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Toxic Culture Is Driving the Great Resignation
- Research using employee data reveals the top five predictors of attrition and four actions managers can take in the short term to reduce attrition.
- More than 40% of all employees were thinking about leaving their jobs at the beginning of 2021, and as the year went on, workers quit in unprecedented numbers. Between April and September 2021, more than 24 million American employees left their jobs, an all-time record. As the Great Resignation rolls on, business leaders are struggling to make sense of the factors driving the mass exodus. More importantly, they are looking for ways to hold on to valued employees.
- Our research identified four steps — offering lateral career opportunities, remote work, social events, and more predictable schedules — that may boost retention in the short term. Leaders who are serious about winning the war for talent during the Great Resignation and beyond, however, must do more. They should understand and address the elements of their culture that are causing employees to disengage and leave. And above all else, they must root out issues that contribute to a toxic culture. Our next article will explore, empirically, what constitutes a toxic culture and how organizations can address this challenge.
ABOUT THE AUTHORS
Lessons learned, MIT SMR
Golden Knowledge (GK) Juice
- To better understand the sources of the Great Resignation and help leaders respond effectively, we analyzed 34 million online employee profiles to identify U.S. workers who left their employer for any reason (including quitting, retiring, or being laid off) between April and September 2021. The data, from Revelio Labs, where one of us (Ben) is the CEO, enabled us to estimate company-level attrition rates for the Culture 500, a sample of large, mainly for-profit companies that together employ nearly one-quarter of the private-sector workforce in the United States.
- While resignation rates are high on average, they are not uniform across companies. Attrition rates for the six months we studied ranged from less than 2% to more than 30% across companies. Industry explains part of this variation. The graph below shows the estimated attrition rate for 38 industries from April through September, and the spread across industries is striking. (See “Industry Average Attrition Rate in the Great Resignation.”) Apparel retailers, on average, lost employees at three times the rate of airlines, medical device makers, and health insurers.
Industry Average Attrition Rate in the Great Resignation
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Lessons learned, MIT SMR
Golden Knowledge (GK) Juice
- The Great Resignation is affecting blue-collar and white-collar sectors with equal force. Some of the hardest hit industries — apparel retail, fast food, and specialty retail — employ the highest percentage of blue-collar workers among all industries we studied. Management consulting, in contrast, had the second-highest attrition rate but also employs the largest percentage of white-collar professionals of any Culture 500 industry. Enterprise software, which also suffered high churn, employs the highest percentage of engineering and technical employees.
- Top Predictors of Employee Turnover During the Great Resignation
- Much of the media discussion about the Great Resignation has focused on employee dissatisfaction with wages. How frequently and positively employees mentioned compensation, however, ranks 16th among all topics in terms of predicting employee turnover. This result is consistent with a large body of evidence that pay has only a moderate impact on employee turnover.6 (Compensation can, however, be an important predictor of attrition in certain settings, such as nurses in large health care systems).
- The top five predictors of employee turnover
- Toxic corporate culture. A toxic corporate culture is by far the strongest predictor of industry-adjusted attrition and is 10 times more important than compensation in predicting turnover.
- Job insecurity and reorganization. In a previous article, we reported that job insecurity and reorganizations are important predictors of how employees rate a company’s overall culture. So it’s not surprising that employment instability and restructurings influence employee turnover.
- High levels of innovation. It’s not surprising that workers leave companies with toxic cultures or frequent layoffs. But it is surprising that employees are more likely to exit from innovative companies. In the Culture 500 sample, we found that the more positively employees talked about innovation at their company, the more likely they were to quit. The attrition rates of the three most innovative Culture 500 companies — Nvidia, Tesla, and SpaceX — are three standard deviations higher than those in their respective industries.
- Failure to recognize performance. Employees are more likely to leave companies that fail to distinguish between high performers and laggards when it comes to recognition and rewards. Companies that fail to recognize and reward strong performers have higher rates of attrition, and the same is true for employers that tolerate underperformance.
- Poor response to COVID-19. Employees who mentioned COVID-19 more frequently in their reviews or talked about their company’s response to the pandemic in negative terms were more likely to quit. The same pattern holds true when employees talk more generally about their company’s policies for protecting their health and well-being.
- Provide opportunities for lateral job moves. Not all employees want to climb the corporate ladder or take on additional work or responsibilities. Many workers simply want a change of pace or the opportunity to try something new.
- Sponsor corporate social events. Company-organized social events, including happy hours, team-building excursions, potluck dinners, and other activities outside the workplace are a key element of a healthy corporate culture, so it’s no surprise that they are also associated with higher rates of retention.
- Offer remote work options. Much of the media coverage of the Great Resignation has focused on the importance of remote work in retaining employees. Unsurprisingly, when employees discussed remote work options in more positive terms, they were less likely to quit. What you might not have expected is the relatively modest impact of remote work on retention — just a bit more powerful than compensation in predicting lower attrition.
- Make schedules more predictable for front-line employees. When blue-collar employees describe their schedules as predictable, they are less likely to quit. Having a predictable schedule is six times more powerful in predicting front-line employee retention than having a flexible schedule. (A predictable schedule has no predictive power for white-collar employees.)
Top Predictors of Attrition During the Great Resignation
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ABOUT THE AUTHORS
PhD with awarded honors in computer science in France
Fernando is the director of "genioux facts". He is the entrepreneur, researcher and professor who has a disruptive proposal in The Digital Age to improve the world and reduce poverty + ignorance + violence. A critical piece of the solution puzzle is "genioux facts". The Innovation Value of "genioux facts" is exceptional for individuals, companies and any kind of organization.
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