How to counteract high staff turnover in leadership roles

C-suite

Article

Six ways to minimise high staff turnover

Good workplace culture
Professional development opportunities
Competitive compensation and benefits
Leadership development programs
Confict resolution and mediation
Performance management and feedback

Tension between non-executive board members and executive directors or senior leadership can and does force people to leave businesses. In this article, two Robert Half senior execs, Patrick McKinney and Cameron Eustice, explain how to counteract high staff turnover in leadership roles – and why Sam Altman and OpenAI may just provide some of the missing puzzle pieces.

When Sam Altman left OpenAI in November 2023, it became a global news story. The chief executive of the business behind ChatGPT had reportedly lost the confidence of the board, which cited a lack of clear communication, “hindering its ability to exercise its responsibilities”, as one of the primary drivers behind the very public exit and falling out.

But just as quickly as Altman left, so too the campaign to reinstate him gained momentum. Within hours, other members of OpenAI’s leadership threatened to resign, along with swathes of the company’s employees. Altman also had the backing of a key investor, Microsoft. Within days he was back, promising to improve governance and get the business – and its reputation – back on track.

A specialist in C-suite and senior leadership engagements across a broad spectrum of market sectors, Patrick McKinney is one of Robert Half’s Managing Directors of Executive Search. “High employee turnover, particularly at the leadership level, has profound implications for a business. It can impact confidence, instill a culture of fear and instability, and even affect financial performance”.

“It often arises from a misalignment or disagreement at a strategic level; non-executive board members or investors might believe in one cause or person and the chief executive something – or someone – else. Such a lack of alignment, however slight, can have significant knock-on effects. People can and do leave businesses when there is a change of leadership, so when leaders repeatedly move on, the business is subject to an elevated risk of others following suit, perhaps en masse. In this way, a significant change in the leadership of a business can represent an existential threat to the business itself”.

In this account of how businesses can prevent excessive leadership turnover, we examine the importance of introspection (i.e. self-awareness) and succession planning, alongside prompt decision making and clear communication. We also explore key strategies to improve employee engagement and retention in order to reduce costly staff turnover, all of which are vital to business success.

Chief executives and non-executive board members need to understand the people around them. Are they the right people to lead and advise the business in the next five years? If not, who are the right people? And where are they? Invariably, the business would benefit from the skills and experience of specialist advisors to assist them with finding the best candidates leadership roles.

Consider this; a business has appointed a new chief financial officer (CFO) every year for the past four years. This business needs to turn its focus outwards and consider that the source of the ‘rot’ may not be the CFO at all and consider other drivers – the CEO, for example. In this case the business should seriously consider a change of leadership before placing another new CFO, otherwise the toxic cycle is likely to continue.

“High staff turnover continues if nothing changes at a foundational level,” says Cameron Eustice who, like Patrick McKinney, boasts a decades-long career in both search and commercial leadership. “So, it’s important for businesses to engage in a level of ‘organisational introspection’, and to plan ahead for how to manage changes that minimise disruption to their staff.

“Boards and CEOs also need to be prepared to make difficult decisions. It sounds obvious, but many talk about succession planning yet don’t do anything about it.”

Succession planning is especially important when businesses are navigating external market changes or challenges. And the right leader now might not be the right leader in the future.

Patrick McKinney: “During periods of significant economic instability, for example, companies require leaders with specific skills to navigate financial challenges. The response shown by many to the 2008 Financial Crisis is a great example. During that time, a number of organisations replaced their CEOs with leaders experienced in cost-cutting and restructuring, in an effort to stabilise their finances.”

Technological advancements and regulatory changes can also disrupt industries and necessitate shifts in leadership. The rise and rise of AI has prompted many companies to seek leaders with a deep understanding of AI and its implications. OpenAI's leadership crisis itself reflects this trend, where the need to align with the pace of tech advancements and strategic pivots can lead to turnover if existing leadership is not perceived as keeping pace with external pressures.

