Turnover & Retention
Understanding and Reducing Voluntary Turnover
Voluntary turnover has been the subject of much scrutiny, both by organizations and by researchers. Voluntary turnover occurs when employees leave the organization deliberately (i.e. quitting); this can be contrasted with involuntary turnover, which occurs when employees leaving the organization without choosing to do so (i.e. being fired or laid off).
More effective prediction and prevention of turnover is highly valuable to organizations because the cost of replacing an employee can be extraordinary – around ½ to 2x the employee’s first-year salary. However, despite the large amounts of time and energy that have been invested in trying to understand why employees quit, there is still much that is not understood about the turnover process.
What We Do Know About Turnover
What researchers and organizations are learning is that there are many different “paths” that employees may take when they quit a job. The “standard model” of turnover – what people traditionally associate with “quitting” – occurs when an employee is dissatisfied with his or her current job, so he or she initiates a job search and quits when a suitable replacement is found.
New research indicates, however, that this standard model is often more of an exception than the rule when explaining why and how an employee quits his or her job. In fact, one study found that 23% of turnover occurred as a result of unsolicited job offers – when an employee is sought out by another organization and offered a more attractive position.
Another important factor that contributes to voluntary turnover is the condition of the labor market. When unemployment rates are high, employees are more likely to continue working a job that they are dissatisfied with. When unemployment rates are low, job satisfaction becomes more influential, and employees are more likely to seek new employment if they are dissatisfied with their current job.
There are four distinct paths that employees may take when exiting the organization through voluntary turnover.
- Path 1: Dissatisfaction → Search for a new job → Quit. These individuals are unsatisfied with their current job and quit after searching for and finding a new job. This path represents the “standard model” of turnover.
- Path 2: Dissatisfaction → Quit → No new job → Search. These employees are dissatisfied with their current job, but quit before initiating a job search. This may be because they feel it is more efficient to job search while unemployed, or because of unbearable working conditions or impulsiveness.
- Path 3: No search → New job → Quit. These individuals receive an unsolicited job offer and then quit in order to accept the new position. Often, these employees are relatively satisfied with their current job, but the new offer is more enticing.
- Path 4: Quit → No new job → No search. These are employees who leave the workforce altogether. This type of exit is often associated with pregnancy or other family-related issues. Job dissatisfaction may play a role in whether the individual decides to quit, but is not a primary factor.
The most important point that employers can take away from this information is to be aware of the most common types of turnover within your organization. This can be done by conducting exit interviews or surveying departing employees. This information can then be used to focus employee retention strategies to minimize future turnover.
- If the most common exit paths are job satisfaction-related, as in Paths 1 and 2, then efforts should be focused on monitoring and increasing employee job satisfaction. Organizations can monitor the satisfaction of their employees by using surveys or interviews, and also by encouraging communication between managers and subordinates.
- If employees are being drawn away by more attractive job offers from other employers (Path 3), resources can be devoted to more actively managing salary increases, career paths, promotion and training opportunities and making positions more competitive.
- If employees are leaving because of family or other personal reasons (Path 4), employers should consider implementing “employee-friendly” policies, such as flexible work arrangements, childcare, or other employee assistance services.
By determining the most common reasons employees leave the organization, employers can use resources more effectively to reduce voluntary employee turnover.
The DeGarmo Group
This was a summary of the research and practice implications from: Lee, T.H., Gerhart, B., Weller, I., Trevor, C.O. (2008). Understanding voluntary turnover: Path-specific job satisfaction effects and the importance of unsolicited job offers. Academy of Management Journal, 51 (4), 651-671.