5 Key Factors Impacting Employee Attrition and Retention
Given the rapidly evolving dynamics of the modern workplace, understanding the factors that influence employee attrition and retention is critical. Despite the attention garnered by layoffs, often within high-profile organizations, the broader labor market presents a complex picture of concurrent hiring spurts and strategic workforce adjustments across various sectors.
At Perceptyx, our research and consulting teams have dedicated themselves to collaborating with leading organizations across the globe. Together, we've developed sophisticated employee listening and action strategies that are purpose-built for specific industries and specific talent challenges. Our listening strategies are designed not only to gauge the pulse of the workforce but also to foster an environment where employees feel valued, heard, and motivated to grow alongside their employers.
This article draws on the collective expertise of our team members, who share their insights on the evolving dynamics of attrition and retention. In the sections that follow, we look at some of the strategies that can empower employers to effectively monitor, understand, and influence these critical aspects of their organizational health in 2024 and beyond.
1. The Importance of Feeling Valued
Michael Mian, Ph.D., Principal Consultant: “In customer-focused roles, the feeling of being valued significantly impacts an employee's decision to stay with an organization. This feeling of value extends beyond mere financial compensation. It encompasses factors such as employee empowerment, the opportunities provided for career growth, and the investment an organization makes in the development of its employees.”
“Employees' perceptions about their compensation, work/life balance, and the flexibility of their schedules are crucial elements in their overall job satisfaction. In the modern work environment, where the boundary between professional and personal life is increasingly blurred, the ability to maintain a balance is vital. Employees greatly value flexible scheduling, which directly affects their quality of life and overall satisfaction with their job. It's important for employers to recognize that these factors are not perks but necessities in cultivating a motivated and committed workforce.”
“Another critical aspect is the alignment between job expectations set during the hiring process and the actual role once an employee joins the organization. A significant mismatch between these can lead to early turnover. New hires often enter a role with certain expectations, and if the reality falls short, it can lead to feelings of disillusionment or even betrayal. Similarly, performance expectations need to be clear and realistic. When employees feel that what is expected of them is either not communicated well or is unattainable, it can lead to frustration and a decline in job satisfaction, which often precedes the decision to leave.”
(Read Dr. Mian’s blog on survey design strategies for understanding retention in your organization.)
2. Compensation Is Just the Tip of the Iceberg
Crystal Perel, M.A., Senior Consultant: “When I attended the IPMI conference in May, a key theme emerged from discussions with Chief Human Resources Officers (CHROs) across various industries. It was unanimously recognized that feeling valued and recognizing employees are the primary methods to enhance engagement and retention in the workforce.”
“In my work with different organizations, I've consistently found that compensation is often cited as the top reason employees choose to leave a job, and usually by a substantial margin. This is an interesting observation because, while it highlights the importance of fair and competitive remuneration, it also tends to mask deeper, more complex issues within the workplace. Compensation is frequently just the tip of the iceberg. Beneath it are more intricate challenges that contribute to an employee's decision to leave an organization.”
“These deeper challenges include a heavy workload, the all-too-common issue of burnout, leadership that fails to inspire or support, and a lack of clear pathways for professional development and career progression. These factors collectively create an employee experience that can be unsatisfying and demotivating. When employees face these challenges on a daily basis, the appeal of better compensation from another employer becomes not just about the money, but also about the potential for a more rewarding and balanced professional experience.”
“It’s important to address these underlying issues to create a more fulfilling and engaging work environment. It's not just about increasing salaries; it's about understanding and improving the overall employee experience. This approach is essential for organizations looking to retain their best talent and foster a productive, committed workforce.”
3. The Need for Clarity of Direction, Both Personally and Professionally
Sarah Jorgenson, Senior Consultant: “Two critical factors can significantly influence an employee's decision to stay with an organization: feeling valued and having clear career and growth opportunities.”