Regardless, if a business can clearly communicate why change is happening, it has a greater chance of success. If not, employees and the market might perceive a disagreement – even if there isn’t one – which can impact confidence, reputation and share price. Good businesses have leaders who can clearly communicate during times of change.

Here we share six proven ways to improve staff morale and job satisfaction, elevate your organisation’s employee engagement and retention strategy, and reduce high staff turnover, both in leadership and throughout a business.

Good workplace culture. A positive workplace culture involves promoting open communication, recognising employee achievements, and encouraging collaboration. This creates a supportive environment where employees feel valued and motivated, leading to higher job satisfaction and reduced turnover.

Professional development opportunities. Ensure everyone, including leaders, are provided with opportunities for professional growth. Mentorship is particularly important for senior leaders. To invest in people’s development boosts morale, job satisfaction, and loyalty, which in turn reduces turnover and elevates overall engagement within the organisation.

Competitive compensation and benefits. “A competitive salary isn’t the be all and end all, but it helps,” Cameron Eustice reminds us. “Then benefits packages - things like salary sacrificing opportunities, flexible working arrangements, employee assistance programs – superannuation guarantees, and bonuses will all contribute to employees feeling fairly compensated and a company’s ability to attract and retain top talent.”

Leadership development programs. Investing in training and coaching for current and future leaders enhances their skills and capabilities, fostering effective leadership and helping to build employee engagement and a strong internal leadership pipeline.

Conflict resolution and mediation. Proactively addressing unrest or conflicts between board members and executives through mediation and facilitated discussions is vital. Effective conflict resolution can prevent disputes from escalating, promotes mutual respect, and helps ensure that organisational goals remain aligned.

Performance management and feedback. Cameron Eustice: “Clear performance expectations and metrics – especially at a leadership level – and providing regular feedback on these, helps identify and address potential issues early on. Transparency and fairness in performance management is vital for building trust and engagement, and minimising turnover.”

OpenAI’s story illustrates the importance of getting leadership change right. But it also shows what can happen when a chief executive has gained a widespread personal following among employees, investors, and other members of the leadership team.

As businesses prepare for their next chapter, they would do well to ask themselves this question: do we have the right people in the right roles to move forward and achieve our goals? If not, then they should be assessing and anticipating what’s needed, making decisions early, and clearly communicating what they are doing – and why. If the alternative is waiting for a boardroom coup and the implications of a high-profile exit that come with it, which business would you rather represent?

What are the main causes of high employee turnover?

The main causes of high employee turnover include poor management, lack of career advancement opportunities, inadequate compensation, and poor work-life balance. Other contributing factors are toxic workplace culture, insufficient employee recognition, and job dissatisfaction. It’s essential, then, for retention strategies to address these issues in order to maintain a stable workforce.

What are the effects of high employee turnover?

High staff turnover can have detrimental effects on organisations, including increased recruitment and training costs, loss of important organisational knowledge, reduced productivity, and decreased employee morale. If high turnover is ongoing, it can also lead to a negative reputation, making it harder to attract top talent.

How can high employee turnover be reduced?

Company culture speaks volumes; improving work-life balance through flexible working hours and fostering a positive workplace culture where employees feel valued are crucial strategies. Offering competitive compensation and benefits certainly helps, but high employee turnover can also be reduced greatly by enhancing management practices and providing sufficient career development opportunities for staff.

How does high employee turnover affect company culture?

High employee turnover is immensely disruptive, creating instability and impacting team dynamics (cohesion). Frequent departures can lead to a loss of organisational knowledge and continuity, causing remaining employees to feel overburdened and stressed, which in turn can impact morale, reduce trust in management, and create a pervasive sense of uncertainty. It can also negatively impact an organisation’s reputation, making it challenging to attract (and retain) top talent.

What makes a good business leader in 2024?

Don’t neglect business succession planning, it will change your fortunes

5 skills to shape modern leadership styles in the changing world