Building a growth-ready portfolio company that weathers shifting economic challenges requires more than strong financials. You have to invest in the people who will drive progress and innovate creative solutions in response to those changing climates.
Human resources (HR) health checks can reveal insights that drive significant value for both investors and their companies. These checks can evaluate everything from employee engagement and retention to the quality of leadership and work place culture. In this article, we’ll explore actionable HR health check strategies for fostering growth, reducing turnover, and building a workplace that attracts and retains top talent.
Assessing HR Turnover: Identify Red Flags and Patterns
Turnover is a critical metric for understanding the health of any organization. Retaining top talent is significantly more cost-effective than hiring new employees. High turnover rates also impact a company’s overall value by destabilizing operations and lowering morale. For private equity and venture capital firms, high turnover in their portfolio companies could signal underlying issues that will hinder growth and reduce ROI. Ensure you know the signs it’s time for an HR assessment.
To calculate turnover for example, say 10 employees out of a workforce of 150 left last year. The turnover rate would be about 6.7%, based on this calculation:
10 / 150 x 100 = 6.7%
Excessive turnover drives up costs and diverts time and attention from organizational goals. It can lead to a loss of institutional knowledge and hinder efforts to foster corporate culture. Fortunately, most of the drivers behind employee turnover are preventable and fixable. Steps to reduce turnover include rethinking recruiting strategies, enhancing career advancement opportunities, and providing more training and development offerings.
Key Indicators to Track
In an HR health check, tracking metrics like turnover rate, average tenure, and voluntary vs. involuntary departures offers insights into workplace satisfaction and stability . Compare key metrics to benchmark your company against industry standards and competitors.
Shifting Generational Priorities
A key driver of turnover, especially among younger employees, is the shift from valuing paychecks to prioritizing meaningful work. Millennials and Gen Z employees have led the movement to align personal values with the company mission. They increasingly look for roles that offer growth and flexibility with a built-in sense of purpose. A comprehensive HR health check helps uncover these generational needs and allows companies to adapt and stay competitive in the talent marketplace.
Retaining Top Talent: Build a Culture of Engagement
In a competitive economy where inflation and labor shortages tie company hands, employee engagement is more critical than ever. Loyal and motivated employees are engines for growth. To capitalize on this asset, private equity and venture capital firms must recognize the direct correlation between the company culture and engagement levels.
Retention Tactics
Compensation is no longer enough. Employees increasingly prioritize flexible working options, growth opportunities, and an inclusive culture. Here’s how an HR health check can help uncover areas for improvement:
Flexibility in the Workplace: Offer hybrid work options, flexible schedules, and remote work opportunities to increase job satisfaction and reduce turnover. In an HR health check, assess current flexibility policies and review employee feedback to determine whether you meet this need competitively.
Growth Opportunities: Employees want clear growth pathways and continual professional development support. An effective HR health check evaluates training programs, mentorship opportunities, and career pathways.
Inclusive Culture and Open Communication: Build a culture of inclusivity and open communication. An HR health check reviews diversity and inclusion initiatives, assesses employee perceptions of inclusivity, and evaluates how you collect and address feedback.
Recognition Strategies: Recognition matters to the members of your team and your company’s bottom line. Yet, research indicates that just 57% of employees are highly satisfied with their employers' recognition programs. Whether they clock in or have an office offsite, employees want to feel appreciated for their role. They’re also asking more from employers, including improved access and opportunity for recognition. Recognition is key to employee growth and development.
Authentic Leadership
Authentic leadership builds trust and loyalty. Employees are drawn to transparent and empathetic leaders who communicate how each contributor’s work impacts the company’s overall goals. Through an HR health check, companies can assess leadership styles and ensure leaders foster a culture of openness and trust so employees feel invested in the company’s mission.
Effective Performance Review Processes: Drive Productivity and Accountability
Structured, regular employee performance reviews allow both employees and management to align on goals, expectations, and career development. An HR health check will evaluate whether your review processes are effective, timely, and balanced in delivering constructive feedback.
Key Performance Indicators (KPIs)
Clear KPIs are essential in measuring employee performance effectively and fairly. An HR health check helps companies identify which KPIs align with business goals and determine if they provide actionable insights. Performance reviews should focus on both quantitative metrics and qualitative aspects like leadership, teamwork, and problem-solving abilities.
Two-Way Feedback and Open Communication
Modern performance reviews are no longer one-sided. Employees value leaders who listen to their feedback and implement meaningful changes. An HR health check can reveal whether these channels are utilized effectively and help establish open feedback systems that encourage transparency and continuous improvement.
The Bottom Line: HR Health Drives Portfolio Performance
For private equity and venture capital firms, a robust HR health check performed by an experienced team is a strategic investment that can boost portfolio company performance. Trust Growth Operators to help you develop a resilient workforce by strengthening your company from within. Long-term success starts with a nextLEVEL® Assessment.
Book a 30-minute call today to learn more and start fortifying your people power.