Employee Engagement Studies – What Went Wrong (Part 1 of 2)

Remember when your organization had dozens of job applicants for each opening, and people were applying for openings that didn’t even exist?  Then COVID hit, followed by the Great Resignation and Quiet Quitting. Now weeks go by without a single qualified applicant for positions important to the growth and health of your organization. Does this describe your organization? More importantly, what can your organization do to attract, develop and retain talented people in order to keep your key positions filled?

For the past 25 years I’ve been tracking following some of the key data sources surrounding employment and engagement trends, from the US Bureau of Labor Statistics JOLTS report (Job Openings and Labor Turnover Survey) to Gallup’s Employee Engagement Statistics to Jobvite’s Job Seeker Nation Report to Gartner’s HR Practice.  In addition to looking at the megatrends, I conduct several employee engagement studies each year for my clients to look at micro issues that affect talent acquisition, engagement, and retention. 

 

Two Employee Engagement Studies

My company and I recently completed the second of two significant employee engagement studies, one in healthcare and the other in technology services. Both studies were completed in response to our clients wanting to better understand how to reduce turnover and retain talented staff in key roles.  Several hundred employees were surveyed and more than 10,000 interview questions were asked and answered.  The employee demographics involved were 19% Gen Z, 69% Millennial, and 12% Gen X.  The studies investigated five specific areas: employee satisfaction, manager satisfaction, cultural satisfaction, organizational satisfaction, and positional fit.  Unsurprisingly, each of the studies tended to validate the other in terms of the findings and both studies were consistent with other engagement studies conducted over the past two years.  Each of the studies resulted in the identification of high impact solutions that any employer can implement to reduce the voluntary turnover they are experiencing.

 

The Incredibly High Costs of Turnover and Disengagement

Most employers accept employee turnover as a cost of doing business.  That mindset is okay when you’re hiring the right people and total employee turnover is under 15%.  Otherwise, most of today’s enterprises are suffering excessive turnover in the 30-35% range.  That means the average tenue of employees is now under 3 years.

Consider the cost of turnover:

• SHRM says the cost to replace a good employee runs between six and nine months’ annual compensation for the position.
• Forbes, Wall Street Journal, and others routinely cite the cost of the wrong hire at two to three times the annual compensation for the job.
• In 2022 Shortlister compiled and published some shocking statistics in The Great Employment Turnover Statistics in 2022.
• com assembled this insightful research, 25+ Crucial Average Cost Per Hire Facts for 2022.

 

Here’s what the annual cost of excessive turnover looks like for small (15 employees), medium (150 employees), and large (1,500 employees) employers who accept employee turnover of 33% per year instead of the best practices target of 15% per year.  Consulting the sources cited above, the assumptions I used are:

• Average job fully loaded compensation (benefits included) of $50,000 plus $15,000 benefits for a total of $65,000.
• Cost of replacing one solid performer at the above SHRM-cited average of 7.5 months’ annual compensation for the position ($40,125).

 

In addition to the cost of excessive turnover, most of the workforce is not engaged at work.  Gallup, for instance, says that just 29% of Millennials and Gen Z are engaged, and those two generations make up more than 54% of today’s workforce (and rising fast), according to Pew Research.  The Engagement Institute pegs the annual disengagement cost at more the $500,000,000,000 (that’s a half-trillion dollars).

When employee turnover is high, customers notice because the quality of work is lowered, and the quality of service is reduced.  Employees notice excessive turnover too and have second thoughts about sticking around.  All of which, in turn, adversely affects to employer’s overall brand.

Add all this together and you can see that rising employee turnover is simply not just another cost of doing business, but evidence of a terminal disease that threatens the very life of your organization. 

In Part 2 of this post we’ll present 9 implementable strategies employers are using to drive voluntary turnover down below 15%… and saving their employers millions of dollars.

 

Bottom Line

Voluntary employee turnover in excess of 15% is excessive.  The current market trend shows most employers are averaging in excess of 33% voluntary turnover.  Excessive turnover is a cancer to an organization’s profits, employee morale, work quality, employee engagement, and n employer’s overall brand perception.

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