Employees leave employers for many reasons. A certain level of employee turnover can be expected for reasons over which the employer has little or no control. For example, individuals may choose to further their education, relocate to another community, get married or change their life priorities. People may also leave because another organization offers more salary and/or benefits; or a more engaging job prospect. These reasons are understandable and, likely acceptable as long as the turnover percentage is not too high. Under normal circumstances, there is little need for concern over what is considered a normal turnover rate in your industry or community.
Competent employees who enthusiastically engage with your culture and the work you do are hard to find. Retaining the commitment of these employees should be a significant leadership and Human Resource priority. When talented employees leave, at least three negative messages race through the grapevine about Front Line Leaders and/or the senior leadership team itself:
- They do not treat talented people well,
- Pronouncements about being competitive in its salary and benefit programs are just lip service, and
- Hype, promoting walking-the-talk about its Values and Guiding Behaviours, are just meaningless words.
The rumour mill is reinforced with negative messages, about your Positive Employee Relations program, every time a good performer leaves. So, why do good performers leave for reasons that are ostensibly in the employer’s control? The reasons can be categorized around three topics, in order of priority:
- relationships, and
The concept of careers may vary widely from company to company and from employee to employee. However, the universal underpinning of careers involves:
- a healthy and hopeful future,
- job expansion and/or advancement,
- breadth of job responsibilities,
- degree of authority and level of accountability,
- problem solving and decision-making,
- education or competency development, and
- innovation and creativity.
Front Line leaders and next-level managers should dismiss the false premise that the concept of career applies only to individuals in technical, professional and/or leadership roles. The desire for a positive and hopeful job future, regardless of position, is a universal truth.
There are four key reasons behind relationships leading to employee departures:
- Relationships with the Front Line leader. If the relationship with a Front Line leader is not built on a foundation of mutual respect, trust, and transparency, it is doomed to repetitive cycles of dysfunctional behaviours. For example, if such a scenario where to take place and a qualified employee where promoted, the negative consequences can still include:
- lack of respect for one’s leader,
- long-term personal bitterness and regrets, unacceptable performance and unfulfilled potential, and
- in extreme cases, actively-dysfunctional behaviour such as white-collar crimes or industrial sabotage.
When characterized by little mutual respect and trust, an employee’s working relationship with a Front Line leader is forced into one of compromised Values. The resulting dysfunctional norms often cause the employee to behave in ways that may satisfy their Front Line leader while conflicting with their own beliefs. In such a stilted relationship, creativity, innovation and free-and-easy dialogue become much more difficult – if not impossible. By instinct, the employee must guard against spontaneity as this may overstep the unwritten norms of the relationship.
- Mentoring/coaching relationships. Mutual respect is essential for the success of coaching and mentoring programs. Without respect, why would anyone place their career progression in the hands of their next-level manager or their organization? Respect transcends performance. Regardless of how successful the employee is, if the relationship doesn’t move beyond the simplistic black-and-white of performance, neither the employee nor the Front Line leader is going to give wholehearted commitment to the process. The investment in coaching and mentoring is both professional and personal; without the give and take inherent in respectful and trusting relationships, the dynamic will not work.
- Peer relationships. A study of at-work relationships also includes employees’ interactions with their peers. Most people seek collaboration, not competition, with their colleagues.
A work environment where competition is supported by senior leaders frequently leaves employees on their own, fending for themselves with little support, no advice on past experiences, and no synergy. Information is power and there is no benefit in sharing that information, not even for the good of the organization. Why? Because the employer is always a secondary priority; an individual’s career aspirations and achievements are the first priority. Competition – for its own sake - within the organization, develops silos and prompts team players to leave.
- Hostile relationships If a Front Line leader cannot make a positive and sustained difference in the performance of his/her job because of hostilities between:
- themselves and other Front Line leaders,
- themselves and next-level managers,
- themselves and charismatic employees, or
- employees and employees,
The Front Line leader’s long-term relationships are immediately questionable. If the time and energy necessary for a turnaround is significant, a newly-hired Front Line leader may leave.
