Employers vastly underestimate the impact of workers leaving an organization on the staff left behind, leading to even more turnover, according to a new study by the University of British Columbia.
“The research sends a clear message to organizations that they should be extremely careful when they make exit decisions or they risk destabilizing the whole organization very quickly,” says Sima Sajjadiani, associate professor at UBC’s Sauder School of Business, who co-authored the report alongside two researchers from the University of Minnesota.
The study analyzed data from roughly one million employees at 1,620 stores of a U.S.-based retail chain over a 22-month period. It found layoff announcements had a strong and immediate impact, increasing voluntary turnover among those who remained at the company.
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Such events can enhance feelings of job insecurity among those who remain, leading to more employees quitting, said the report. However, the researchers found voluntary departures resulted in fewer turnovers and that it typically takes longer for the ripple effect of subsequent departures to happen.
“To high performers, voluntary exits are a positive signal that there are better opportunities elsewhere, so while employees might not leave immediately, they do begin to look for other opportunities,” says Sajjadiani. “Usually, the subsequent voluntary turnovers after [the initial] voluntary turnover takes three months or so, but for layoffs, it’s really within the first month that a layoff is announced that a lot of employees leave the organization.”
The study also found that, when workers are fired, their departures have a relatively small, fleeting effect and can even reduce voluntary turnover afterwards. “Usually, these are people who are disruptive or abusive or aren’t doing their fair share,” she says. “When they go, high performers tend to stay longer and the risk of voluntary turnover actually goes down.”
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But the study noted if high performers are dismissed without clear justification and communication as to why, “employers not only open themselves to legal headaches, it also sends the wrong message to other high performers [and] they also start heading for the door.”
Sajjadiani says the study is the first of its kind and should signal to employers that they need to consider possible increased turnover rates when telling other workers about an employee exit. “Not all turnover events are the same. It really depends on how disruptive, critical and novel the experience of these events are for the workers in the organization and, depending on these three factors, we are going to see various effects of these events over time.”
While the study’s data predates the coronavirus pandemic, Sajjadiani says the research remains relevant. “It is very timely for organizations to pay attention to these results because the final message of our paper is that, whenever you make exit decisions, especially when it’s involuntary, when there’s a layoff or you dismiss employees, those decisions don’t end there.”
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