Retention and Turnover in North America: Is it an issue for your employer?

Did you quit your job recently? Are you about to? Know people on their way out? Considering your options? You’ve probably noticed you’re not alone. Retention is falling and turnover is rising everywhere in the U.S. workforce as record numbers of employees leave their jobs. And while turnover is costing employers, the responses aren’t keeping up.

As headhunters that work closely across North America, we’ve seen a lot and looked up a few things (read on) but most of all we need your story and your views.

What we’re hearing from you

“The work-life balance was terrible and the hours were ridiculous.”

“The decisions about promotions made zero sense.”

“Nobody knows what they're doing in this office and nobody cares.” 

“My manager either ignored me or criticised me at every chance he had until I left. He got promoted and his supervisor was given a management award.” 

“My office had a lot of white male bullies in charge. A lot of women and LGBTQ people have left.” 

“My supervisor pretended to be my friend but kept passing me over for promotion while telling me what a good job I was doing”

“I was assigned more work than I could actually do and then my reviewers were unhappy with the quality of the work done under the conditions.”

“People are constantly leaving, putting inexperienced people in charge of work they’re not qualified to do. These people then get blamed for mistakes they made because they weren’t trained and didn’t have the experience.”

“I rage-quit after getting verbally abused for the last time about a report I researched and wrote.”

“I withdrew my application after I heard the horror stories and saw the Glassdoor reviews for that employer.”

Sound familiar?

As recruiters we’ve talked to a lot of you. The analysts, researchers, staff members at U.S. financial and professional services firms looking for our help to scout for a better opportunity. We’re on the phone with you every day giving you a hand with your search. 

We’ve heard it all (we think – but keep it coming). But generally you want to grow more, do more, feel more secure—and more agile. Maybe you’re looking for more flexibility, a better way to balance work with life and adulting. Maybe you want a better manager, better organisation, more training, better pay, better benefits, more ownership in the work. Or all of that, just a better situation overall. You know there’s more out there. You’re not alone, and we’re here to help connect you and your friends.

So keep talking to us and keep putting us in touch with your colleagues. We like hearing from you. We want to help you and we’ll keep doing all we can.

What we’re hearing from them

We’ve also talked to your employers – past, present, and future. They’re looking for you or trying to fill your shoes in the job you just left. It’s not easy for them either, by the way. We’re seeing a lot of management consulting firms in particular that struggle to retain staff—although those with a multidisciplinary service offering and those that focus on complex client projects seem to do better.

We’re not sure why so many firms struggle and why some do better than others. The employers themselves may not know. Is your employer asking why people leave? If not, they probably don’t know.

What’s going on?

It depends you who ask. We hope you’ll give us your take. And we hope your employer is looking at it too. Every place is unique. 

But generally workers in the United States are leaving their jobs at increasingly high rates (which the Society for Human Resource Management, a professional association in Virginia, says has risen every year since 2010).

In May 2018, the Work Institute, a workplace research and consulting firm in Tennessee, said a good economy has helped. The firm says there are also more skilled jobs open than there are workers to fill them because of declining population growth, lower labor force participation, and increased job growth.

So employers can’t always hire unemployed people because there aren’t many. They have to poach sometimes these days.

Quit rates rising

A 2019 study by TINYpulse, an employee engagement software company in Washington state, is called “The End of Employee Loyalty” and finds that 43 percent of employees would leave their jobs for a 10% raise. It says “weak company cultures are to blame” and includes a lot of other finds on the lack of awareness from leadership, lack of direction and recognition, and the impact of manager support on employee engagement. That’s engagement, not necessarily retention, but it’s related. 

On a similar note, the Work Institute predicted that more than one in four employees would quit in 2018. The institute estimated that by 2020 one in three workers would quit their jobs. We may be close to that point now.

A third of U.S. workers seriously considered quitting their jobs in the previous three months, according to a CNBC/SurveyMonkey Workplace Happiness Survey from June 2019. The people surveyed said they feel underpaid, undervalued, and unable to grow. Many of them want more autonomy in the work, better technology, maybe a mentor. 

Don’t believe us on the rising quit rate? Go nerd out and crunch your own numbers with the U.S. Bureau of Labor Statistics. You know you want to. Head for the appropriately-named JOLTS page (for Job Openings and Labor Turnover Study). Find the one-screen data search, select your data, and hit run. We looked at the information, financial, and professional services sectors.

