Anybody that knows me knows that I am a passionate supporter of the mighty Parramatta Eels Rugby League club. My support has never dimmed despite recent tough times (our only highlight was making the 2009 grand final where we were beaten by the Melbourne Storm. The Storm was subsequently found to have cheated the salary cap and was stripped of the premiership which in my mind makes Parramatta the 2009 premiers). This week, Parramatta was in the headlines once again for all of the wrong reasons. The club is apparently in disarray with new coach Ricky Stuart letting 12 players know that they would not be required next year. It was a mass cleanout and it smacked of panic. However, my take on it is slightly different.
In business, we are educated to avoid turnover at all costs. It is extremely expensive (some recent statistics have it valued at over 100% of the replacement salary), time consuming and has the potential to be damaging to morale. There is a great deal of uncertainty with replacing people with unknown talent; as the saying goes, better the devil you know! However, I encourage clients to look at “planned” turnover through an entirely different paradigm; I ask them to consider the cost of not turning over their existing talent base.
This week, I had a conversation with two CEO’s about their experiences with planning for turnover in their roles. Their experiences were both quite interesting and enlightening.
My first client has had over 20 years experience as a CEO in both national and international companies. In his previous position, he was required to acquire over 20 companies through the Asia Pacific region and this saw him have to drive efficiencies leading to a great number of redundancies and retrenchments. He regularly acquired businesses in distress and his strategy was clinical and decisive; he would always replace the CEO and the CFO as he believed that they were ultimately responsible for the poor level of performance within the company. From here, he would decide based on performance and attitude who would stay and who would go. He was ruthless but highly successful. When he moved into a new role, he called me into his office for a meeting. His new role saw him installed as the CEO of an Australian based business which had been performing under expectations. It was losing money and he expected to make changes. Together, we drew up a list of who were the expected departures but this time he was determined to give them all three months to prove their worth. He developed a plan together with a key performance checklist he expected delivered within an agreed timeframe. Low and behold, only one of the 14 executives at risk was let go and they are still working cohesively and successfully four years later. His experiences over 20 years at this level had taught him that his past approach may have been too severe – in hindsight, he would have always given people clear goals and set the performance expectations for them to meet before terminating them.
second client has also had extensive experience at CEO level within the Asia Pacific region. He took over two businesses, one working well and one almost insolvent. In business one, he made a couple of changes, namely exiting the internal candidate who missed out on the CEO role and Sales Manager, because he didn’t feel as though they were buying into his strategy. He felt that they were not interested in his plan and more interested in internal politics. At company two, he replaced four of his six key executives within the first three months. This decision was purely performance based and quite simple. He turned over 80% of the total employee numbers within the first six months. Both strategies proved to be well founded and successful and both businesses grew profitably. His experience has taught him that it is a “horses for courses” scenario but that you should never be scared to plan your turnover; the benefits may actually outweigh the costs.
This made me reflect on my own experiences. In my past role, I was asked to take over as General Manager of a division of a business. We were struggling badly; turnover was already high and our culture was not healthy. I was quite young at the time and this potentially contributed to my bravery. I made a clear decision to remove anyone who I felt behaved in a manner not in accordance with our values and this included some senior managers who I felt had become “bitter and twisted” as well as being expensive and non-productive. My first three months as a General Manager were very tough; our performance was not improving and we had a number of new staff. However, gradually, we improved and became a highly profitable and successful office. Our key value was teamwork and each and every one of us had to act with the best interests of the business at heart. We could have never built this office with the type of people we had working with us when we took over; it would have been far more expensive for me not to have acted and the turnover was necessary and beneficial.
This brings me back to Parramatta. To our coach, Ricky Stuart, I congratulate you for making the tough decision. You have been there for six months now and know what is working for the club and what is not. You know who displays the required behaviours and who doesn’t and you have evaluated the talent and return on investment. You are planning your turnover in line with your overall strategy and have communicated your vision clearly and honestly. Hold your head high and ignore the criticism you are receiving in the press; turnover is not a necessarily a dirty word and, if managed correctly, can lead to you delivering a premiership in the next couple of years!!
Brad McMahon – Managing Director