Prong #4: Eliminate Costly Employee Turnover

In my first installment of this series, I stated that the key reasons why corporate profits have grown substantially in all of my companies during my tenure are passion and the use of my unique four-pronged approach. I am leaving the passion part to you, but have been discussing my four-pronged approach in detail.

Naturally, each prong works to different degrees in each company, but if you use all four of them, I can guarantee you will see amazing results. Here is the final key ingredient in my approach:

PRONG #4 – Eliminate costly employee turnover.

One of the largest unnecessary costs that an organization incurs is caused by employee turnover. To replace an employee position, the employer will incur hefty “hard” costs like recruiting fees, help wanted ads, drug testing, credit checks, etc. More importantly, there are huge “soft” costs that are involved. 

The 

 “learning curve” of a new employee is enormous. 

Not only does the new hire require training in the specific job tasks and the organization’s automated systems (e.g. e-mail, ERP, and human resource systems), but the person has to learn about the entity’s culture and the various other departments with which the employee must work closely. Depending on the degree of responsibility involved, the employee can take at least a year to become fully efficient at his or her job.

I have a terrific history of creating an environment in the Finance Department to maximize employee productivity and eliminate (or dramatically minimize) employee turnover. I accomplish this by taking an active interest in the career development of every employee in the department as well as spending time to cross-train and mentor such employees. 

When I arrived at a publicly held manufacturer and distributor, the average tenure of the domestic Finance Department employees was a mere 1.5 years. During my two-plus year tenure, one position was eliminated through increased automation and no other employee in the Finance Department left the Company. This representative record was accomplished at all my employers by:

a. Taking an active interest in each employee’s career path.

I realized very early in my CFO career that if you demonstrate true interest in the employee, he or she will perform better, care more about the company, and even have a better attendance record. I begin taking this interest immediately upon being named a company’s CFO. Within my first week, I distribute a questionnaire to each Financial Department employee (no matter the size of the Department) and require each person to complete and return the questionnaire to me within a relatively short period of time. 

The questions include probing as to his or her likes and dislikes about their current position and the Company in general; suggested responsibility and systems changes; but the most important question deals with the employee’s career aspirations.

Within the next month or two, I spend time with each individual to discuss the responses. Besides obtaining excellent ideas as to potential system enhancements, I get a quick read on the general attitude of the staff regarding their jobs and the organization. The majority of each meeting is spent on the employee’s career aspirations.  

Two perfect illustrations that demonstrate how this process adds to employee job satisfaction and ultimately, will dramatically reduce the employee turnover rate occurred while I was the CFO of a medical supplies and equipment distributor.

When I met with the Accounts Payable Manager, she explained that she really disliked her current position and was more interested in becoming a controller and possibly growing into a CFO role someday. 

I told her that we had many important accounts payable system enhancement projects to complete, but if she would help expedite these projects and train a senior accounts payable clerk to replace her as the department manager, I would try to give her more and more controllership assignments. Within a short time, she was promoted to assistant controller and ultimately became a controller.

During the meeting with the Credit and Collection Manager, she clearly showed her love for her job and wanted to become more of an expert in this area. I helped her gain accreditation in her field and spent time teaching her how to better read and analyze financial statements and the applicable footnotes. After our employer was acquired by a multi-billion distributor, she moved up very rapidly in the parent company’s Credit and Collection Department.

b. Educating the Financial Department employees.

Upon entering a new organization, a new hire is trained in the specific required tasks and systems. Too many times, I have noticed that the person is not given enough information about the employer’s operations, financial history, or current and future company goals. The clerical employees rarely understand “how their piece of the pie fits the entire pie”. Many times, this lack of understanding leads to frustration and eventually unnecessary employee turnover.

I combat this problem by conducting regularly scheduled Financial Department meetings (typically on a monthly basis). 

Some of these meetings might be mostly informative (e.g. I arrange for a “guest speaker” like the Director of Marketing, the CIO, the VP of Sales or even the CEO to speak about his or her role in the Company’s operations and to answer any questions from the “floor”) while other meetings are more participatory (e.g. distributing the 10-K for study and then, having a “college bowl” contest with the winning team getting lunch on me). Additionally, I would have each small functional head give a synopsis of the advances on the various projects that were made during the previous month. At all my employers, these meetings quickly became a monthly highlight for most of the attending participants and added greatly to employee morale. 

c. Cross-training.

There are two huge benefits to cross-training the Financial Department’s clerical staff (e.g. having an accounts payable clerk become proficient in processing the payroll, teaching an employee who enters cash receipts to enter vendor invoices or cut disbursement checks). 

First, you create more depth and flexibility within your organization. Should a valued employee take an extended vacation, become ill or leave suddenly, you can easily substitute a cross-trained employee into the missing spot on a temporary or permanent basis. Second, you have enhanced greatly the staff’s marketability by adding to their resume of skills. Once again, I guarantee the appreciation for such cross-training will show in their overall performance and attitude. 

Not only has this methodology worked well in the Financial Department, but numerous other fellow senior managers in other departments have attempted to emulate it and have achieved equally successful results.

So now, I have shared my secret formula for maximizing my employers’ profits and enterprise value. Remember, I truly believe you will look like a hero and show a major improvement in your company’s profitability if you are passionate and utilize this four-pronged approach: 

1.  Understand fully an entity’s operations and develop the key financial metric that truly makes it “tick”.

2. Educate the management team about finances and have them “take ownership” of their operations.

3. Create scalability in the Financial Department through automation.

4. Eliminate costly employee turnover.