Why do people leave current jobs?
Despite what Jessie J said, it certainly looks like it might be about the price tag and the money. According to a recent Harvard Business Review most people have no idea whether they are paid fairly and, whilst there are reams of research data supporting employee engagement, very little focuses on a person’s primary reason for employment in the first place; getting paid. And open and honest discussion around pay was found to be more important than typical measures of employee engagement. This article will explore what this means for organisations and how ‘getting the money right’ is a catalyst for enhanced retention, engagement and performance.
When asked why people join and leave companies, employees will give many reasons – new career, opportunity to diversify and learn new skills, disenchantment in current role etc. – all of which have degrees of legitimacy. However, in recent research reports by the US not-for-profit group, WorldatWork, the consistent number one reason that employees move jobs is an “opportunity to earn more pay elsewhere”. Let’s develop this theme...
There is a natural churn in employees in all market sectors, 20% of employees actively looking at other employment opportunities, at any point in time, is not uncommon in many industries. In addition to the reasons listed above, economic pressures in recent years (downsizing, limited pay increases, bonus freezes) and an expectation of increased levels of employee performance for the same money has added to levels of frustration and an increased appetite for employees to look elsewhere. This has resulted in even greater churn rates.
It is also clear that the biggest challenge for management today is how to retain its key talent – those employees who are the strongest performers, have highest potential or are in critical jobs - is even more important during economic recoveries when organisations compete more aggressively for market share and talent.
Turnover is also costly (>50% of an individual employee’s salary to replace them) and, in itself, directly impacts business performance. As a result, reward professionals are under increased pressure to make counteroffers, increase new-hire offers, make more frequent exceptions to rewards policies and programmes and offer special deals to attract and retain key talent.
The 20-60-20 rule
Ray Silverstein defines the 20-60-20 rule as the top 20% of employees getting 80% of the work done with the rest done by the average employees (60%) and little if any done by the worst 20%. Furthermore, in a recent article calling for a focus on high performers, HR expert from San Francisco State University Dr John Sullivan says those high-performing workers can achieve as much as 12 times (will vary by industry) more than their average counterparts. Bottom line, high performers are the people who give discretionary effort and really move businesses forward.
In a recent article Josh Bersin supports this view and refers to these employees as hyper-performers who exist in all organisations. Their existence is one of the key challenges to the traditional views of performance management (PM) scores conforming to a normal distribution curve. Bersin argues that a more relevant distribution of PM scores should be the power law distribution which acknowledges that, for most organisations: a small number of hyper-performers account for a very high percentage of total business value; a broad range of average performers exist; and that a smaller number of low performers, whose contribution is minimal, form a significant part of the workforce.
The hyper-performers are the employees that companies need to attract, retain, empower and reward accordingly.
Most organisations will acknowledge that key employees will continuously search for better jobs (or be sought by recruiters) because they recognise their own abilities and know the value they deliver to their current employer. They understand the Power Law and the role of hyper-performers. If their remuneration does not reflect the value they believe they deliver, they will look elsewhere. They themselves know that their skills/ability are at a premium.
Furthermore, most organisations appreciate that the turnover of key talent is very expensive as it is not just the cost of employment (everyone is not equal), but the disproportionate level of productivity and value that this key talent delivers.
The majority of companies have a pretty clear definition of where their key talent is and acknowledge that their retention efforts are focused there rather than on the broader employee base. In the World@Work study, the most effective method for retaining key staff amongst respondents was to “pay key employees above the labour market”, primarily as cash.
Other interesting perspectives on ‘the money’ in the same recent Harvard Business Review article were:
A lack of understanding amongst employees of how they are paid relative to the market. Around two thirds of employees paid at market rates believe they are paid below market rates and about a third of employees paid above market rates also believe they are paid below.
Managers know that engaged employees are more effective. But, despite the vast amount of employee engagement research out there, very little of it focuses on a person’s primary reason for employment in the first place: getting paid.
One of the top predictors of employee sentiment, including “satisfaction” and “intent to leave,” is a company’s ability to communicate clearly about compensation and relativity to the market.
Open and honest discussion around pay was found to be more important than typical measures of employee engagement.
The key emerging themes are:
- A recognition that pay is the leading reason that employees join and leave organisations
- A disconnect between what employees are paid and what they believe are ‘fair market’ rates are for their equivalent role
- The criticality in attracting and retaining key talent – the hyper-performers
So, it is all about the money! Organisations need open and transparent discussions with all employees about their pay and relativity of this to the market in order to dispel the myths and uncertainties. Equally, companies need to recognise who their hyper-performers are (they themselves know who they are!) and the value (up to x12) they bring to a company’s performance. Their compensation needs to reflect the value they deliver. If not, there is a real danger they will vote with their feet and take their talent elsewhere.