive market, where the talent pool for senior leadership is concentrated and relationships are deeply personal, losing a key executive can have outsized consequences. The following five talent management strategies address the real drivers of executive departure and offer a more durable foundation for retention.
Strategy 1: Create a Compelling Strategic Narrative
Executives are not motivated by tasks. They are motivated by purpose and impact. When senior leaders feel that the organisation’s strategic direction is clear, ambitious, and meaningful, they are significantly more likely to stay.
When the strategy is vague, shifting, or uninspiring, they begin looking elsewhere. We find that this is particularly true for “Multilatinas” expanding from Colombia into the broader region. Executives want to feel they are captains of that expansion, not just passengers.
How to Implement This
- Involve executives in strategy development, not merely its execution. Leaders who shape the direction feel ownership of the outcome.
- Communicate the “why” behind strategic decisions. Executives who understand the rationale behind pivots and priorities can advocate for them rather than resenting them.
- Connect individual executive mandates to the broader organisational mission. A CFO who sees their role as “managing the books” will be less engaged than one who sees themselves as “enabling the resources for transformation.”
- Review and refresh the strategic narrative regularly. A three-year plan created in a single offsite becomes stale within months if it is not revisited and adapted.
In the Colombian context: many organisations in Colombia are undergoing significant strategic transitions, such as internationalisation, digital transformation, and ESG integration. Executives who feel they are part of a historic organisational evolution are far more committed than those who feel they are maintaining the status quo.
Strategy 2: Invest in Executive Development — Even at the Top
There is a persistent myth that development ends when you reach the C-suite. In reality, the most effective organisations invest more in the development of their senior leaders. Executives who feel they are still growing are more engaged and less likely to be tempted by external opportunities.
Development Approaches That Resonate with Executives
-
Executive coaching: one-on-one coaching with a seasoned professional provides a confidential space for reflection, challenge, and growth. Research by the International Coaching Federation consistently highlights that over 70% of coached executives report improved work performance and communication.
-
Board and governance exposure: for executives aspiring to board roles, providing opportunities to observe board meetings, attend governance training, or serve on subsidiary boards is a powerful retention lever.
-
International assignments: for organisations operating across Latin America, secondments to other countries broaden the executive’s perspective and deepen their commitment to the organisation.
-
Peer learning networks: connecting executives with peers from non-competing organisations combats the isolation that often accompanies senior leadership.
-
Academic partnerships: sponsorship of executive education programmes at leading business schools (such as INALDE, Universidad de los Andes, CESA, or INCAE) signals the organisation’s investment in the executive’s long-term development.
The Development Conversation
The most important development tool is a candid conversation between the executive and their supervisor. If this conversation does not happen regularly, the first indication of dissatisfaction may be a resignation letter.
| Manager Conversation | Executive Leader Conversation |
|---|---|
| ”Are you hitting your KPIs?" | "Are you growing in the direction you want?" |
| "Here is your feedback for the quarter." | "What roadblocks can the board remove for you?" |
| "Complete this training module." | "Which external peer group would value your input?" |
| "Let’s review the budget." | "Let’s review your 5-year career arc.” |
Strategy 3: Strengthen Governance and Board Relationships
The quality of the relationship between an executive and the board of directors is one of the strongest predictors of retention at the C-suite level. Executives who feel trusted and appropriately governed stay longer. Those who feel micromanaged leave.
Governance Practices That Retain Executives
- Clear role delineation: the boundary between board oversight and management execution must be explicitly defined.
- Constructive board engagement: board meetings should be forums for strategic dialogue rather than inquisitions.
- Consistent messaging: board members should speak with one voice to the CEO to avoid contradictory instructions.
- Performance feedback: the board should provide the CEO with structured and timely feedback.
- Support during crises: executives who feel the board “has their back” during difficult periods develop deep loyalty.
