29 June 2006

Turnover Risk: Emotional Intelligence Factors...

The turnover in personnel in your organization could increase your operational risk.

Freddie Mac (FRE) on Wednesday released its annual report for 2005, with Chairman and Chief Executive Richard Syron describing the year as one that brought "reason for pride" as well as "some disappointment."

Freddie Mac said elsewhere in its information statement that "we have recently experienced high employee turnover rates, which strain existing resources and contribute to increased operational risk.

"We are also assessing our standards of performance and how we enforce those standards to create a more effective culture of accountability," the firm added.

There are many examples of how strained resources and a lack of personnel contribute to the increase in operational risks. Today's search on their corporate website under careers produced 216 job postings that mention "risk" and 19 of these are operational risk. Enforcing standards of performance is another matter in itself and remains a challenge for any enterprise the size and complexity of Freddie Mac.

In this research paper Key Personnel: Identification and Assessment of Turnover Risk by Craig Schreiber and Kathleen Carley you can find some of the answers for this significant business issue:

Intellectual work is the central commodity of any knowledge-based enterprise. Personnel are not simply brought in to run the assets of these companies as they are for more traditional manufacturing and service based enterprises. The personnel are the assets and as such, identifying and retaining key personnel is a major concern for knowledge-based enterprise.

While this example from a study at NASA is not even close to the financial services environment from a workplace perspective, it is valid from a knowledge worker point of view. When your personnel are your assets, turnover risk can be a real and present threat. What can a CEO or Executive Management do to mitigate the growing threat of turnover in personnel?

Some of the answers may be found in "Emotional Intelligence" by Daniel Goleman.

"The airplane cockpit is a microcosm of any working organization. But lacking the dramatic reality check of an airplane crash, the destructive effects of miserable morale, intimidated workers, or arrogant bosses---or any of the dozens of other permutations of emotional deficiencies in the workplace----can go largely unnoticed by those outside the immediate scene. But the costs can be read in signs such as decreased productivity, an increase in missed deadlines, mistakes and mishaps, and an exodus of employees to more congenial settings. There is, enevitably, a cost to the bottom line from low levels of emotional intelligence on the job. When it is rampant, companies can crash and burn."

The Board of Directors may want to ask about the Emotional Intelligence of corporate management at the next board meeting and put this on the operational risk dashboard.

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