Sack ‘em all (before they quit)

The proportion of Americans leaving their jobs voluntarily is at a 17-year high. A survey by Gallup in 2017 found that around half of American employees were hoping to leave their current job.

Some of this is cyclical. The unemployment rate is 3.9%, close to its lowest level in the past 50 years. Workers rightly think that it will be easy to find a new job. But there is also a structural problem in some industries. The hospitality sector, for example, is largely staffed by low-paid, low-skilled young people. In Britain the industry’s annual job turnover is as high as 90%, says Polina Montano, co-founder of Job Today, an app that links employers with potential workers.

It is tempting to blame this restlessness on millennials—people who reached adulthood after 2000 and who are sometimes portrayed as being less committed to their careers than their seniors. Another Gallup survey, this one in 2016, found that 21% of the American millennial cohort had changed jobs within the previous 12 months. But in fact workers aged 25 to 34 have always had the shortest average job tenure, at around three years. The low for this measure, at 2.6 years, was reached back in 2000, when the first millennials were starting college.

High turnover is not great news for employers. Nick South of the Boston Consulting Group says a certain amount of churn is good for bringing fresh blood into a company. But anything over 20% a year can be disruptive. Even in low-skilled jobs, replacing workers can be expensive. The post must be advertised; managers spend time interviewing; new workers take a while to learn the ropes.

The costs are particularly large for high-skilled workers. A survey in 2016 by Deloitte, suggested that a combination of hiring costs and lost productivity added up to $121,000 per departing employee. Figures from the second quarter of 2018 showed that employee turnover in the American software sector was running at an annual rate of 24%, with two-thirds of those workers leaving voluntarily. That must be a problem given the difficulties in recruitment. A survey in 2018 by Manpower found that global talent shortages were at their highest since the employment agency began collecting the statistics in 2006. Two-thirds of large organisations said they could not find workers with the right skills.

So how can companies hang on to their staff? An obvious answer would be to pay more than the competition. Despite low unemployment, overall wage growth has not risen much in America, perhaps because a large army of discouraged low-skilled workers have been rejoining the labour force. Given the shortage of high-skilled workers, those employees ought to be in a strong negotiating position, but even among them there is little sign of a surge in compensation.

Another approach is to convince employees that the company has a positive social impact. The idea that a business can help a community wider than just shareholders and customers has been dubbed “inclusive growth”. It may sound woolly but, according to a new survey by Deloitte, 38% of businesses have found that inclusive-growth initiatives boost employee engagement, encourage them to stay and bring more talent in.

Technology can also help managers to spot particular individuals who might be planning to quit, and to head off the problem with some well-chosen words of encouragement or improved benefits; some Silicon Valley firms are looking into this approach. One academic paper* looked at the language people used when communicating with colleagues, and how closely they cleaved to the linguistic style of their organisations, a process the authors call the “enculturation trajectory”. (In academia, business-school professors will fit in only when they start to use terms like enculturation trajectory.)

The survey looked at over 10m emails exchanged over five years at an American tech firm. It found that new employees who were slow to learn the corporate lingo were more likely to get fired, and that long-lasting employees who veered away from the culture in their messages were more likely to quit for another job. But this raises the Orwellian prospect of managers using artificial intelligence to comb through employees’ emails. Instead, to make an old-fashioned suggestion, they could just stop by their desks for a chat.

* “Enculturation Trajectories: Language, Cultural Adaptation, and Individual Outcomes in Organisations” by Sameer B Srivastava, Amir Goldberg, V Govind Manian and Christopher Potts

This article first appeared in the Economist


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We will fight for a world where everyone feels safe, valued, able to grow, and be inspired by their role and the organisation that they work for. And that starts with us…