For more than twenty years, the Gallup organization has conducted research about why good employees change jobs. The results are surprising.
The top four reasons, in order, are as follows:
- Lack of opportunity for career advancement
- Pay and benefits
- Lack of job fit
- Management and general work environment
Responses to these four areas totaled 91% of the reasons employees quit. Item 2, pay related items, represented only 20% of the total reasons given.
I find this interesting because almost every time an underappreciated employee quits, the response of my business owner/client is to offer the employee more money. Frequently, even if the employee accepts the increased pay, the employee ends up leaving a year or two later. Why? Because other non-pay-related issues are never addressed. Despite how emphatically the owner tells the employee that they are valued, the owner’s behavior after the crisis-driven pay raise reverts back to normal and the employee soon feels under-appreciated again.
There was a popular book published about fifteen years ago based on the annual Gallup polls of why employees leave companies. The final conclusion was that employees quit managers, not companies. The book listed about ten reasons employees quit based on the Gallup research.
The top reason for quitting was that the employee did not feel that their manager was interested in them or in their career advancement. The second reason was that the employee did not have a friend or friends at work. Those two reasons were far more frequent than any of the financial or benefit-related reasons that were also found in the poll.
The most significant observation from this older research from Gallup was that neither of the top two reasons had a financial element to them. Both related specifically to the relationships the employee had in the workplace. Without a good relationship with either their boss or a coworker, the probability of a good employee leaving went up significantly.
The newer data cited at the beginning of this article suggests that pay had become more important in the stay-or-leave decision than it was before the Great Recession. This makes sense given the slow growth in pay rates in the last seven years. However, it was still given as the reason for leaving only 20% of the time.
From both the older data and the new data, at the core of why employees leave, is the impact of the manager on employees. This means that, in a small business, the reason why good employees either stay or leave is directly related to the actions of the business owner.
I see this frequently in my small business clients. Companies that are owned and run by a person who cares about their employees are able to retain good employees. Companies where the owner clearly is only concerned about their own welfare struggle to retain high performers. In fact, companies owned by self-interested and toxic owners generally end up with a loyal staff of under-performers. These less skilled workers end up staying with the company and tolerating the environment because they are unable to get a job anywhere else.
I lived through this firsthand in the early 2000s when I was hired to run a manufacturing company. The company had been a former client, and I knew that they needed an injection of new creative talent. Over a two-year period, we were able to upgrade the level of staff and management in almost every area. As a result, the company went from losing money when I started to strong profitability by the third year.
However, shortly after the third year began, two of the best employees I had hired left. In the exit interview, they both expressed concern that the culture would soon revert to the toxic unproductive culture that existed before I joined the company.
It turned out they were right. Within six months, one of the owners decided I wasn’t needed anymore. After I left, all of the managers I had hired left as the culture quickly reverted to what it was before.
The fact was that no matter what changes I made, I could not change the company because the ownership was not willing to change.
The conclusion from the Gallup research, as well as my own observations from more than twenty years of consulting, is that good companies have good employees because they are owned by good people who care about their employees. Toxic organizations are generally owned by people who take advantage of their employees. The result is that companies with bad ownership may be able to make money but they make less than they could because they are unable to retain high performers.
The ultimate sustainable competitive advantage is the ability of a company to attract and retain more than their share of the best available employees in their industry. Good ownership and management allows a company to get and keep more than its fair share of high performers. Selfish owners who create toxic environments are doomed to a cycle of ups and downs as they attract and then lose good employees and managers who can make a difference.
The key question is what can a business owner or manager do to create an environment that allows them to attract and retain high performers? Based on the research, here are some key actions that owners and managers can take to build an organization with superior talent.
- Pay competitively. This means paying at least the market rate for salaries and offering benefits that are competitive. The point is to take salaries and benefits off the table with regard to why an employee would leave. The reality is that good employees are almost never overpaid. They always produce value that far exceeds their compensation.
- Take a sincere interest in the careers and futures of your best employees. Share the plans you have for them as the company grows. Let them know, frequently, how valuable they are to you. Let them know that you want them to work at the company for their entire career and become a partner with them in giving them opportunities.
- Employees like to work in jobs that fit their skill sets. Make sure you know your employees’ strengths and weaknesses. Ask employees what functions in the company they are interested in. Better yet, to get an objective read on an employee’s capability, utilize some of the employee assessment tools that are available. (If you need help in this area, contact me.)
- Make sure the work environment is a positive one. Is the office conducive to success? Do the employees have all of the tools that they need to be successful? Sometimes little things like comfortable chairs or adjustable desks can make a big difference. Don’t be penny-wise and pound-foolish – give employees what they need to be productive and happy.