Project Experience

Manufacturing…The Loss of Key Players May Signal Significant Inner Turmoil

Client Situation
When a company loses its technology people or experiences the sudden, unexpected loss of a top-level executive, it raises a red flag to the business world and may indicate turmoil within the walls of the company. As a result, Wall Street watches such events very closely. In one instance, there were three major worldwide producers of a high-tech, low-volume, and high-margin product. One of these companies was suddenly having trouble keeping its engineers, who were steadily defecting to one of the other two companies. Recent press releases revealed that the company was in financial trouble, but one competitor hired us to look more closely at the reasons behind the high turnover rate.

Fuld Approach
We began by studying salary structures by region and business unit. We discovered that the company had been experiencing problems retaining engineers ever since it had moved its development function to the West coast a few years earlier. Not only was the new location in a high cost of living area, it was also far from the company's corporate headquarters on the East coast limiting effective communication efforts.

Benefits and Implications
The move had upset the company's strategy. With only three competitors in the market, employees who feared for the health of the company looked for positions within the competitor organizations. A simple miscalculation in plant location had snowballed into widespread problems in the companies operations. For more information on analyzing star defections in the manufacturing industry, contactnbulger@fuld.com.