A recent study from UBC Sauder School of Business suggests that the departure of an employee, whether they quit or get fired, can cause many of their colleagues to follow suit and leave the company.
To investigate the impact of employee departures on their colleagues, the researchers analyzed employment data from a large retailer with high turnover. They examined data for approximately one million employees, including their hiring date, store location, position, reason for leaving, and departure date.
The study authors also had access to employee performance records, so they could evaluate whether workers were high performers or low performers.
The researchers studied the stores as a whole and analyzed the movement of employees in and out of them over a period of time. This allowed them to observe the effects of individual exit events on the stores in the immediate, short-term, and long-term.
The UBC study is different from previous studies as it examines the impact of employee exits on the likelihood of further departures, rather than just on the performance of remaining employees or the company as a whole. It specifically looks at which types of exits lead to the most departures and how the performance level of exiting employees influences this effect.
The researchers found that layoff announcements have a strong and immediate effect, and boost voluntary turnover among those who survive the layoffs.
The researchers found that layoff announcements have a strong and immediate effect, and boost voluntary turnover among those who survive the layoffs.
Dr. Sajjadiani explains that if high performers are laid off, it could lead to an increase in turnover, including both high and low performers. This is a negative situation for organizations because it indicates that job security is not guaranteed, and it could result in employees feeling undervalued and unappreciated. As a result, they may decide to leave their jobs as soon as possible.
When employees quit their jobs voluntarily, their departures give a more moderate boost to voluntary turnover, and it takes longer for that ripple effect to occur.
Dr. Sajjadiani explained that when good employees see others leaving on their own, they might think there are better jobs out there. They might not leave right away, but they may start looking for other jobs.
When workers are dismissed, however, their departures have a relatively small and fleeting effect—and can even reduce voluntary turnover.
According to Dr. Sajjadiani, employees who are disruptive or don’t work hard and leave the company won’t have much impact on high performers. In fact, when these low-performing employees exit, high performers tend to stay with the company longer, and the possibility of them leaving decreases.
When a high performer is fired without a clear reason, it can lead to legal problems for the employer and also give the impression to other high performers that their jobs are not secure. This may result in more high performers leaving the company.
Dr. Sajjadiani believes that organizations don’t realize the full extent of the negative consequences of employees leaving and the resulting costs. This research shows that companies should be cautious when making decisions about employee departures because the impact can be significant and quick, affecting the entire organization.
“Communicating clearly and compassionately, justifying these decisions and trying to avoid the most severe course of actions are better for organizations than simply cutting people,” Dr. Sajjadiani said.
Source: University of British Columbia