The financial services industry in general, and advisory firms in particular, are experiencing an acute talent shortage. The best people are very much in demand, and most firms will eventually lose key people. Good people come and go. It's always hard to swallow--but best not to take it personally.
There will always be opinions as to why someone left. Familiar culprits include: The culture is dysfunctional; the boss's grip is too tight; the decision process is stifling; there's no clear strategy; nobody works as hard as I do and I should get paid more. Learning why somebody quit your firm is important. It can help you to improve the way in which you manage, develop, and empower people--and fix the firm's employee experience for those left behind. The departure of a key person may also mean it's time to re-examine your compensation plan to determine if it is competitive. There are plenty of benchmark studies available with which to compare your firm against.
But it is equally important not to overeact, and infer that a single departure is evidence of something chronic or more sinister. Overreacting can throw your business off kilter. First, sort through legitimate criticism from disgruntlement. Perhaps the person leaving is just not that into you anymore. Perhaps he is no longer challenged and is now seeking something new. Maybe the person is a mercenary just looking for a bigger payoff. Alternately, the departing employee may be realizing that you're unhappy with his work and simply heading off the inevitable.
Whatever the reason, when employees entertain offers from other firms, they have drifted to a negative place. At this point, it is very hard to bring them back. Left unchecked, these employees become carriers of a virus that infects the rest of your organization, especially if they are good at building relationships with co-workers. Before long, they've created a subculture that challenges the way things work and the way you manage, and it pits people against their colleagues in a very unhealthy way.
Beware of Counter-Offers
There's one thing I have come to believe that is almost always true: by the time an employee has decided to leave, the decision is probably right for both of you. As a result, I am not typically supportive of counteroffers to keep an employee unless you had been considering a larger role and a larger paycheck for that individual all along. On the other hand, if you are just reacting to somebody else's offer and your only hope of retention is to propose a raise or new title, then the dynamics will be difficult to manage going forward.
Throwing money at unhappy people does not make them happier. It certainly doesn't make them glad they stayed. The undercurrent of whatever they were feeling about working in your business will persist. The money or the promotion is often a means of appeasement that merely defers their decision, temporarily muting their dissatisfaction with you and where they work. The criticism and rancor will likely persist, albeit more quietly. Instead of saying, "For what I contribute here, I'm woefully underpaid," they will say, "It took the threat of me leaving for them to realize my value."
This scenario has a way of sowing seeds of doubt and distrust among your other associates. By overreacting to the threat of somebody leaving, you risk ...
... compromising your pay equity and harmony with other employees. Don't think you can keep the counteroffer a secret. Quite the opposite will occur; others will likely view this power play as a signal of how to behave.
When I reflect back on the counteroffers I've made, I find it's something I eventually came to regret. I realized I was bribing that person to stay. In every circumstance, I naturally felt vulnerable because I did not have another person who was capable or ready to take on that "key" person's role. In addition, sometimes I felt it would be too humiliating to be dumped by someone regarded highly by clients and other employees. Neither of these justifications is a good foundation on which to build a personnel retention program. The big lesson from all this? As early as possible, reduce your dependency on any one person so that you can manage through the disruption of an inevitable departure. Creating redundancy not only gives you additional capacity to grow, it also provides leverage to manage through staff turnover.
Embrace Those Still With You
By the way, those who want to leave, for whatever reasons, could be completely right. The fact they had to paint you into a corner to create a desirable outcome demonstrates that you have not engaged with them as you should. It could also mean your reward structure and management style is wrong, or that you were unable to come to a mutually fulfilling agreement as to what is best for them, for you and for the organization at large. If a person is not committed to your mission or your business, then it is very difficult to get them to function in a positive way over the long term. The result is that you and your mutual frustration will boil over. Understanding these factors will help you to be more decisive about the personnel decisions you must make.
Having been on both sides of this issue, I know the answers as to why people leave are usually more nuanced than we initially think, and consequently elude a completely logical explanation or solution. As in any relationship break-up, both parties probably carry some of the blame. There are circumstances where this is not true, as when a person is offered an extraordinary opportunity to take on a new and bigger challenge, or when they have been offered a substantially greater economic potential. These cases are harder to address because you're essentially being trumped by another company that sees a different potential for your employee than you did.
Regardless, when faced with the departure of a key person, it might be wise to consider reinvesting in the people who are still with you rather than squandering resources on someone committed to leave. If your compensation structure is below market, or if others on staff have earned greater responsibility, then the departure of a key person may provide you with the opportunity to recognize their value to your organization by giving them a raise or promotion.
The exit of a key person provides an opening for the next-in-line to step into a leadership role. If the departing person was truly as important as you thought, and as good at their job as he believed he was, then he was probably prepared for a successor to take over without much disruption. If that did not occur, then the departure of that key employee allows you to make the changes necessary to limit your vulnerability when other people leave in the future. Watch closely for those who are ready to seize the moment and use the transition time to plan and implement changes to your firm's culture or compensation.
With apologies to the lyricist of Camelot, if ever someone leaves you, take inventory of your entire organization to see if you should structure it differently. But do not be precipitous or partially informed when taking action. Consider multiple points of view and trust your own instincts. Engage those left behind in sharing their ideas on what could be improved, including their working relationship with you. Above all, stay focused on your mission, your goals and the culture you are trying to create. People come and go. As I wrote in my June 2009 Investment Advisor column, we are all dispensable.