The death spiral of your greatest asset

Many times when I was hired as the new VP of Human Resources the company was in a death spiral of their greatest asset:

  1. Their employee turnover rate had been high for some time and in some cases increasing.
  2. The average tenure of an employee continued to go down.
  3. The quantifiable skills inventory of the greatest asset was also going down.

There was no discernable strategy or plan on how the company was going to turn the situation around. In some cases, management had a plan which had little to no effect on the problem. The symptoms continued to get worse.

What are the symptoms of an employee death spiral?

  1. Routinely losing high value employees
  2. Routinely losing employee influencers
  3. Your employee turnover is at or above the industry average

High value employees make up the backbone of your economic engine. Their skills convert to revenues and profits. When you lose these employees the cost will be in lost revenues, profits and most importantly - opportunities. The marginal cost increases with each additional lost employee. This loss is difficult to recover without major changes.

Employee influencers are even more damaging. Many influencers are also high value employees. You are losing their skills and they are also affecting the other employees in the organization. You have seen this when other employees are clearly upset when a certain employee leaves. “I did not think that Employee X would ever leave”. At this point, the internal conversations within your greatest asset will be overwhelmingly negative. During these conversations, additional employees will decide to seriously look for another opportunity.

There is only one way out of a death spiral - identify the root causes of the turnover and make the significant changes necessary. When I was a VP of HR at a privately held company, the changes which made the biggest improvements were nearly invisible to the employees. The employees merely saw the changes and the dramatic improvements in the symptoms.

Sometimes it is as simple as beefing up the hiring/selection process allowing for the correct decisions at the beginning of the employee life cycle. At the company above, this one change reduced turnover by over 20% immediately - this equated to $500,000 per year. The change in employee morale and engagement was overwhelmingly positive and priceless.

What changes could be made to kill your death spiral?