57% employee turnover threatens business viability of this leader

Most large wealth management and distribution firms in India have one thing in common: high employee attrition. Some employees move on for better prospects, others move on to set up their own practices - often because they believe their firms' policies are not always in their clients' best interests. High employee turnover is a huge drag on any firm's resources, and even as you spend a lot more money on recruiting and training new blood, you lose out on experienced hands guiding your clients - which in turn does disservice to your clients. Most think there is nothing that can be done about it - its just a way of life. Ignore the issue for too long, and you run the risk of attrition getting to such high levels that it threatens your business viability - just as a 57% attrition did for NovaCare. The way NovaCare dealt with the core issue offers rich insights to any wealth management / distribution firm or bank that believes that employee attrition is perhaps getting out of hand.

NovaCare is one of the largest providers of rehabilitation services to hospitals, nursing homes and individuals in the US. They help patients coming out of injuries to regain physical fitness and get back to their normal lives.

As you can imagine, the therapist is the heart and soul of such a business - and this is where NovaCare found itself in a deep hole back in 1988. Therapist turnover was steadily on the rise and hit a staggering 57% in 1988. The company's inability to retain trained and skilled therapists caused a significant dent in business performance and its share price sank as analysts started questioning the viability of its business model.

CEO John Forster went into the heart of the problem and recognised it for what it actually was. The company had grown rapidly through a series of M&As, which meant that its corporate head office started looking more like a private equity firm than a rehab firm. Generating more billable hours per therapist was the only metric that its head office measured success by. In sharp contrast, therapists measured their success in terms of delivery of high quality health care and satisfactory and quick patient recovery.

This growing disconnect between outcome expectations of the therapists and their managers caused a huge exodus of good quality therapists. The only way to fix this, he recognized, was to instil a set of core values that everybody in the firm would abide by - his head office staff as well as his therapists. With the help of external consultants, wide consultations across the firm, focus group meetings with customers and feedback from over 250 staff members, the company developed two statements: a statement of guiding purpose and a statement of fundamental beliefs - which would be used as the framework for creating and implementing policies, goals and business practices across the firm.

As many such exercises in creating vision-mission statements go, many therapists were initially sceptical about the whole effort. What helped immensely though was the fact that a fairly large set of real life work situations were taken up as illustrative examples to show exactly how the guiding purpose and fundamental beliefs should be used to determine the right course of action for the company in each situation. The statements no longer were abstract sentences to be framed and hung on the walls - they became essentially the guide to redraft policies and practices across the firm.

The company took pains to clearly define how it will measure quality of care provided to its customers, rather than focusing only on quantum of billable hours per therapist. More powers were delegated to field managers to ensure delivery of quality care. The head office saw a welcome induction of senior professionals with a health care background, rather than having only finance professionals with spreadsheet skills.

From a business-threatening employee turnover rate of 57% in 1988, attrition reduced to 32% by 1990 and 27% by 1993. More importantly, its ability to hire quality therapists improved dramatically. A company that struggled to hire 300 professionals in 1988, added 776 new faces in 1990 and 2546 in 1993. The company was well and truly back from the brink and on solid ground - only because it was able to effectively resolve the conflict around what's more important - the client's well being or its own near termbusiness profitability.

Share this article