Executive leaders and boards in the middle market face unique challenges. Given the retirement of baby boomers and the pace of change in our business world, the competition to attract and retain top leadership talent has never been greater.
For many seasoned leaders, the promise of a mid-market role is thrilling: the chance to create impact, scale a company and shape a culture. But just as quickly, the experience can turn into a misalignment of vision, support or control. Understanding why executives join and why they leave isn’t just an HR concern; it’s a strategic imperative for founders, boards and investors seeking to engage leadership and accelerate growth.
In our research and experience working with middle-market companies, we have found the top four reasons executives voluntarily leave or, conversely, are attracted to a company are vision, culture, leadership and compensation.
Culture. Culture remains one of the most influential factors in executive recruitment and retention. Executives are drawn to environments that grant autonomy and decision-making authority, particularly when paired with a clear, purpose-driven ethos. According to a 2024 report by Deloitte, 76% of mid-market executives cited culture as a top reason for accepting or rejecting a leadership role.
Companies and boards that actively foster healthy cultures, live their values, have robust reward and recognition structures, set realistic expectations and encourage open dialogue are the ones that build resilient leadership teams and retain top executive talent. Research from the Institute for Corporate Productivity shows that organizations with a strong and consistent culture are 3.5 times more likely to report breakthrough performance.
However, these cultural advantages can quickly become burdens. Founder-dominant cultures that resist the shift to professional management, unclear decision-making structures or environments where unwanted behaviors go unchallenged can undermine even the most seasoned leaders. A 2023 study by the National Center for the Middle Market found that 58% of mid-market companies experienced C-suite turnover in the last 24 months, citing misalignment in culture and vision as primary factors.
In one mid-sized organization, the absence of a consistent culture created deep organizational drift. The new CEO resisted efforts to define core values, leaving the organization without a shared understanding of how things should be done. In this vacuum, inconsistent and often undesirable behaviors emerged, fostering a fragmented environment. Compounding the issue, the leadership leaned heavily into a consensus-driven style without guardrails. Executives spent excessive time trying to gain unanimous agreement on minor decisions, leading to paralyzing inefficiencies. Within a year, four top executives left the organization.
Given culture serves as both a foundation and a competitive advantage, it is essential for executives and directors to conduct regular cultural “pulse checks” and foster open discussions to assess organizational health. In the middle-market, executives feel culture more immediately and personally. When it clicks, it can accelerate performance. When it doesn’t, it’s often the reason they move on.
Vision. Vision is equally important, not just as a slogan, but as the reason executives show up, stay engaged and go all-in even when the path gets steep. In middle-market companies, where leaders are expected to be both architects and operators, vision becomes the glue that holds executives in place. McKinsey’s Organizational Health Index indicates executives are 58% more likely to stay long-term with organizations that have a bold, clearly communicated vision. According to PwC’s 2023 Global Workforce Survey, nearly seven in 10 executives say their decision to stay with an employer is directly tied to whether the company’s vision aligns with their personal purpose.
Conversely, when vision is missing, ever-changing or not operationalized with clear, measurable goals, even the most capable executives begin quietly planning their exit. Without a defined direction or clear performance benchmarks, they are left navigating in the dark, unsure where to steer the organization or how their success will be judged. Deloitte research reinforces this dynamic, citing gaps between vision and execution as a leading cause of voluntary executive departures.
Many mid-sized firms treat vision as a checkbox — written once, buried in a deck and rarely revisited. Meanwhile, the executive team is expected to lead boldly and inspire others without a true North Star. That disconnect creates fatigue, misalignment and, eventually, turnover. Executives don’t leave companies. They leave when the company stops believing in something worth staying for.
Leadership. Leadership dynamics are as critical as the other pillars. In mid-sized firms, leadership is shaped just as much by personalities as by organizational charts. A supportive board, a founder who embraces professional management, clearly defined roles and a cohesive senior team all create fertile ground for executive success.
On the other hand, a brilliant strategy or generous equity package can quickly be overshadowed by a toxic board relationship, a micromanaging founder or a misaligned executive team. A 2023 study by the National Center for the Middle Market found 42% of executives who left middle-market roles cited “founder interference” or “unclear authority” as key frustrations. In these cases, executives were hired to drive change but not truly empowered to lead it.
The same can be true among privately held family-owned businesses, where some members may exercise undue authority. Questioning expenditures after board approval, making undermining comments about leadership decisions or interfering in day-to-day operations can create unnecessary obstacles that distract leaders from executing strategy and dilute their authority.
For executives to do their job well and grow the company, founders, owners or boards must shift from controlling to empowering and resist the urge to meddle in daily decisions.
The makeup of the executive team itself is equally important. Executives are drawn to environments where they trust each other, can challenge ideas constructively and feel aligned on priorities. High-functioning executive teams make faster decisions, handle conflict maturely and share credit for wins. Fragmented teams operate in silos, hide behind politics and create friction that slowly wears leaders down.
Compensation. Compensation, while often seen as the cornerstone of executive hiring, is rarely the root cause of retention failure by itself. However, it can accelerate departure if the company does not have a comprehensive compensation and benefits package that is both externally competitive and internally equitable. Executives respond to competitive base salaries, meaningful and transparent annual incentive plans, and long-term incentive structures that are realistically aligned with the firm’s trajectory.
Long-term incentive plans, such as synthetic equity plans (phantom stock/stock appreciation rights) or performance-based unit plans, have become requirements for most privately held companies. PwC’s 2023 Executive Compensation Trends shows that 68% of senior leaders weigh long-term incentive plans as a primary consideration. In our executive search practice, job offers often decline when no long-term incentive plan exists.
However, promises of future upside without clear mechanisms, opaque valuation models and internal compensation gaps erode trust. According to WorldatWork, 75% of executives express mistrust when equity plans lack transparency or appear subject to revision. Companies must align compensation not just with industry benchmarks, but with the psychological contract of trust, fairness and mutual accountability.
What Compensation Practices Cause Executives to Leave?
- Base salary well below market without adequate annual incentive compensation
- Internal equity issues between them and other comparable positions
- Discretionary bonuses without a consistent track record
- Unachievable goals for incentive plans
- No long-term incentive plan when competitors offer them
What Do Executives Look For in Compensation?
- A clear compensation strategy that sets performance expectations
- Competitive base compensation relative to the market
- Performance-based annual incentives tied to achievable goals
- Long-term incentive with understandable goals and reward potential
- Comprehensive benefits addressing executive needs
- Change of control incentives if the company has a likelihood of being sold
The Golden Rule: Strategic Integration
For companies committed to reducing churn, it is not enough to recruit well. Integration must be treated as a strategic process. Offers should reflect all four dimensions of executive fit — culture, vision, leadership and compensation. Expectation alignment should be documented and revisited, not assumed. Harvard Business Review reports organizations implementing a six-month structured onboarding process see a 43% improvement in executive retention over two years. Middle-market firms live at a strategic crossroads. They are no longer start-ups, but not yet corporations. Their biggest opportunities lie in attracting and keeping leaders who can bridge those worlds. That means focusing not just on resume fit, but on the systemic dynamics across culture, vision, leadership and compensation. In this space, executive movement is not just a personnel issue but a strategic signal. The companies that decode it best will be the ones that scale with clarity, resilience and trust. Those that don’t will continue to lose executives to better-aligned competitors, often without fully understanding why.