In response to the Great Resignation, companies have pulled out all the stops to keep the talent they have from walking out the door. Perhaps the most common tactic is to increase compensation. Many companies are promising more flexible work arrangements. Other approaches involve offering more employee-centric amenities and more support programs, such as increased access to physical and mental wellness services. All of these approaches to increase workforce retention are laudable and might be effective in the short term.
But we urge caution and recommend considering different approaches. As you look at workers across your organization, division or business unit, do you say to yourself, “I hope none of these people voluntarily turn over in the next three years?” Of course not. Very likely, you are terrified about losing the top 20%, nervous about losing the next 50% and ambivalent about the loss of the bottom 30%. Even those odds may be generous. Only a fraction of the top 70% of employees are even at risk of leaving at all. Large-scale retention initiatives like raising salaries, offering flexible work arrangements and change initiatives to improve job satisfaction are intended to retain everyone—top, average and bottom performers. Those with irreplaceable skills; those with commonly available skills; and those with no immediate plans of leaving. We ask, “Why try to retain everyone when, in reality, you could focus your efforts on retaining the most valuable employees who are actually at risk of leaving?”
Recent research has shown that employees exhibit changes in behavior in the form of verbal and non-verbal cues that are strong predictors of turnover. In fact, if these behaviors are observed by managers, it is quite likely the employee will be gone within 12 months. This type of research, while novel for predicting employee turnover, is very common in many other areas of life. Most are familiar with the classic studies by psychologist John Gottman demonstrating that certain verbal and non-verbal cues exhibited by married couples can accurately forecast eventual divorce. Poker players give off “tells” that indicate the strengths of their hands. Everyone gives off cues that, if properly interpreted, can predict hidden current behavior and future behavior. Those planning or in the process of quitting also give off readable cues.
In a series of scientific studies, Gardner and his team demonstrated that a cluster of “pre-quitting behaviors” was predictive of later turnover even after statistically controlling for various employee attributes (age, tenure, education, etc.). The research team used a wide variety of books, articles, blog posts, Internet articles, consultant studies and manager nominations to develop a list of over 900 potential cues of turnover. These ranged from “missing work for doctor appointments more frequently than usual” to “acting indifferent toward most things work-related.” These were narrowed down by expert judges, experienced HR and general managers, and finally by statistical algorithm. The result was a list of 13 employee behaviors—which are listed in the sidebar—that that are highly predictive of future turnover.
Once you ask managers to reflect on and report the pre-quitting behaviors of their subordinates, you can use the data to craft a set of targeted retention strategies. We recommend focusing on employees with the highest turnover risk scores. First, calculate an average score of the 13 items, as rated by their managers, for all employees. Assume that the employees in the top-third of quitting scores (67th percentile and higher) are most at risk of leaving. Will employees with lower scores quit? Yes. Will all of these high-risk employees quit? No. These are simply the most at-risk employees and should be considered for retention efforts.
Next, we recommend looking at the recent job performance scores of these high flight-risk employees. As mentioned above, you are probably indifferent to the loss of the bottom 30% of employees. We recommend letting them quit on their own or allowing the performance management system to encourage better performance or involuntary turnover. For those in the middle 50% of the performance distribution, work with your recruiting team to identify those in roles that are difficult to fill with outside hires. For instance, average performers on your cyber-security team may be good targets for retention efforts. Also, among the middle 50%, work with your managers to identify individuals with unique, firm-specific skills that would be difficult to replace. Individuals with strong leadership potential or those who have a deep understanding of home-grown software or mechanical systems may also be great targets for retention efforts. Finally, all of the high flight-risk individuals at the top 20% of the performance distribution should be a focus of retention efforts.
Keeping High-Risk Employees: A Focus on the Few
The number of people targeted for retention may not be as large as imagined. Following the recommendations of this targeted approach might result in focusing on only 10% to 20% of your employee base.
The first step to take with these targeted individuals is to examine their work history. Have raises been consistent with their performance? Have they been promoted consistent with performance, skills and time in their roles? Have they had the opportunity to participate in training programs to improve their technical or leadership skills? Are there any red flags with their work behavior that would make them less worthy of targeted retention efforts? Gather this information and review it with their direct manager.
The next step would be to coach the employees’ managers on how to conduct “stay interviews” with the targeted employees. The goal is not to convince the at-risk employees not to quit. The goal is for the manager to (1) express to the employee how much their efforts and accomplishments are valued; and (2) discuss the factors causing them to stay with the company or encouraging them to leave. The managers and employees can create near-term career plans that remove obstacles and create paths to the desired future. As a final step, the managers can consult with HR about changes in pay, retention bonuses and flexible work arrangements based on what was uncovered in the review.
The end result is a targeted, customized retention strategy for the most valuable employees who are most at risk of leaving. Better employees will be retained at a much lower cost and low-performing employees who are on their way to quitting or being terminated will not be slowed down. This is a win for the employee, the manager and the company.
Changing Manager Mindsets
Increases in pay, flexibility, amenities and support for employee wellness have been shown to increase job satisfaction, which is a key driver of reducing turnover. But in focusing on making employees more satisfied with their current jobs, leaders who create these interventions may overlook the fact that turnover is, in fact, more often about tomorrow. A large percentage of employees leave not simply because of how satisfied they are in their current job, but because they fail to see a path for advancing their careers within their current workplace.
The key takeaway is that if companies want to keep talent from walking out the door, they need to create visible pathways for future advancement. Doing so requires attention to two factors: markets and mindsets. First, companies must build out their internal talent markets, which is surprisingly easy to do. But that is not enough. They must also change the mindsets of managers, who all too often fail to embrace the spirit of these talent markets.
