Facing Reality…

Cindy and I first heard Carly Fiorina speak as part of a Live2Lead event we hosted in late 2018 then we were in a small group with her in Orlando, FL the following spring. I contacted her team after that event, which led to quite a bit of interaction with her over the next year. Carly was actually the last person that Cindy and I met face-to-face with before the world began shutting down for Covid in March of 2020. One thing we’ve heard her emphasize over and over is that leaders must “take the time to understand exactly where they’re starting from as well as to understand the possibilities of where they could be!” Each time, she shared the importance of developing a “realistic, clear-eyed, complete assessment of the current state” before we can ever set achievable goals for our future state.

Carly’s words were geared at big-picture, strategic planning for organizations, but they apply at least as much to the issues that are killing profitability in so many organizations today! All too often, having the wrong focus and struggling with the idea of investing in developing our team members’ skills that are less technical really boils down to not having that “realistic, clear-eyed, complete assessment” of our current state.

Ask nearly any executive what their annual turnover ratio is and I’d expect you’ll get a response fairly quickly. They may even be able to tell you how that relates to the national average in their respective industry. What I’ve rarely seen though is one of those executives who is able to go into detail on the total cost of turnover! I frequently cite a Gallup study that shared ““The U.S. Bureau of Labor Statistics has found that the U.S. voluntary turnover rate is 23.4% annually. It's generally estimated that replacing an employee costs a business one-half to five times that employee's annual salary. So, if 25% of a business' workforce leaves and the average pay is $35,000, it could cost a 100-person firm between $438,000 and $4 million a year to replace employees.” And each time, I go on to challenge whoever I’m talking with to do the math, just using the most conservation of those numbers, for how that study applies to their organization.

As I discuss all the things that contribute to this massive hit on profitability, through turnover alone, I see all kinds of reactions. What I have never seen is an executive who has been fully aware of the total profit that’s being lost! Unfortunately, I could share similar examples tied to employee engagement, poor communication, and several other profitability killers that far too many organizations have no established baselines for measuring. When there’s no clear-eyed assessment of the current state, it’s nearly impossible to understand how some simple changes in behavior can impact our future state - and capture so much of that profit that’s being lost! In so many scenarios, organizations throw money at whatever appears to be causing the most pain in that moment without dialing in on the root cause, just like the example I gave before about a doctor writing a prescription for pain rather than identifying what was causing the pain…

We can absolutely change this and keep those profitability killers in check but it will require that clear-eyed view of our total current costs AND a clear-eyed view of the real root causes that are driving our current issues so we’ll pick up there soon!