Streetwise: The Cost of Lost Expertise

May 30, 2021

From our friends at Eure Consulting:

Every business owner has to face the day when a great employee decides to leave. Chances are that employee was someone who worked well with clients and the internal team, came to work with a positive attitude, and knew the company’s product or service inside and out.

Often, it doesn’t make much difference if the person gives plenty of notice and time to prepare or if they leave within days. The impact of a great employee leaving sends ripples across the entire organization and may have ramifications on your clients.

I ask CEOs all the time: “Do you have a plan for when Sandy Superstar leaves?” I usually hear a response along these lines: “Oh, she’ll never leave! She’s so happy here and she loves what she does. She would tell me if she was unhappy and plus, I pay her a lot of money!”

And then Sandy Superstar announces she’s leaving. And it hurls the company into a panic. People start wondering what happened and maybe even spreading rumors about why she’s leaving. Someone has to step in to pick up the workload and management has to get the job posted right away.

Regardless of the systems a company has in place, employee turnover is a reality. Employee turnover is a fact of life in the business world. How you manage that turnover is a test of how well you as the CEO “walk the talk” regarding your organization’s culture.

When employees leave, the loss can be seen in three critical areas: 

  1. Impact on other employees

Whether they show it or not, a teammate leaving will affect your remaining employees. Losing a colleague can bring everyone’s morale down. You may be extremely excited for the person leaving and their new opportunity, but you can still feel sad that they’re leaving you.

It also tends to cause people to rethink their own options. Is there something better out there? Could they find a great opportunity elsewhere? What are they missing out on? These thoughts often fade quickly, but occasionally they can cascade into other departures.

2. Impact on the bottom line

The cost to find, hire, and train a new employee will impact your bottom line. Especially if it is for an extremely specialized or technical role. These costs come in terms of both money and time. Money to advertise and source candidates. And time of yours away from your other responsibilities.

3. Impact on productivity

There’s no way around it, when a key employee leaves, productivity falls. The vacancy they leave behind means that either the work doesn’t get done, or someone else has to pick up the slack, leaving their own work undone. Either way, you won’t be getting done as much as you were before the employee’s departure.

There is also lost productivity in that the employee who left took their expertise with them. They were the expert in that role and there’s no way to get all of the knowledge about that role out of their head and into someone else’s. The new person filling the role will take time to get up to the full speed and efficiency of the departing employee.

You will never be able to eliminate these impacts on your company completely, but you can mitigate them. Through a fairly simple strategy.

You have to build in redundancies.

CEOs rarely plan for the departure of a critical employee. But succession planning must be part of a company’s regular discussions. No one should be the only person who can complete a job. Encourage your managers to intentionally groom key people for more responsibility. If managers remain focused on helping others grow, it will be less disruptive to fill a void when a key employee leaves. Helping each employee improve their skills isn’t a one-time event; it’s part of a culture of responsibility.

You should be cross-training whenever possible. Each role should have written processes for how work is done. And each employee should document any critical information or expertise so that it can be easily shared. This way, if one employee wins the lottery and quits tomorrow, your entire operation will not come to a screeching halt.

Some employees might feel threatened by this approach, they will worry that you’re planning to replace them. Simply explain that you are preparing for the “what ifs”. Be sure to include every employee in the process and give them time to ask questions. Ask employees which roles they would like to learn more about and let them choose, to the extent possible, in what areas they’d like to cross-train. This way you’ll get better buy-in for the process and therefore more accurate documentation of each role.

Cross-training is much easier in a smaller company where everyone is already involved in almost all aspects of the company. You have to be intentional and proactive about cross-training in a larger company, but it will pay off. Even if you only have one person leave a year, you will save time and money if you can keep up productivity while searching for their replacement.

Prepare now for departures to mitigate their impact.

In an ideal world, star employees would stay at your company forever. But that’s not the real world. Every company has some level of turnover. Part of your job as the CEO is to prepare for these what-if scenarios and to make sure that you’re ready to handle these curveballs when they come.

Losing employees is disruptive. It’s critical that a company thinks about what would happen if a key employee leaves. This conversation is a critical exercise for management because it at least forces the team to be proactive. Have you trained someone on what each key employee knows?

You need to start building in redundancies and cross-training so that more than one person knows how to do every job at your company. But you should also take the time to explain why you’re doing that. Your employees should feel valued and appreciated by you throughout this process. Show your employees the benefits of having redundancies and that you’re preparing just in case. Most employees will appreciate the forethought and proactivity you’re showing.

These discussions should just be part of your regular run of business. Make it part of your culture. Start planning now for how to handle the departure of key employees and you’ll be able to reduce the effect they have on your company.