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Why should executive contracts include probationary periods?

On Behalf of | Mar 24, 2023 | Business Disputes

Executive contracts include many elements. One element that’s often included that might have some people stumped is the probationary period. This is a protective measure that helps both parties. 

Regardless of which side of the matter you’re on, you should understand a few points about the probationary period.  

Assess fit and performance

A probationary period allows the company to evaluate the executive’s performance, work ethic and ability to meet goals within a set time frame. It provides an opportunity to assess how well the executive fits the company culture and can work with other team members. This period acts as a trial run, ensuring the executive is a good match for the organization before committing to a long-term contract.

Training and adaptation

A probationary period gives the executive time to familiarize themselves with the company’s processes, systems and expectations. It allows them to learn the ropes and adapt to their new role without the pressure of immediate long-term expectations. The company can also provide necessary training and support during this period to help the executive integrate more effectively.

Flexibility and risk reduction

Including a probationary period in an executive contract offers both parties flexibility in case the employment arrangement doesn’t work out as planned. The company can terminate the contract with reduced legal and financial risks if the executive fails to meet performance expectations or is not a good fit for the organization. Similarly, the executive can decide to leave the position without severe repercussions if they find the role unsuitable.

A probationary period in a contract for executives typically includes specific performance goals and expectations for the executive to achieve. This clarity helps set the foundation for a strong working relationship and ensures both parties understand the requirements for successful long-term employment. Review the contract thoroughly so you can be sure you know the requirements for both sides.