The Challenge of Retaining Talent: 4 Reasons Why Employees Quit

Monday, August 27, 2018
Catherine Morin

An estimated 42 million American employees will leave their jobs in 2018, according to a national study conducted by Work Institute. With staff turnover reaching a 10-year high nationwide, the employee-driven marketplace calls for executives and managers to improve retention strategies proactively.

Keeping top talent from leaving organizations in search of other opportunities starts with understanding the reasons behind what drives employees to move on.

A recent report by Compdata Survey & Consulting reveals that employee turnover in America has increased in recent years, rising from 15% in 2013 to 18.5% in 2017. Voluntary turnover, which occurs when employees willingly choose to leave their positions, was reported at 13.5% in 2017, compared to 9% in 2012. 

Frequent turnover has become the new normal in several industries across the country, and companies are increasingly concerned about retaining good employees. While some turnover is necessary for an organization to thrive, an excessive rate of replacement can have a negative impact on workplace productivity and atmosphere.

Consequences of High Employee Turnover

Employee turnover results in a major loss of trained and experienced staff that know the goals and policies of the organization and their roles in reaching these objectives. New employees need time to learn these duties, inevitably leading to production loss, which in turn equates to money loss.

 A study conducted by the Society of Human Resource Management shows that employers often spend six to nine months of an employee’s salary to find and train a substitute. For a worker making $60 000 per year, for example, that represents  $30 000 to $45 000 in recruiting and training costs.

High staff turnover can also have emotional implications for the remaining workforce. Good relationships are critical to an employee’s satisfaction with their job.  As friends and coworkers leave, remaining employees continuously have to go through the process of getting to know new people, which can significantly affect their morale.

It can be difficult for workers to stay motivated and perform at high levels when colleagues are vanishing all around them. A lack of trained and active workforce leads to increased workloads and responsibilities for the remaining staff. Picking up the slack for departed coworkers often results in exhaustion and frustration. 

New employees can also suffer from low morale as they struggle to learn new procedures and duties.

4 Causes of High Staff Turnover

While many analysts link the current increase in job turnover to economic growth, there are other factors that employers can control to minimize the impacts of this trend.

1. More Opportunities

In 2008, the United States’ economy collapsed, leaving the country in its worst financial state since the Great Depression of the early 1930s.While some Americans still carry the scars from this downturn a decade later, most metrics show that the economy has recovered significantly and is still growing steadily. This expansion has opened up new job opportunities. 

According to the Labor Department, the number of job openings in the United States currently exceeds the number of unemployed Americans. Job openings rose to 6.7 million at the end of April, compared with 6.3 million people who were unemployed. It is the first time such an event has happened since the US government began tracking this data in 2000.  

According to a business report conducted In July 2009, as the Great Recession was officially ending, there were on average 7 unemployed people for each job opening. Today, this ratio has narrowed to only 0.94 people per available position.

There is technically an available position for everyone who wants one ─ and more. More jobs means more choice for workers who are looking for the right company fit.

More work could be responsible for employees feeling more confident about leaving their current positions for better ones. If an organization isn’t a good fit, it’s no longer the only option. Workers are more likely to look for other opportunities.

While changes in the economy are not under the control of employers, internal factors can also contribute to high staff turnover.

2. Bad Management

A 2017 Gallup poll of more than 1 million American workers found that the main reason people leave their job is a bad manager or immediate supervisor. Nearly 75% of workers who resigned voluntarily did so because of their bosses and not the position itself.

While employees do not have to be friends with their boss, they need to have a relationship that revolves around mutual respect. Dysfunctional relationships between supervisors and subordinates can have disastrous effects on employees’ morale. A toxic relationship in the workplace is just as bad as one in your own home.

Regardless of how good a job may be, people will quit if their relationship with their boss is unhealthy.

Good bosses know and value the unique abilities of their employees, and learn how to best integrate them into an effective action plan to maximize productivity. They define and communicate clearly specific objectives with their staff. They empower employees by delegating responsibilities and sharing knowledge.

Some bosses give overly detailed directions on how tasks should be completed and constantly try to control their employees. Lack of freedom in the workplace can be a detrimental reason for employees moving on to another job.   

How Managers Handle Stress is a Huge Game Changer

Professionals need feedback on their performance and constructive advice they can use to improve their work. Recognition for a well-executed job is also critical for staff retention. Employees can quickly get frustrated and disheartened if their boss never provides positive feedback, fails to recognize their performance or takes credit for their work.

Managers who value staff retention help employees expand their abilities. They give their team members the opportunity to take on new projects, discover new work tools and earn professional accreditations. Many talented employees quit because they feel like there is no opportunity for advancement in their current position.

Great leaders motivate employees and help them optimize their performance. Workers should be able to come to their boss when they need support or worry that something is about to go wrong.  If they feel intimidated by a manager with a short temper and an impatient attitude, they’re probably going to want to look for a new job.

While managers need to think carefully about how they treat their employees, they often experience a lot of stress themselves.

They may feel constant pressure from the higher-ups and emotionally drained from always trying to keep their staff engaged while achieving targets. They may eventually start taking that stress out on employees, which can ironically result in steadily decreasing engagement and productivity.

Some managers worry so much about losing their position that they simply follow orders without standing up for their team or questioning the enterprise’s policies.

Such stress-induced behaviors often pertain to the workplace culture.