In family-owned Colombian enterprises: the relationship between professional executives and founding families is the single most important retention factor. A 2024 KPMG survey found that only 48% of South American family businesses have a formal board of directors. This lack of structure often leads to role confusion. We advise implementing clear governance protocols, such as those outlined in Colombia’s Decree No. 46 of 2024 regarding conflicts of interest, to protect professional executives from family politics.
Strategy 4: Design Meaningful Autonomy and Impact
Executives do not stay in roles where they lack agency. The most common complaint from departing senior leaders is not insufficient pay but insufficient authority. They are often hired to lead transformation but denied the resources or political support to achieve it.
Autonomy Principles for Executive Retention
| Autonomy Dimension | What It Looks Like in Practice |
|---|---|
| Strategic autonomy | The executive can shape the direction of their function or division |
| Operational autonomy | Day-to-day decisions do not require unnecessary approvals |
| Talent autonomy | The executive can build their own team and make hiring decisions |
| Financial autonomy | Budget authority is proportionate to the executive’s accountability |
| Innovation autonomy | The executive has permission and resources to experiment |
The Impact Imperative
Beyond autonomy, executives need to see the tangible impact of their work. Organisations that provide clear metrics and celebrate leadership wins publicly create an environment where senior leaders feel their presence matters.
Warning signs of impact deficit:
- An executive’s initiatives are consistently deprioritised or overridden.
- The executive is excluded from decisions that directly affect their remit.
- Results attributable to the executive are not acknowledged or are credited elsewhere.
- The executive feels their role could be eliminated without consequence.
When these signs appear, retention is already at risk regardless of how competitive the compensation package is.
Strategy 5: Build a Culture of Trust and Psychological Safety
The final retention strategy is cultivating an environment where executives feel safe to be candid. They need to disagree, admit uncertainty, and take calculated risks without fear of disproportionate consequences.
What Psychological Safety Looks Like at the Executive Level
- Candour in leadership meetings: executives can voice dissenting opinions without political retribution.
- Tolerance for intelligent failure: experiments that do not succeed are analysed and learned from rather than punished.
- Transparency in decision-making: the rationale behind major decisions is shared openly.
- Vulnerability in leadership: the CEO models honesty about challenges and limitations.
- Conflict resolution norms: disagreements are addressed directly and professionally.
The Trust Equation
Trust at the executive level is built on four elements:
- Credibility: “I believe this person knows what they are talking about.”
- Reliability: “This person does what they say they will do.”
- Intimacy: “I feel safe sharing sensitive information with this person.”
- Low self-orientation: “This person prioritises the organisation’s interests over their own.”
When any of these elements erodes, executive retention becomes fragile. An executive who does not trust their colleagues or their board will eventually disengage.
Building Trust in Latin American Organisations
In Colombian and Latin American business culture, trust is deeply relational. It is built through personal connection and consistency over time rather than merely through contractual agreements. Cultural studies, such as those by Hofstede, indicate that Colombia has a high “Power Distance” index. This means subordinates often expect autocracy. You must actively work against this cultural grain to create safety for senior leaders to speak up.
The Integration of All Five Strategies
These five strategies are not independent. They reinforce each other:
- A compelling strategy gives executives purpose.
- Development keeps them growing.
- Strong governance provides stability and trust.
- Autonomy enables impact.
- Psychological safety holds the entire system together.
Organisations that address all five dimensions create an environment where executive departure becomes the exception.
How EP HeadHunter Supports Executive Retention
EP HeadHunter’s engagement does not end with placement. We partner with our clients to ensure that the executives we place are set up for long-term success through structured onboarding support, executive evaluation insights, coaching referrals, and periodic check-ins during the first year.
Our deep understanding of the Colombian and Latin American executive market allows us to advise organisations on retention strategies that are culturally relevant and grounded in behavioural science.
Concerned about retaining your senior leadership talent? Contact EP HeadHunter to discuss how our advisory services can help you build a retention strategy that keeps your best leaders engaged and committed.