“One of the key issues I'm observing in many organizations is the lack of clarity in direction. Employees are increasingly finding it difficult to envision a long-term future with their current employers. This isn't just about the immediate role they're in; it's about their overall career trajectory within the organization. When employees can't ‘see’ themselves growing or advancing in the company, it starts to impact their perception of having a viable career path there. This lack of visibility and uncertainty about the future can be profoundly demotivating and is often a critical factor leading to an employee's decision to leave.”
“Our internal research at Perceptyx supports this view. We've found a significant correlation between an employee's perception of their career development opportunities and their long-term commitment to the organization. This research isn't just about numbers and data; it's about understanding the human aspect of organizational life. When employees feel that their growth and career development are supported and they have a clear sense of direction, they are more likely to feel connected and committed to the organization.”
4. The Importance of Culture
Christian Roome, Senior Consultant: “Career opportunities are certainly a significant part of an employee's vision for their future within an organization. The chance for growth, the ability to progress, and the potential for personal and professional development are key drivers of employee retention. However, equally important is the organization's culture and its values. Employees need to feel that they are part of a culture that resonates with their personal values and beliefs. This cultural fit is what often makes the difference between an employee who is merely satisfied and one who is truly engaged and committed.”
“In recent times, the traditional structure of organizations has been evolving. One notable trend is the stripping away of managerial levels, a change that challenges the traditional pathways employees envision for their career progression. This flattening of organizational hierarchies can lead to ambiguity and uncertainty about career advancement opportunities. It requires organizations to rethink how they define and present growth opportunities to their employees.”
“Additionally, the widespread shift towards working from home has had a profound impact on how employees perceive and experience organizational culture and values. The physical separation from the workplace can lead to a sense of disconnection, making it more challenging for employees to feel a part of the organizational culture. This shift necessitates a reevaluation of how culture is communicated and sustained in a remote or hybrid work environment.”
(Read Perceptyx’s latest research on hybrid work and return-to-office policies.)
5. Help Employees Envision a Successful Future
Bradley Wilson, Ph.D., Principal Consultant: “The key to retention lies in the anticipation of success, both for individuals and the organization as a whole. Success, of course, is a subjective concept, varying significantly from one person to another. However, four elements play an important role for most employees: achievement, affiliation, affluence, and autonomy.”
“Achievement and affiliation are often prioritized by organizations, particularly those that have experienced increased attrition following the implementation of new Return-to-Office (RTO) policies. While these elements are important, many leaders overlook the critical aspect of autonomy. Autonomy allows employees to feel in control of their work and their environment, which is especially significant in the context of recent shifts towards more flexible work arrangements.”
“The ability of organizations to enable individuals to anticipate success, work in their areas of strength, and contribute to something larger than themselves is vital for driving retention. This is true across various business sectors and economic conditions. However, the high inflation rates seen over the past two years have added a new layer of complexity. This economic pressure has created a financial incentive for employees to change jobs in an attempt to maintain their purchasing power, which has been significantly impacted since 2022.”
“When compensation adjustments fail to keep pace with the rising cost of living, employees effectively experience a reduction in pay. This is exacerbated when companies offer higher pay to new hires for the same roles, leading to a perception among existing employees that loyalty is undervalued and eroding trust within the organization. In today's economic climate, helping employees manage their compensation and benefits is more important than ever. It's not just about providing a fair wage; it's about ensuring that employees feel their financial well-being is being considered and protected.”
Perceptyx Can Help Your Organization Get a Handle on Retention
Retention is one of the keys to maintaining a thriving organization. By employing various survey design strategies, such as addressing retention in census surveys, engagement index and retention sentiments, lifecycle surveys, and follow-up or pulse surveys, organizations can better understand and predict retention. When powered by our People Insights Platform and consulting expertise, these strategies provide valuable information to develop targeted and effective retention initiatives.
As an experienced listening partner, Perceptyx can assist you in developing and implementing survey strategies to better understand retention in your organization. Schedule a meeting with a member of our team to learn more about how Perceptyx can support your retention efforts and help you create a thriving workplace.