One common reaction when talking to people about attrition is, “Why worry about attrition? You cannot stop it, so just hire more or give everyone raises.”
We were once called into a meeting with the executive suite of a large BPO. The principal in charge of the call center stood up and slammed his hand down on the conference table, saying, “The only thing you can do about attrition is pay people more money, nothing else.” (We went on to lower their attrition between 15-30% with no additional pay increase). But of course, this is not always true. People who are consciously paying their staff significantly less (10-15%) than geographically similar companies will need to first address this imbalance.
Likewise, it is also possible to pay people at or above market rates and still have attrition. Why? What is going on? What is driving this behavior? Several studies have come out recently looking at the differences in attrition mean between public companies from an investor point of view provides some clues. One study * was conducted over a 28-year period encompassing many different economic cycles. It showed that companies who prioritized employee satisfaction and worked on retaining employees, consistently outperformed the market. Similarly, the reverse was also true: companies that “balanced their budgets on the back of their employees” (through layoffs, etc.) did much poorer in the long run. Researchers from the study concluded that investors should invest in companies which make employee- retention a priority because those companies are more likely to thrive and survive.
Obviously, the answer to attrition is not only wages.; the answer is engagement and career path. In our studies since 2001, we have found that employees who are most engaged and have a clear idea of where they are going in their career with the company stay the longest and perform best. This pattern is so consistent that we have altered our modeling to take it into account.
So who are the winners and losers? The winners are the companies who prioritize employees’ engagement and career path. These companies net a higher value due to retention of key assets and productivity. The losers are companies who ignore these emphases and seek to prioritize short-term temporary measures over long-term success. A further detriment results: a lack of faith of potential public investors.
* “28 Years of Stock Market Data Shows a Link Between Companies Who Prioritized Employee Satisfaction
and Long-Term Value” by Alex Edmans/HBR 2016