The owner of a multibillion dollar Australian tech firm turned to me and said: “Tom, I often dream about firing everybody and just having one big computer. Wouldn’t that be paradise?!” This pretty much sums up how most business owners and CEOs think about their people: like a necessary evil, a nuisance, or a stone in their shoe.
People: your best capital
A business is nothing other than a group of people. One of the best things you can do to make your organization future-proof is to take good care of your people, give them plenty of opportunities to grow, and attract a never-ending stream of new top talent.
The Human Resources (HR) head of one of our clients told us in confidence that they had a serious turnover problem. This was no issue if only bad people were leaving, but a lot of good people left as well. When I raised the high turnover with the family who owned the business, it became clear to me that they cared. They wanted their business to become a magnet for top talent.
Turnover is serious business
Most of the time, top management and CEOs do not take enough time to listen to each other, let alone to their people. They do not know what their employees actually want. In the example above, we conducted confidential one-on-one interviews with selected employees across all ranks. When we found out what they wanted, it was surprisingly simple: some food vending machines for the ones who stayed late and worked overtime; better transportation for the ones who lived farther away from the head office and had to do two-hour commutes every day; clearly laid-out career paths and growth opportunities for the top talent below 30, who joined the business straight out of university.
Then we presented the best solutions that would have the highest positive impact and could be implemented right away. The result? Our client saved millions of dollars over several years because turnover decreased dramatically.
Money matters less than you think
Besides being chair of Tom Oliver Group, I am also an MBA professor lecturing at some of the world’s highest-ranked business schools. The top talents in my classes frequently tell stories that confirm the phenomenon that employers rarely understand the real needs of their employees. One of my students, a bank executive from New York, was working at a top bank but felt miserable and utterly unappreciated. The reason? Her boss treated her badly, had a horrible temper and lashed out at her frequently. But instead of changing anything about his behavior, he kept throwing more money at her. The result? She left.
The secret is that often, there are quick fixes to high turnover that have little to do with money. In her case, it was respect and appreciation.
Dark secrets behind high turnover
When we calculated the actual cost of high turnover for one of our clients, the owner stared at the full amount and was shocked.
First of all, most executives only think about the obvious costs of hiring and firing: the money and time you spend to recruit people, conduct interviews and get them started. But what happens after that? Can you use the new talents to their full potential? Of course not! They go through a lengthy onboarding and learning process that can take anywhere from a few months to a year, depending on the type of your organization and their position. During that time, for most businesses, the actual bottom line contribution of those new top talents will be negative because they will cost you more money, time and resources than they will contribute. These “shadow costs” dramatically increase your overall turnover costs.
Second, consider what happens when top talents leave. You have an empty spot that rarely gets filled immediately. Even if you tell someone else to cover that spot in the interim, it rarely works out.
Third, top talent leaving is bad for the reputation of your business. Word gets around quickly, especially with people’s comments online and on social media. This can be the reason why other top talents who had considered joining your company already take their career elsewhere and do not make you the “employer of choice.”
Fourth, people resign internally before they actually leave. This means you already have massive productivity loss before their actual resignation.
On top of these, what most business owners and boards neglect is the detrimental effect on internal employee motivation and productivity when top talent leaves. Other high achievers start asking: “Am I working for the right organization?”
Here is an extreme example: a board member of one client told me in confidence that “all board members except for the CEO already had exit strategies,” and that they were “just waiting for the right time to pull the trigger.” The CEO and owner had no clue. Fortunately, because we received the information in time, we could bring this to the owner’s attention and put together an action plan to avoid a mass exodus.
Make people a priority
I was fortunate enough to work with Ramon Sy as part of the work we did for Asia United Bank and the family of Jacinto Ng. Ramon had started as a cigarette vendor and risen to become the founder of iBank, head of the influential Bankers Association of the Philippines and a legend in Philippine banking.
What impressed me most was that everyone I met who had worked for him at iBank was still full of admiration and praise for him, even many years after the bank had been bought and stopped to exist. I asked Ramon: “What was your secret?” He smiled and replied: “It is simple. I always made sure I would clean my desk of all urgent matters as fast as possible so I could give the rest of my time to my people.”
Solutions, next steps
Take turnover seriously. If top talent is leaving your business, do not play down its importance but get to the bottom of it. What are the real root causes? What can you do to fix it? In an ideal world, no top talent should ever leave your business unless they give birth to a child, move to the other end of the world, or die.
Make sure you have an effective system in place that ensures people’s voices are heard. If your HR faces challenges in setting up an effective system, maybe they might be missing one or two pieces of the equation. Then, get an outside advisor to establish that system for you that will save you millions of dollars in the years to come.
When you give people a voice and actually listen to what they need and want, the outcomes will often surprise you. We have seen again and again with businesses around the world and in the Philippines that most of the real reasons why people are leaving can be fixed fast and at no great expense. Remember: execution is king! Make sure you remedy the situation as fast as possible.
See you next week! INQ
Tom Oliver, a “global management guru” (Bloomberg), is the chair of The Tom Oliver Group, the trusted advisor and counselor to many of the world’s most influential family businesses, medium-sized enterprises, market leaders and global conglomerates. For more information and inquiries: www.TomOliverGroup.com or email Tom.Oliver@inquirer.com.ph.