Most people would want to leave an environment that is hostile to the intentions of management, internally competitive, or lacking in respect and trust among peers. Employees, irrespective of their status in the hierarchy, may stay long enough to gain specific experience, training or a title that will embellish their resume. However, they will always be another turnover statistic waiting to happen.
In the case of a newly-hired employee, compensation should never be the primary cause of voluntary departure. Front Line leaders should have confidence in the salary/wage and benefit systems and believe the higher rate is competitive and acceptable to the employee. If not, the employee would have negotiated further, not accepted the position in the first place, or unfortunately has accepted the position under false pretences.
An employer who lowers the hire rate in a labour market where there are more candidates than jobs is buying a short-term gain that will lead to long-term pain. The ethical reality of such a situation is so poor that turnover may be the employer’s naive strategy for union avoidance. Such behaviours are grounded in greed, not Positive Employee Relations.
In most organizations sound compensation practices are based on internal comparisons and evaluations of positions and a study of compensation in the community to determine salary ranges.
When an organization, with generally sound compensation practices, is experiencing economic-driven employee turnover, senior leadership should address:
- Is compensation based on an accurate comparison with your industry and the geographic labour market?
- Where was the comparison line drawn — at the 50th percentile or at the 75th percentile?
- Are wage/salary determinations made equitably based on a reasonable assessment of performance and potential?
The technology to determine marketplace compensation ranges is well within the capabilities of most organizations. A sound compensation strategy requires a judgment call to be made by the senior leadership team regarding which survey data to use and which percentile to benchmark. In other words, how competitive do you wish to be in your labour market?
Objectively, this decision is linked to the organization’s Values, its Strategic Business Plan and the calibre (e.g. competency levels, advancement potential, etc.) of employees it wishes to recruit and retain. Unfortunately, the decision regarding percentile is often influenced more by short-term financial results than by a long-term business strategy. Lowering the percentile, for example, from the 75th to the 50th, will impact positively the bottom line in the short-term. Such a tactic will negatively impact employees’ bottom line (their take home pay).
If there is a positive goodwill balance in the organization’s ‘trust and respect’ account with the employees, the event may pass, in the short term, with little more than a brief explanation. However, if the organization’s ‘trust and respect’ account is in arrears, employees will likely have little sympathy for such a move and the top performers will begin to contemplate leaving. Once good will leaves the relationship, mediocrity is a normal outcome.
If the organization’s ‘trust and respect’ account is in arrears, employees will likely have little sympathy for such a move and the top performers will begin to contemplate leaving. This is another example of an outcome that leads to mediocrity. If the resulting dissatisfaction has great significance, the result will have more negative consequences – signing union membership cards.
If the compensation rates are appropriate (competitive within your community and industry), one of the main reasons employees voluntarily terminate is the method used to evaluate the worth of their past year’s performance. The process is likely disrespectful and/or insensitive to the individual’s perception of his/her contribution. Also, there is the potential that the employee’s performance was measured against difficult to define subjective factors (e.g. flexibility, dependability, adaptability, etc.) versus objective Performance Standards.
Assuming most employees, most of the time, are willing to perform their job responsibilities well (or at least as well as they have been trained to do), tying a salary adjustment solely to a Performance Appraisal is problematic. Why? In many cases the size of the organization’s compensation budget is determined by many over-riding financial and economic factors that influence the bottom line before the employees’ contributions are considered. This means an employee who performed at an above-standard level of accomplishment may receive an increase of one or two percentage points above the rise in inflation or the cost of living.
From the employee’s perspective, performance assessed at above standard is an endorsement of a personal and professional accomplishment. To then be told the reward for such an achievement is only a percentage or two above the norm is demoralizing, no matter how empathetic the Front Line leader may be. Without a cogent explanation by senior leadership, the employee has a limited number of options. The employee can leave to find a better-paying job; stay and try for more financial rewards, next year; or stay to become dissatisfied and turn against the organisation.
In two out of the three scenarios, the employer loses.