Personal Reasons and Compensation Rank as Top Turnover Causes

A recent U.S. analysis on the top reasons why employees leave companies points to compensation as the No. 2 reason, preceded only by “personal reasons/life changes.” Perhaps most striking was the differing perceptions about fair pay. Although 73% of employers believe that their employees are paid fairly, only 36% of employees feel they are paid fairly, according to Payscales.[i] 57% of employers are worried about retention.[ii]

Many studies have found that an organization’s ability to get pay right, that is pay competitively to the market, is critical for attracting and retaining great talent in tight labor markets—which is what we are seeing right now in the U.S. The importance of getting pay right is a familiar theme of Towers Watson research[iii] as well as academic research, such as the American Psychological Association for Organizational Excellence.[iv]

A San Francisco based recruiter told me last month that, for the first time in his career, a software engineer wanted to be paid his current hourly rate to interview with the recruiter’s client.  While Silicon Valley high tech firms aren’t giving out BMWs like they did during the dot.com bubble, there’s still a hot market for employees with the right skills. Job candidates have more means than ever before to gauge the employment market by using social Internet sites like Glassdoor.

The tight labor market isn’t letting up any time soon.

The robust U.S. job growth rate in February of 242,000, which was about 42,000 more than expected by economists, is a good sign of the continued persistence of the U.S. economy, despite the global oil slump and slow global economic growth[v]. Inflation remains low at about 1-2%. Wages and hours worked slightly dipped, but are increasing at about 2.4% annually. Still, there are 94 million people not in the job market, and it will probably take higher wages to attract them.

Pay Alone Does Not Provide the Full Answer.

There are those who point out that depending on pay alone to attract and retain employees is deceptively wrong. I am one of them. While companies need to pay competitively, including base pay, bonuses and incentives, they also need to engage with their workforce—especially their top talent. Your top employees drive the highest value for your business.

Employee engagement is key to retaining employees.

Leigh Branham in his book, The 7 Hidden Reasons Why Employees Leave, points out that the “First thing to realize is that employee turnover is not an event—it is really a process of disengagement that can take days, weeks, months or even years until the actual decision to leave occurs.”[vi]

His book is based on analyzing the surveys of the Saratoga Institute. He poignantly quotes the words of an accountant who resigned his post. “The very first day I started thinking of leaving. I was given an assignment, and I realized very quickly that I was not going to receive any mentoring or support.”  The research convinced Leigh that there is a 13 step process in the engagement-to-departure decision. While there’s not enough space here to go through all 13 steps, employee turnover begins with questioning the original decision to accept the job. Then, the employee moves on to seriously thinking about quitting, weighing the cost of quitting, the possibility of trying to change things, then resolving to quit and passively seeking another job. Leigh points out that, in some cases, employees disengage from the job but never leave the company.

Leigh argues in his book, and he has the research to back it up, that most of the reasons why employees leave have nothing to do with pay. Rather, employees leave because they are not feeling mentored or developed, they are ignored, or they have been passed over for key roles and promotions. Employee departures can also be triggered by a company merger or acquisition, change in boss, or the loss of a mentor. And, yes, leaving can also be about pay – pay always comes up higher as a reason for leaving in hot labor markets, where employers raise pay to compete for hard-to-find skills.

Should you pay attention to pay?

In this hot market, you would be a fool not to pay close attention to pay, and more often than just once a year. But, also pay attention to the engagement of your workforce – especially your top talent. If they don’t feel engaged and quit, you’ll have the expensive costs of turnover and replacement. Worse, perhaps, you’ll have employees who quit and stay—that can cost you nearly as much as turnover, but you may never be able to figure it out.

What has been your experience? Is pay the No. 1 reason that employees leave, or is it gradual disengagement? I would love to hear from you.

Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and is a Managing Partner of InnovationOne.US. He works with key decision makers and human resources leaders on talent management, leadership development and coaching, innovation, and other strategic initiatives. Please e-mail Victor at victorassad6@gmail.com or visitwww.victorhrconsultant.com. For innovation visit www.InnovationOne.US.

[i]“Escape to Comptopia: 2016 Compensation Best Practices Report,” Payscale Research Report. February, 2016. Found at https://hub.payscale.com/i/645228-payscales-2016-compensation-best-practices-report?utm_source=Marketo&utm_medium=Newsletter&utm_campaign=Mar2&utm_content=cbpr-flipbook&mkt_tok=3RkMMJWWfF9wsRonuavPeu%2FhmjTEU5z17%2B4oWqGwgp141El3fuXBP2XqjvpVQctqPL7YDBceEJhqyQJxPr3BLdcN1Nl2RhHqCA%3D%3D.

[ii] Ibid.

[iii] “The 2014 Global Workforce Study: Driving Engagement Through a Consumer Like Experience” (August 2014), Towers Watson. Found at www.towerswatson.com/en-US/Insights/IC-Types/Survey-Research-Results/2014/08/the-2014-global-workforce-study.

[iv] “Employee Recognition Survey” (August, 2014) American Psychological Association for Organization Excellence.

[v] Jeffrey Sparshott (Mar. 4 2016, 5:22 pm ET), “U.S. Employers Look Past Global Tumult: Strong hiring diminishes slack, but wages remain soft,” The Wall Street Journal. Found at http://www.wsj.com/articles/u-s-added-242-000-jobs-in-february-1457098501

[vi] Leigh Branham (2005) The 7 Reasons Why Employees Leave: How to Recognize the Subtle Signs and Act Before It’s Too Late. AMACOM, American Management Association, New York.

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