How attrition rates change when employees leave

For the study, researchers were granted access to the human resources system of a major retailer, allowing them to see employees' performance and why they chose to leave the company. For the years 2014 and 2015, the researchers studied around 1 million employee records.

They found that high-performing employees — defined as those ranked in the top 40% — were more affected by layoffs than low-performing employees — defined as those ranked in the bottom 40%.

Specifically, the attrition rate for high-performing employees increased from around 1.5% to around 2% in the six months following a layoff announcement, while the attrition rate for low-performing employees only increased from 2.01% to 2.15%.

According to Sima Sajjadiani, an assistant professor at the University of British Columbia's UBC Saunder School of Business and a co-author on the paper, the larger increase in attrition rates among high-performers is likely because high-performers typically have more employment options. Because of this, once layoffs are announced, high-performers may start pre-emptively job searching to secure a new job rather than wait to see if they're included in the layoffs.

"Companies should consider the possible ripple effect when they make decisions about layoffs, especially because high performers are disproportionately affected," she said.

The researchers also found that, when a low-performing employee was dismissed for cause, the voluntary turnover rate for high-performing employees dropped from 1.5% to 1.43% and increased among low-performing employees from 2.01% to 2.24%.

"High-performing employees may view the dismissal of a low-performing colleague as the organization maintaining standards, which can be seen as a positive sign about the organization's commitment to performance," Sajjadiani said. "On the other hand, low-performing employees might perceive the dismissal of a similar peer as a warning sign that they might be next, leading to an increase in voluntary turnover among this group."

The researchers noted a similar pattern among voluntary departures, finding that when a high-performing employee quit, others tended to do the same within six months, as did low-performing employees when another low performer quit.

However, the researchers found that low-performing employees didn't follow high-performing employees after they quit. And when a low-performing employee quit, the retention rate for high-performing employees slightly improved.

"Employees seem to be aware of their own level of performance," Sajjadiani said. Often they see a peer leaving as a signal to look for a new job elsewhere, but only if the peer who left matched their quality of work.

Ultimately, Sajjadiani said organizations need to maintain high performers' job satisfaction so they and their other high-performing colleagues choose to stay with the company. However, when low performers leave, other low performers may go with them — which Sajjadiani said may not be bad for the organization. (Ward, Wall Street Journal, 6/10)

Although staff turnover is inevitable across a manager’s career, you can reduce the risk of being caught off guard by a staff member’s departure by watching for certain flags.

Use this conversation guide to prepare a few key talking points for a focused and honest conversation about your staff member’s mindset.