3. Bad Workplace Culture

The concept of a workplace culture encompasses a company’s norms, values, overall mission, business plan and working environment. Business owners and executives set the pace for creating and refining the organization’s culture.

Corporate culture has a lot do to with how employees experience their professional life.

Companies with a good culture are able to meet their objectives while making their employees feel valued and satisfied with their work. These organizations tend to have a more productive workforce and lower employee turnover rates.

Businesses that cannot provide such positive environments often suffer from low employee morale, becoming undesirable places to work with high a turnover rate.

Transparency is Key

Employees may like their job, but consider that the corporate culture does not match their values. For example, if an organization has a culture of fear and mistrust, workers may have an unpleasant daily experience going to work despite how they feel about their own position.

Most people can agree that they appreciate a workplace in which management is accessible, communication is transparent, executives are respected and approachable and the objectives are clear and understood.

Employees need to feel that they are part of an effort that is larger than just their job and that they matter in the larger picture of a company. To be able to connect their work to the bigger picture, they need to understand the organization’s vision, mission and overall plan.

Many workers want to resign because they do not see how their work contributes to the company’s advancement. To retain employees, managers must help them see that their job leads to the achievement of specific goals that make a difference.

In a  survey conducted by Bevery Kaye and Sharon Jordan-Evans for their book on employee retention, Love’em or Lose’em, having a great work environment and company culture is listed in the top ten reasons why employees stay with an organization.

For example, wireless retailer The Cellular Connection discovered that while only 44% of their employees initially chose to work for the company for its positive culture, over 82 % say it is a contributing factor in staying.

4. Insufficient Salary

Recent data from Glassdoor, one of the world’s largest employment and job review sites, reveals that 45% of recruiting managers cite salary as one of the main reasons why employees change jobs. The survey, conducted among 750 hiring decision-makers in the United States and the United Kingdom, also suggests that salary is the most influential factor for a job seeker’s decision on where to work. 

This raises the question of whether salary range information should be included in job descriptions. Even though pay can be a big motivator when applying for a  job, Glassdoor’s own research found that fewer than 1 in 10 online job listings include pay data.

“If candidates were better informed about how their pay and career could progress during the initial job search and recruiting process, they would be less likely to take a job that turns out to be a bad fit,” says Carmel Galvin, Chief Human Resources Officer at Glassdoor.

She thinks that companies could reduce employee turnover by taking the time to communicate salary with potential candidates and to ensure pay realities meet expectations.

It is not crazy to assume that the abundance of job openings will soon give workers who do not feel well compensated more leverage to demand pay raises. Employers should therefore regularly benchmark salaries against those of other companies in their industry to make sure they maintain a competitive pay structure.

Effective Employee Retention Strategies

Organizations that rank high in employee retention are often some of the most profitable and successful businesses.

Colossal chocolate and snack food empire Mars Inc. is renowned for its high employee retention rate. With $35 billion in annual revenue in 2017 from brands including M&M’s, Snickers, Wrigley’s Juicy Fruit and Lifesavers, it is the third largest private company in the United States.

 Recent data from Great Place to Work shows that 86% of Mars Inc.’s say their workplace is great.

The 100% family-owned business believes that the key to success is to focus on employee satisfaction and well-being. Mars creates a cohesive culture across its multiple offices and is committed to creating a positive environment not only for its staff but for everyone the company touches.

Several internal programs reward employees for embracing the company’s key principles and concepts that define its culture.

Generous bonuses paid time off for community service, transparent financials and competitive internships help keep the business’ staff turnover to around 5% in the United States. 5%, that’s nuts! Many families have even had multiple generations working for the company.

Mars even offers some unusual (yet company appropriate) perks, like vending machines that dispense free candy all day long.

 To give its associates a sense of direction and purpose, Mars makes sure to provide true mentors to help with career development and integration to the company and industry.

High employee retention is also achievable in smaller businesses. While the restaurant industry has a notoriously high staff renewal rate, a 35-year-old fast food chain shows impressive employee engagement.  

Pal’s Sudden Service, a drive-thru burger chain based in Kingsport, Tennessee, has a 1.4% turnover rate for assistant managers and above, which is extremely low for a field where people usually jump from company to company. Among front-line workers, turnover is only one-third of the industry’s average.

In 35 years of operation, only seven general managers have left the company voluntarily. 

A case study conducted by the Harvard Business Review reveals that Pal’s “hires for attitude and trains for skill,” which is atypical in the restaurant industry.

Almost 90% of Pal’s employees work part-time, and 40% are between the ages of 16 to 18. Given the complexity of managing this segment of the demographic, the hiring process begins with a psychometric screener to see how well candidates align with the characteristics of Pal’s most talented employees. 

Every employee has to go through 120 hours of training before starting a new position and must be certified in each of the specific tasks they perform. Every day, a computer randomly generates the names of two to four employees to be recertified in one of their jobs by taking a small quiz. If they fail, they have to get retrained for that job before they can perform it again.

 “People go out of calibration just like machines go out of calibration,” CEO Thomas Crosby explains. “So we are always training, always teaching, always coaching. If you want people to succeed, you have to be willing to teach them.”

An Important Step

Understanding the causes of staff turnover is an important first step toward retaining talented employees. While the successful economy and growing job marketplace allow a large percentage of workers to make career moves, well-informed employers can prevent turnover by using effective management strategies, developing a positive corporate culture and offering competitive wages and benefits.