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Staffing industry recruiting news, advice and thought leadership.

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Staffing industry recruiting news, advice and thought leadership.

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Layoffs and Voluntary Departures Induce Turnover

A study published by the Academy of Management tested the Turnover Event Theory (TET) which seeks to evaluate the effects of dismissals, layoff announcements, and voluntary turnover on teams. The study was conducted exclusively in the retail industry, (studying 1,620 retail stores over 22 months) but the results may very well apply to other industries and levels of workers. 

Researchers found that both high-performing and low-performing employees often responded quite differently to three different types of employee exits: layoffs, firings, and voluntary departures. An article by the Wall Street Journal analyzed the results. “The authors found high-performing employees—employees whose performance reviews ranked in the top 40%—were often much more affected by layoffs than low-performing employees, those in the bottom 40%. 

The attrition rate for high-performing employees increased by about a third to about 2% from 1.5% within six months of the layoff announcement. The attrition rate for low-performing employees, though, rose only modestly within six months of the layoff announcement, to about 2.15% from 2.01%.” 

This makes intuitive sense. If you suspect your company is in trouble, you’re smart to start forming a Plan B., even if your team wasn’t affected by the first round of layoffs. Savvy and high-performing workers will recognize that they should start testing the market early before they are in danger of being laid off. Middle to low performers, on the other hand, are not as confident about testing the market. They often think they’re safer in their current environment, where they have tenure and relationships that they hope will help them hang on longer. They’re often more risk-averse and hold out hope that some sort of severance will be offered (which they forfeit if they leave voluntarily.) Better to hang in there until the bitter end, they figure. 

Terminations tell another story. When companies dismiss a low performer for cause, the retention rate for high performers improves. Researchers found that the voluntary turnover rate among high performers actually fell slightly (to 1.43% from 1.5%) within six months. But the turnover rate for low performers increased over six months to 2.24% from 2.01%. Life probably got better for high performers, who no longer have to work around (or for) a problem employee, and who may be encouraged by the company taking action when it’s needed. They also may feel secure in their job if they know they are a top performer and not at risk. Low performers, on the other hand, see that the gig may be up soon for them as well. It makes sense to leave while it’s still their choice.  

Voluntary departures tended to inspire others to leave; the researchers found that high performers tended to follow other high performers out the door and low performers tended to do the same.  

What can a manager take away from this data? First, layoffs (including the rumors and threat of layoffs) can have a negative effect on the company, even among workers who aren’t directly affected. Strong communication is needed during this period to assuage fears and keep everyone informed of what is happening.  Failing to communicate clearly about what’s happening can make things worse. 

Regular check-ins with your top-tier talent are essential, even when the company isn’t going through a crisis. If you’ve just lost a top performer, you’d better check in with your other valued workers. Take time to ask how they’re feeling about their workload and the company culture; if one great employee was tempted to leave, others may be feeling the same way. 


Additional Resources: 

In our new book Relentless: Leading Through Performance, Relationships, and the Lessons of Sports, discusses the importance of communication, specifically Retention Interviews, as a strong retention tool.   

Retention interviews 

When good people leave, your team—and possibly the whole company—is diminished. But in my experience, the first time you usually hear why a good employee was open to another offer is when you get their two-week notice. Anything you learn at that point is useless. 

Even more useless is the concept of exit interviews. Most good employees will skip them. After all, if you were interested in what they had to say about their workplace and working conditions, wouldn’t you have asked a little earlier? 

The employees you’ll probably hear from are the ones who should be going (you’re glad they made the decision for you). They may very well show up for an exit interview, mostly to take revenge on everyone they feel is responsible for their bad experience. Axe grinding, pot stirring, and self-dealing are the best you can expect from these interviews. You either get nothing from these conversations because people have already checked out or you get the extreme opposite, which is an opportunity to roast you, which is usually less than helpful.  

The reality is you should be having conversations about employee satisfaction levels regularly, long before they have decided to leave. For some managers, that is a conversation they want to avoid; they are afraid they might hear something they’d prefer not to. What if your star performer wants to move on? What if they think your management style stinks? 

What if they do? Wouldn’t you rather know it before they give two weeks’ notice, when you could actually do something about it? 

Here’s why retention interviews (sometimes called “stay” interviews) are a good idea. First, they help you form stronger connections with your top performers. The retention interview is your chance to give specific feedback and appreciation in a meeting that’s not a performance evaluation, so it’s free of the tension and misgivings those meetings can be charged with. It can be a relaxed and more personal conversation, which will allow your employee to let down their guard and provide meaningful information. You might consider yearly meetings with your team members so you can identify issues before they start impacting morale and your ability to retain talent. 

A retention interview also lets top performers know they’re top performers—an overlooked and underused tool for retention. When you let an employee know that they’ve been noticed and pegged as high potential, they’re going to be less likely to leave and go to a company where they have to prove themselves all over again. This is your chance to let them know you see and appreciate their hard work and the results they’ve achieved. It’s an important addition to the public recognition I hope you’re also regularly investing in. 

Retention interviews also help you uncover talents or potential for growth you might never have the time or presence to notice during day-to-day operations. We often take our employees for granted, not noticing whether they’re actually happy doing what they’re doing. You might mistake meticulous reports every month for enjoyment in doing them, when your employee is actually chomping at the bit for more challenging work. This is your chance to ask what would make their job easier, what tasks might be better suited for another team member, and what you can do to keep them motivated. 

If you do enough regular retention interviews, you might also see patterns, such as a consensus on what makes the office a great place to work, or common frustrations that could be addressed. If you discover that information, fix what’s frustrating (right now), and tout what’s great about the team when you’re recruiting talent. 

You might be thinking of combining annual reviews with retention interviews. “I’m already meeting with them; I can just add a few retention questions to my agenda, right?” 

I say no, for a couple of reasons. For one thing, the two meetings have a very different focus. Annual reviews are just what they say they are: a look back at performance over the year. They focus on what you did: did you win the game or not? 

Retention interviews are focused on something very different: what do you want to achieve over the coming season, and what do you need to get there? Do you have goals I can help you achieve? What can I do to support you? (If you need more ideas on what to ask, there’s a list of retention questions at the end of the chapter.) 

I believe strongly in regular, scheduled retention interviews to stay on top of the needs of all of your employees to prevent them from leaving you for another opportunity. The idea is to get ahead of the dissatisfaction curve. 

You might also schedule a retention interview when you sense a change in attitude or performance. You don’t want the meeting to morph into an unproductive b*tching session, so you’ll need to be skillful in phrasing your questions and steering the conversation (there are some sample questions below). You’ll also need to do some careful thinking before the meeting about how you plan to use the feedback. Make sure you set realistic expectations about what you can and are willing to change so your employees don’t feel like they’ve wasted their time talking about things that can’t be fixed. 

About the Author:

Rich Thompson, CEO of XPG Recruit, is an expert on staffing, human resources, training and leadership development.  He is also a former All-Big Ten football player for the University of Wisconsin.  XPG Recruit provides recruiting for staffing companies.  The XPG Recruit Athlete division places former athletes into business careers and works closely with universities through its sister company, Podium X.