Fun fact: First-year employees are most likely to leave and cost the company the most, according to the Work Institute’s 2017 retention report.

The cost

How much does this turnover cost a company? Nobody knows exactly. There appear to be no recent authoritative public estimates. But here’s what we do know.

In March 2019, Gallup estimated that employee quits cost U.S. businesses $1 trillion. 

Other estimates are lower. The 2018 Work Institute study estimated that turnover would cost U.S. businesses more than $600 billion in 2018 and approximately $680 in 2020, an increase of 19 percent from 2017 (p. 33).

The 2018 study also notes that each lost employee cost the company 33 percent of the employee’s base pay. The 33 percent figure appears to have come from the institute’s 2017 study, which added that cost estimates for individuals quitting have ranged from $4,000 per person to 1.5 times the employee’s salary (p. 9). Gallup estimates, “conservatively, that it costs between 1.5 and 2 times an employee’s salary to replace him or her.

There are other estimates on what it takes to replace an individual employee. A 2016 study by the Society for Human Resource Management found on average companies take 42 days and pay $4,129 to hire an employee (pages 16). 

A 2012 study by the Washington, DC-based Center for American Progress, a liberal public policy and advocacy group, found that businesses pay approximately a fifth of a worker’s salary to replace the worker. The same study also found that turnover costs for highly-compensated executive positions could be as high as 213 percent of the executive’s salary. 

Citing research from the 1990s (notes 6-8 on p. 107) the authors of a 2001 academic article wrote, “One well-known New York law firm estimates the replacement costs of an associate at as much as $200,000. A BusinessWeek study estimated the replacement costs alone are over $10,000 for about half of all jobs, and for 20 percent of all jobs are over $30,000. In a separate study, the Hay Group found replacement costs are about 50 to 60 percent of a person’s annual salary” (pages 96-97).

Multiple sources (example, example, example) cite a now-unavailable study by the Society for Human Resource Management that allegedly estimated the average cost for replacing a salaried employee to be about six to nine months’ salary. 

Bottom line: Turnover on the whole might cost U.S. businesses north of a trillion dollars. Individually, we don’t know what turnover costs a company, or what an individual quitting costs a given company, but it’s a lot. Multiplied by the rising rate of turnover. Which a company may or may not be measuring.

Why people quit

That’s them. Back to you. You know why you left already or will soon. What about the workforce generally? How common is your situation?

The Work Institute interviewed more than 234,000 people on why they quit for the 2018 report. Here are the 10 main reasons:

·     Career Development

·     Work-Life Balance

·     Manager Behaviour

·     Well-Being

·     Compensation & Benefits

·     Relocation

·     Job Characteristics

·     Involuntary (terminations or layoffs)

·     Retirement

·     Work Environment

Sound familiar?

Preventable

What’s more, the 2018 Work Institute study found that employers could have prevented 77 percent of the employees who quit in 2017 from leaving. Again, more than three-quarters of employee departures are preventable (the other quarter are employees who relocate, retire, are terminated, or are laid off). The institute adds, “Furthermore, the categories of reasons have not shifted significantly from 2016, which indicates that employers have not responded to a talent marketplace in which the employee is in control – and gaining power.” (p. 16)

Hear that? It’s an employee’s market. You have power, and it’s growing.

But is that your experience? Tell us.

Who’s talking about retention?

You are. To each other. At work. After work. In exit interviews. On social media. Sometimes on Glassdoor but not as much as you used to. 

Loop us in. We want to hear from you, your friends, your frenemies, your work bestie. 

Who else is talking?

Companies where you may want to work or know people. Like Deloitte. News outlets like Forbes. And HR vendors, consultants, and associations like these.

Tell us though, is your employer talking to you or anyone else about retention and turnover?

Tell us your story

Is retention an issue in your office? Brainstorm and sound off! Tell us what’s going on in the comments section below, why, who’s talking about it and who’s not, and most of all what you think should be done about it.

Ben Kinley is Managing Director of the global search firm Lawson Chase, a headhunting firm that works in the areas of: Wealth & Investment Management | Investigations, Forensics & Disputes | Corporate Governance | HR & Talent | Professional Services & Advisory | FinTech & Disruptive Technology. Find out more at www.lawsonchase.com