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5 Best Predictors of Employee Turnover and What Leaders Should Do About Them

Know what to do before you need to act.

Hiring and motivating your employees is more important and challenging than ever. With 47 million people quitting their jobs in 2021, a 3.6 percent unemployment rate in April 2022, and 11.5 million jobs open in March, it is imperative that business leaders attract and keep top talent.

If I were trying to help business leaders with this problem, I would study the sources of employee turnover and try to uncover how companies with the highest employee retention rates manage their employees.

To investigate what was causing all the resignations, the co-authors analyzed over 1.4 million Glassdoor reviews of the companies they studied. They counted “how frequently employees mentioned 172 topics and how positively they talked about each topic.” From there, they pinpointed which “topics best predicted a company’s industry-adjusted attrition rate,” according to SMR.

5 Biggest Predictors of Employee Turnover

Employee turnover is driven most powerfully by a toxic culture rather than dissatisfying pay — which ranks 16th among topics in predicting employee turnover.

Here are the five biggest predictors of employee turnover during the Great Resignation, according to SMR, and how much more important they are than compensation:

  • Toxic corporate culture (10.4 times more important than compensation in predicting turnover). A toxic corporate culture — meaning “failure to promote diversity, equity, and inclusion; workers feeling disrespected; and unethical behavior” — is the leading driver of employee exits.
  • Job insecurity and reorganization (3.5x). When companies face bleak prospects, they often lay off and reorganize employees. Employees in such companies — expecting either being managed out or, if not, being required to take on a heavier workload — are more likely to jump ship.
  • High levels of innovation (3.2x). The most surprising finding of this research is that the more employees talked positively about innovation, the more likely they were to quit. The reason could be that with innovation comes longer hours, a faster work pace, and poor work-life balance.
  • Failure to recognize performance (2.9x). High-performing employees are the most likely to resent a lack of recognition for their results. Companies that fail to recognize — informally and financially — their higher productivity suffer from higher turnover.
  • Poor response to Covid-19 (1.8x). Employees who mentioned Covid-19 more frequently or described negatively their company’s response to the pandemic were more likely to quit.

4 Short-Term Actions to Boost Retention

While it is difficult for any company to change its culture quickly, SMR identified four short-term actions that managers can take to reduce attrition.

Here are the four actions ranked according to how well each action boosts a company’s relative retention rate compared with compensation.

  • Provide opportunities for lateral job moves (2.5 times more important than compensation in predicting relative retention). “When employees talk positively about lateral opportunities — new jobs offering fresh challenges without a promotion — they are less likely to quit. Lateral career opportunities are 12 times more predictive of employee retention than promotions,” noted SMR.
  • Offer remote work options (1.5x). Offering remote work options helps boost retention — however, if industry rivals copy those options, they will not boost employee retention on their own.
  • Sponsor corporate social events (1.3x). Organizing corporate events — “happy hours, team-building excursions, and potluck dinners,” according to SMR — are effective ways to retain employees though difficult if people are working from home.
  • Make schedules more predictable for frontline employees (1.2x). While this works well for blue color workers it is not effective for white collar employees.

On the basis of my experience in management consulting, I think the most innovative companies will keep attracting top talent despite their higher turnover. For more sedate companies, doing these four things will help boost worker retention.

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