Employee Attrition: How can Companies Address the Job-Hopping Trend among Employees?

Employee Attrition in  the Increasing Trend of Job-Hopping

Gone are the days when employees join a company and expect to stay there for their career duration.  According to a year 2016 Gallup report, about half of today’s Gen-Z and millennial workforce, the 20 to 40-something-year-olds, say that they will be changing jobs in the next year or so. And 21% of the respondents reported that they had changed jobs within the past year. 

Traditionally referred to as “job-hopping,” this trend is defined as switching jobs or careers every two years or so. Prospective employers may take a dim view of job hoppers, but the trend looks like it’s here to stay.

The present generation of employees has grown up with a more macro view of the world than the previous ones. They have seen that in times of recession, such as those that followed the 2008 stock market crash, even working for companies that seemed immutable and rock-solid—think Lehman Brothers and Goldman Sachs—was no guarantee that their livelihoods were ever going to be jeopardized.

Thus, it is hardly surprising that an “every-man-for-himself” culture began appearing in current employment trends.

How can companies strike a balance between investing in an employee’s onboarding, training, and settling-in process and accommodating their employees’ tendency to job-hop?

The key is to ask why employees are leaving their jobs, and the answers to this critical question will provide a foundation for companies to address this issue. After all, a lot is at stake, considering the cost of replacing an employee.

Cost of Replacing an Employee

The Society for Human Resource Management (SHRM) estimates a salaried employee’s average replacement cost to be six to nine months’ salary. An employee earning $60,000 annually totals approximately $30,000 to $45,000 in recruiting and training costs.

 

The Gallup poll estimates that employee turnovers cost the US economy USD 30.5 billion annually. 

 

No such data for replacing a departing employee by recruiting a new one is available for Japan. However, considering the total cost of recruitment, possible hire remuneration of the new employee, number of days or even months the position may remain open, possibly initial low productivity of the new employee and other direct and indirect costs would not make the cost of replacing an employee in Japan any less.

 

Why Job-Hopping and How to Improve Retention?

So why do employees job-hop, and how can employee retention be improved?

Money

Not surprisingly, this is the main (but not only) motivating factor, according to the Workforce Vitality Report from ADP, the payroll processing company, especially at junior and mid-career levels.

The report suggests that the largest salary increases occur after two years at a company, and employees who move on at this point are likely to score higher wages at the next place. According to the report, the data bears this out: job switchers generally saw their salaries increase by 5.6% in the last year. With this in mind, it comes as no surprise again then that job-hopping tends to occur at the two-year mark.

So, what can companies do to minimize the likelihood of employees leaving at this point? The answer is obvious: monitor your employees’ progress in your company and offer not just competitive salaries but also increments and benefits that keep employees satisfied, stimulated, and feeling valued for the work that they do for you.

“Pay for performance” is one way to motivate your employees financially, rewarding them with higher salaries or bonuses based on performance measures. For example, a sales associate can get a higher quarterly bonus for meeting quotas. An IT engineer gets a higher salary when a target number of jobs are completed on time with a low error rate. Other methods to motivate employees financially include trips, gift cards, or tickets.

Lower Levels of Employee Engagement

As per the Gallup report, only 29% of millennials reported being “emotionally and behaviorally” connected to their jobs and companies. This means that for your company, probably only 30% of employees care about what happens beyond putting in the hours and getting their paycheck.

Worse, another 16% of these employees reported being actively disengaged, which Gallup interprets as “more or less out to do damage to their company”!

This situation will worsen with the increase in work-from-home policies. Many of us tend to have some level of pride in our companies, an attachment to our physical workplace, workstations, workplace friends, and even our routines of going to the office and returning home to relax.

Because of the adverse effects of work-from-home and remote working, all, or almost all, of these will slowly disappear.

So, not paying attention to engaging millennial and Gen-Z employees could potentially create problems for your company.

Employers must understand how to retain the top talents from these generations and attract employees looking to switch over to them. It is possible to consider that many employees don’t want to switch jobs in the first place, but their companies aren’t giving them many reasons to stay.

