Private Equity

The one number I never allowed our board to report to investors.

I spent eight of my last nine years as a private equity backed CEO. Monthly reporting to our shareholder was routine, and PE investors are naturally data-hungry, left-brain-dominant Excel jockeys. They love figures, and if you’re not careful, will suck every number they can out of the business in a desperate attempt to understand it, predict its future, and prove to themselves that they can sleep well at night.

Their ability, or some would say disability, to see the world primarily through numbers is both their strength and their weakness. They are more floored than most when inevitable surprises hit their companies and tend to beat themselves, and each other, up for not tracking some obscure piece of data that might have given them an early warning of trouble.

Like any sensible entrepreneur, I left the vast majority of this liaison work to the various CFOs I worked with over the years. They are more equipped to indulge the investor in whatever aspect of the business has piqued their curiosity this month, and the finance team would jump with excitement when told, “The investor wants this data. Quick, let’s get it”.

But the one piece of data I always refused to publish on our board pack was employee turnover. It is one of the most basic items of HR data to request and, once you’ve decided how to count it, pretty easy to gather. However, across two investors, we were the only portfolio company not to hand it over. As we always performed well as a business, this was tolerated as “one of Glenn’s oddities.”

Here’s why.

If you’re a 100,000 person strong organisation so that when you get to board level, people really are just a number, and you can only estimate “headcount” to the nearest 1,000, then I accept staff turnover might be an interesting thing to track. However, it will tell you about problems that happened six to 12 months earlier, because that’s how long it takes people to leave jobs they don’t like.

But for the majority of us, running organisations of a few hundred people or the lower thousands of people, it’s not helpful. It can be misleading and can even drive the wrong behaviours.

Reward Gateway had about 400 people by the time I left the CEO job. In a given month, we might have one or two people leaving us, or ten. But the raw number meant nothing.

One person leaving you might be significant if it’s a valued employee leaving because their boss mismanaged them, someone pissed them off, or you made them feel unvalued or unloved. 10 people going in a month might be perfectly fine if every one of them had a great time with you and left in a good way when it was right for them or for the business.

I think the whole idea of tenure and service length is outmoded and wrong. We are all acting in a pantomime of the “permanent job,” whereas, actually, there is no such thing and hasn’t been for decades, and nor should there be.

No one should lay down his or her life for a company or corporate entity, expecting or demanding that it provide all the fulfilment, challenge, and opportunity that they need for 40 or 50 years of work. Can you imagine how hard recruitment would actually get if you told candidates that when they sign the contract, they wouldn’t be able to leave until they retire? That would actually be a “permanent job,” and none of us would want it.

But all of our language in business is wrong; we have this charade of permanence, and it’s responsible for a lot of distress and misery. There is even a whole industry around “employee loyalty” which suggests that everyone who has ever left a company is disloyal. Are you in the first job that you ever had? Are you a disloyal person?

Long tenure is only good for both the business and the employee if that employee is engaged, happy, and productive. Give me two years as an engaged and happy person over ten years as someone “phoning it in” and going through the motions any day.

Pretending that jobs are permanent causes real distress when they end rather than making it natural. So many times in my career, when an executive has left my team, someone has said, “Oh, Glenn, why? What did they do wrong?” or “Oh, I’m surprised. I thought you liked them”. Removing someone from a team is always seen as a punishment for some terrible misdeed or incompetence, but it shouldn’t be. You shouldn’t be on a team because of your performance in the past; you should be on a team because there is a great fit between your skills and abilities and what the team or company needs in the future.

I did this to myself last year when I realised that I was no longer the best CEO for Reward Gateway. I’d done a great job taking the company to 400 staff, 2,000 clients, and $1 billion in revenue. However, I knew I wasn’t the person to lead the company through the next stage, conquer the American market, and get the very best out of what was, by then, an exceptionally talented executive team. It was time for me to leave—not because of a failure in my past performance, but because I was no longer a good fit for the job that needed to be done next.

When I agreed to stay on after being CEO in my current role as “Founder”, I made it a two year fixed term contract, specifically because I wanted it to have a natural, undramatic end. If the job is still a good fit with me at the end and if the company still needs and wants me around then we can extend. But if not, we get a great natural ending.

Business and our organisations are changing at an increasingly rapid rate. That means we need to be continually assessing “fit” rather than just looking at past performance. For example, someone who has done an exceptional job scaling your sales team from 10 to 50 people might not be the right person to scale it to 100 while bringing it closer to the marketing department. Someone’s past achievements shouldn’t be the only thing we look at—the fit between their skills and the near- and medium-term future requirements will make all the difference to their performance and happiness in the role to be done.

The flip side is also true. Just because a company has been a great place to work for someone for the last two or three years, that doesn’t mean the company can always play that role. People should be growing and developing continuously, and they should always be asking: “Is this organisation still great for me or am I ready for something new?” When that happens, we should be able to have open, honest, and positive conversations about it rather than wait until both parties are miserable and then have a falling out. Moving on doesn’t have to mean falling out.

I have seen this happen so many times. I even once included a chart on it in the old Reward Gateway Management Training Programme. It was called the “Peak, Plateau, Plummet” chart. It shows what happens when people stay too long in an organisation that can’t provide the next step for them. Rather than end their time on a high, leave on great terms in a nice, planned ,sensible way, and have the door open to come back, too often it ends with a sour taste for both parties.

“Peak, Plateau, Plummet” chart from Reward Gateway’s 2012 Management Training Manual

I think we should spend less time worrying about tenure and more time worrying about how people are feeling, doing, and performing during their time with us. We should be honest with ourselves that jobs are for now, not for life, and they need to work for both sides to continue. We should change the conversation about leaving, so it’s not just about performance, but it’s also about mutual, future fit.

Breaking up doesn’t need to be so bad.

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