Why Do Employees Stay? A Clear Career Path and Good Pay, for Starters

Here is an excerpt from an article written by Andrew Chamberlain for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.

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Employee turnover is expensive. Replacing an employee who quits costs, on average, 21% of their annual pay. While it’s tempting to dismiss turnover as a fact of life in today’s fast-moving job market, new research shows otherwise.

Many reasons employees jump ship are surprisingly simple, and business leaders who don’t ask why workers want to go may be unnecessarily losing people who are pricey to replace.

At Glassdoor, we have ample data on workers’ job trajectories from millions of résumés that people have shared on our site. Looking at those résumés, we can gain insight into the reasons for employee turnover by comparing job transitions where workers stayed with their original employer with those where people left for another company.

In a new study, Glassdoor data scientist Morgan Smart and I looked at more than 5,000 job transitions from a sample of thousands of résumés shared by job seekers on Glassdoor from 2007 to 2016. Some were employees who moved into a new role but stayed at the same employer — for example, a junior accountant who switched into a job as accounting manager. Others were employees who moved to a new role and left for a new employer.

By combining the data on real-world job transitions with Glassdoor company ratings and salary information, we were able to pinpoint which statistical factors push workers out the door and which motivate employees to stay and grow in their existing organization. Although these patterns are correlational, we believe they reveal important clues to the HR puzzle of how to retain talent. In our study, we looked at how job turnover correlated with pay, company culture, how long an employee has been in their current job, what industry they’re in, and more.

Factors That Drive Turnover

One of the drivers of turnover is easy to overlook: allowing workers to stagnate in their current role. Even after controlling for pay, industry, job title, and many other factors, we find workers who stay longer in the same job without a title change are significantly more likely to leave for another company for the next step in their career. Stagnating in a role for an additional 10 months raises the odds that employees will leave the company for their next role by about one percentage point, a statistically significant effect.

The likely reason is that workers who don’t see a clear progression from their current role to a better position in their company ultimately turn to opportunities elsewhere. And that suggests an easy solution. By providing clear paths for employees, moving them through job titles on a regular progression over time, employers can help boost perceived career opportunities and limit this type of harmful stagnation.

Pay Matters

However, our research finds that escalating workers through new job titles over time isn’t enough; making sure pay is competitive is also essential to retaining talent. We found that 10% higher base pay is associated with a 1.5-percentage-point increase in the likelihood that workers will stay at their current company the next time they move to a new role, a statistically significant link.

The lesson is that in the long term, employees won’t stay for new job titles alone. As they assume new responsibilities on their upward paths, compensation should rise along with career arc. If managers do not offer meaningful promotions, in both responsibilities and pay, our data suggests employees are more likely to look elsewhere for their next role.

Culture Matters

Aside from career progressions and pay, we found that workplace culture matters for employee retention. This will come as little surprise to leaders who are well aware of the research showing the benefits of positive company culture. When employees switch employers, we find they usually move to companies with higher Glassdoor ratings.

In particular, we found that raising a company’s overall rating on Glassdoor by one star (on a one-to-five scale) was associated with a four-percentage-point higher chance that employees would stay for their next role. Similarly, we found statistically significant links between two detailed measures of workplace culture: higher career opportunities ratings and higher culture and values ratings. In each case, raising a company’s Glassdoor rating on these two dimensions by one star (out of five) was associated with a five-percentage-point higher chance that workers would stay for their next role. It appears that employees who see clear career paths for themselves and who feel committed to a company with a positive value system are statistically less likely to leave for their next role.

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Here is a direct link to the complete article.

Andrew Chamberlain, Ph.D, is chief economist at jobs site Glassdoor and director of research at Glassdoor Economic Research.

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