Organize social events that allow people from different departments within your company who would not normally meet to get to know one another.

When it comes to remote working and online meetings, one critical point is to use video power. Do not have the online meetings with the video switched off. Having a meeting only with voices increases stress levels and further reduces the attachments.

Employee Engagement by Effective Communication

Creating an environment of open communication and periodic transparent two-way feedback is very important in order to make employees feel valued. 

Communication about company policies and feedback is equally important for employees’ cultural and behavioral fitment. Many organizations seem satisfied by handling the policy handbook at the onboarding time, but that formality does not serve any purpose.

A tiny percentage of employees would even try to read it, and much less would remember it after some time. An established framework and mechanism must be established to communicate and enforce the policies and expectations continuously. Unlike the forgotten handbooks, these frameworks and processes need periodic reviews to measure their effectiveness.

Understand Why Employees Leave

Conducting a positive and friendly exit interview is a must. Again, these interviews should not be treated as formalities to be completed; rather, they need to be planned and taken seriously. The mechanism of conducting these interviews, analyzing the results, and finding ways to positively and effectively use them to minimize the attrition rate should also undergo periodic reviews. 

Exit interviews alone cannot serve the entire purpose; there has been a mechanism for reviewing and providing feedback from current and former employees. For current employees, an organization may engage external consultants to interview selected candidates anonymously. Various platforms like Officevibe, Vennli, and 15Five enable organizations to gather meaningful employee feedback regularly.

Understand Why Employees Stay

Managers should be coached to get periodic insight into what motivates employees to remain employed with the company. The above-mentioned platforms can also help in understanding this.

Investing in Professional Development and Overall Empowerment

In industries with higher attrition rates, some leaders fear that investing in training may cost them more than the ROI because of the chances of losing the employees soon after any investment in them.

 

However, providing employees with training and upskilling, not only for technical skills but also soft skills and leadership, increases employee engagement & attachment and creates opportunities for their advancement within the organization in terms of pay, recognition, and responsibility.

 

The overall effect is better retention on average and a good overall return on investment. The indirect effect would be that such organizations would always attract good talent from the market because of such policies.

 

Some studies from the Lumina Foundation on the returns of investments in employee training have sown the following results: 

 

• Cigna realized a 129% ROI from its educational reimbursement program between 2012 and 2014.
• With its tuition reimbursement policies, Discover realized a 114% ROI.
• Advocate Health Care, an education assistance program, helped the company achieve $1.3 million in net savings from lower talent management costs.
• A large communication technology company’s tuition assistance program helped achieve 39% ROI, in actual figures that translated into $54.2 million in savings.

 

Career, Community, Cause

With the rise of tech, remote collaborations, and a breakdown of traditional ideas of rank and seniority within companies (for example, your average Gen-Z or millennial IT department team is likely to be infinitely more knowledgeable about software processes than your average baby boomer C-suite exec).

Career progressions are no longer linear. Employees no longer want to wait years before they “get there” in terms of their careers. So, what can companies do to capitalize on this trend?

This is where a T.E.A.M. (Teach, Empower, Align, and Mentor) model can come in useful. Making teaching a key responsibility amongst your employees lets them use their expertise and knowledge to lead their teams, engage in meaningful conversations, share information, and likely gain insights into their own contributions to the company. This directly empowers your employees to produce better results. 

Performance improvement methods such as Six Sigma have always asserted that better results always follow when you talk to the employees closest to work being done, making sense that two-way dialogues are paramount.

When armed with all the requisite information, you should align all desired end results at the team or department level so that everyone has a clear idea of the goals they are striving towards and understands how their contributions make a difference.

Mentoring is a manager’s most important job throughout this process. This includes building morale, setting standards, and having conversations that reward positive results and reinforce successes.

These are only a few of the many areas you can consider when hiring and retaining your team’s key members. For further insights on recruitment and training quality staff, talk to us. We will be happy to discuss all your recruitment needs.