'It's very bad news for organizations, especially if they are laying off high performers'
While there has been greater appreciation of survivor syndrome – when remaining employees suffer after layoffs – the phenomenon of “turnover contagion” is a newer area that should be on HR’s agenda.
That’s backed up by two recent studies showing that when people leave their jobs — either because they’re laid off, fired or they quit — those exits can lead many others to also leave.
This has obvious implications for HR priorities such as employee attraction, retention, engagement and productivity.
“It’s very bad news for organizations, especially if they are laying off high performers, because if those positions get eliminated, both high and low performers start quitting,” says Sima Sajjadiani, assistant professor at the UBC Sauder School of Business, who co-authored a study with academics at the University of Minnesota.
“It’s a signal that people’s jobs aren’t secure, and the organization doesn’t care about them, no matter how hard they work. So they think, ‘I should leave as soon as possible.’”
UBC study looks at high employee turnover
For their study, researchers delved into the employment data of a major retailer with 1,600 locations to better understand why it was experiencing high turnover. In looking at the effect on roughly one million employees, they examined date of hire, location, position, performance records and reason for departure.
And they found that layoff announcements have a strong and immediate effect, and they boost voluntary turnover among those who survive the layoffs.
“It seems like they send the signal of urgency to the rest of the workers in the organization; they feel like, ‘OK, this organization is not a secure place to work, we need to find another place as soon as possible,’” says Sajjadiani.
“That's an important message for organizations, because when they start thinking about adjusting the workforce and planning layoffs, they do not take into consideration the subsequent human capital loss that they are going to face after such decisions, and particularly high-quality human capital loss.”
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, found the UBC researchers.
“To high performers, voluntary exits are a positive signal that there are better opportunities elsewhere,” said Sajjadiani. “While employees might not leave immediately, they do begin to look for other opportunities.”
When there is increasing voluntary turnover, the response is increased voluntary turnover — but over a longer period of time, with a boost around three or four months, she says.
“It seems like people are not getting that signal of urgency with other types of exits. So for example, if I see my colleagues are leaving the organization, and I'm a high performer, the message I'm receiving is that ‘OK, there are good opportunities elsewhere, so I can take my time I can do my research and find a better opportunity for myself.’ But with layoffs, immediate exits can be detrimental for the organization.”
On the other hand, when workers are dismissed, their departures have a relatively small effect — and can even reduce voluntary turnover.
“After firing such bad apples, we see there is a decrease in subsequent voluntary turnover, especially again among high performers — so apparently it's a good thing,” says Sajjadiani.
“Another positive side of that is that we see increase in voluntary turnover of other poor performers. So it seems like they are getting the message that there will be subsequent consequences for poor performance so [they think] ‘This is not my place anymore, I should leave.’ And it helps organizations, especially if they are worried about the legal consequences of firing.”
Visier study looks at turnover contagion
In a similar vein, Visier conducted an experiment involving millions of employee records at 86 organizations with more than 1,000 employees across all geographies. They looked at two groups, “on the team” and “not on the team” between February 2019 to June 2022, and tracked if an initial resignation by an employee would lead to subsequent resignations by their teammates under the same manager.
Depending on team size, the probability of additional team members leaving after that first resignation increased between seven per cent and 25 per cent.
“The message really clearly is for HR and business leaders to please be aware that one resignation, one termination is never just one resignation, one termination,” says Andrea Derler, principal of research and customer value at Visier.
Smaller teams have a greater probability to experience higher resignations due to turnover contagion: for teams of two, the rate is 25.1 per cent; for teams of six to 10, it’s 14.6 per cent; and for three to five, it’s 12.1 per cent compared to a range of seven to nine per cent for larger groups.
But for people who are not on the same team, there is not the same effect.
“When one person leaves, then it triggers so many thoughts in the remainder of the team,” says Derler.
“Psychologically, the reasons are manyfold. They could be because ‘Why is my colleague finding a better job someplace else? I should look too.’ Or it's as simple as ‘Now I'm going to have to take the work over from this person who's leaving, which doubles my workload.’ [Plus] there's a fear of missing out; there is the fact that ‘I will never be as effective without my peers.’”
“A resignation of a team member is not just a single event,” she says, adding employers and HR might think there’s nothing more they can do if “Andrea” resigns.
“What we have learned now is no, it does have an effect on Andrea's peers and colleagues… It always creates a sense of uncertainty, I think, for the people who remain.”
Visier also found the risk of turnover contagion lasts for about 135 days after the initial resignation, but it is most likely between 45 days and 70 days.
Be careful with exit decisions to avoid turnover
Organizations “vastly” underestimate the ripple effects of people leaving and the resulting human capital costs, according to Sajjadiani.
As a result, employers should be extremely careful when they make exit decisions.
“Nowadays that we are experiencing all of these mass layoffs, I think this is something they need to think about. Because in the world of… work and employment, we are constantly communicating signals with our audiences — these audiences can be current employees, future employees, potential employees.”
When employers go through these “careless layoffs, sudden layoffs,” they are sending the message to survivors, as well as potential future employees, that they are not reciprocating the loyalty of high performers, she says.
“When [employees] see that everyone is getting impacted, and there is no clear explanation, there is no clear communication as to why these decisions are being made, people feel betrayed, and they lose their commitment to the organization in the future.”
Employers should clearly communicate how these decisions were made, and acknowledge people who are being impacted, says Sajjadiani.
“It's not just losing a job, it's like losing part of your social identity, part of your social status, social connections. So they need to be mindful of these changes and try to make it as smooth as possible.”
Talk to employees to reduce turnover
Because of the turnover contagion effect, employers and HR need mitigation strategies, such as the line manager speaking to the remainder of the team, says Derler.
“How often have you had a boss, when a peer left, come to you and ask you how you are feeling about that other person leaving?”
Managers should also look out for pre-quitting behaviour, such as team members suddenly losing interest in the job, becoming less productive or working different hours, she says.
“Suddenly, there's something going on with that employee. So talk to them, figure out what it is.”
Leaders should also consider: Has that been person been promoted lately? Is their compensation competitive?
“There's lots of data points we can collect on a people analytics basis,” says Derler, along with behavioural changes.
Also recommended? Enabling and encouraging strong relationships with people beyond the immediate team.
“It can actually be a good retention tool for organizations. Because if I have a lot of good colleagues across my team, and across teams and business units, I'm more likely to stay because I feel I'm more socialized in the culture… I may have just lost my peer who is working within same team, but I still have enough other people who I can rely on, who I can speak to, who I can work with.”