The Value of Internal Talent Markets
Creating an internal talent market is fairly easy—you simply make sure that all open jobs are posted internally and allow interested employees to apply. This functionality is either built into most of the largest HRIS systems or available as an add-on feature. Smaller organizations that rely primarily on external job sites such as Indeed or LinkedIn to post jobs can make current employees aware of these opening through an internal company newsletter, promotion by internal social media staff, announcements during all-hands meetings or any number of other outlets.
Internal talent markets work by increasing visibility of both employment opportunities and employees with needed skills. Even if an employee is not looking to move, having access to this information helps them to see what types of jobs might be available in the future and encourages them to develop skills and knowledge to prepare themselves for internal promotion.
The increased visibility of internal talent markets provides employees with greater confidence to both find and be considered for jobs that will help them advance their careers and make them more likely to stick around. Such visibility is particularly helpful for employees from under-represented groups, who tend to have more limited internal social networks. Making all job openings widely visible and allowing candidates from across the organization to apply breaks down these barriers to advancement, providing more reason for such employees to stay.
The benefits of creating an internal talent market are clear, but in practice, managers often get in the way. The following three manager mindsets can unintentionally undermine an organization’s effort to retain its best employees: tribal mindsets, short-term mindsets and territorial mindsets. In the section below, we explore how each of these mindsets can become impediments to hiring processes and how to overcome them.
Overcoming Managers’ Tribal Mindsets. In the United States, there are no federal or state laws that require jobs to be posted internally, but many firms have already embraced the logic outlined above by requiring managers to do so.
Yet all too often, managers will follow these requirements but fail to embrace their spirit. That is, a manager will post a job internally but has already decided to hire someone from their personal network. This practice creates a widespread sense of distrust and unfairness around hiring decisions. In response, employees are likely to look elsewhere for opportunities.
For internal talent markets to help with retention, companies must convince managers to fully embrace an internal talent mindset. This mindset begins with being open to considering all candidates, even if they initially feel someone might not be a good fit.
One way to encourage an open mindset is to share the following compelling research regarding shaping the hiring process and selecting high quality candidates. Research shows that managers who embrace their internal talent markets hire significantly higher quality individuals. Internal hires perform better, stay longer and are more likely to be subsequently promoted.1
Overcoming Managers’ Short-term Mindsets. For understandable reasons, managers like to hire people who can hit the ground running. And so, it is not surprising that managers prefer to hire candidates who have done similar work in the past. This dynamic can create a retention problem by limiting the ability of employees to make career changes within their organization. Individual hiring managers need to take a longer-term view and be willing to take a chance on someone who may lack all of the necessary skills to do the job, especially when there are external candidates who may have already checked all the boxes.
One way to address this problem is to recognize and reward managers for facilitating within-company promotions and lateral moves. For example, managers who facilitate internal moves might be offered the opportunity to participate in a mentoring or leadership development program. A second way is to create a position dedicated to managing your internal talent market, such as an Internal Talent Market Coordinator who can alert hiring managers to internal candidates’ applicable skill sets and ensure they are considered for new roles. Recent research shows that internal applicants who are granted an interview are at least twice as likely to stay as those who are not given a chance to interview with the hiring manager.2
Overcoming Managers’ Territorial Mindsets. Just as managers want to hire employees who can hit the ground running, they are often reluctant to part with employees who are excelling in their current role. This is because managers are often rewarded based on the performance of their unit and losing an employee—even to another part of the firm—may impede unit performance. As a result, managers routinely engage in talent hoarding by dissuading or otherwise preventing their best employees from pursuing new jobs. While good estimates of talent hoarding are hard to come by—after all, what managers wants to openly admit to hoarding—at least one survey suggests that half of managers have prevented an employee from leaving.3
Hoarding is a manifestation of what researchers refer to as territorial behavior.4 If an employee’s manager is preventing their career advancement, then they are likely to look for opportunities elsewhere.
Managers need to understand the value of letting people go. The number one reason managers hoard talent is that they are afraid that they will be unable to replace them with equally qualified workers. However, there is preliminary evidence that managers who get their employees promoted develop positive reputations inside and outside of their organizations, resulting in more and higher-quality internal applicants when they have job openings. This suggests that managers who let their employees leave are more likely to have a steady stream of excellent candidates to replace them.
Leading in an unprecedented time of increasing potential resignations and talent scarcity requires bold, new strategic thinking. Labor shortages are hitting almost every industry and, given this, investors are beginning to ask for more information on hiring and retention strategies. Our standard assumptions about keeping our best talent may not work in an era when some of our most valuable employees may have “leavin’ on their minds”—because they have unprecedented options.
During the Great Resignation it is especially critical for leaders to anticipate when and who might be thinking of resigning. Pre-quitting behaviors can be observed by managers long before an employee quits. Armed with this advance information, companies can be more focused and targeted in their responses. These responses should include a drive to change manager mindsets away from tribal, short-term and territorial thinking toward cultures that value new career pathways and internal employee opportunities. It’s all a part of upping the game of “leading for keeps” to retain your best talent amid the Big Quit.
|JR Keller, Ph.D., is an Assistant Professor of Human Resource Studies in the ILR School at Cornell University. He can be reached at email@example.com.
|Timothy Gardner, Ph.D., is an Associate Professor and Director of the Master of Human Resource Program in the Huntsman School of Business at Utah State University. He can be reached at firstname.lastname@example.org.
|Brad Winn, Ph.D., is a Professor of Practice at the Covey Leadership Center and Executive MBA Director in the Huntsman School of Business at Utah State University. He serves as a Senior Editor for People + Strategy and is the Principal of Winn Consulting Solutions. He can be reached at email@example.com.
1 Keller, J. (2018). 'Posting and slotting: How hiring processes shape the quality of hire and compensation in internal labor markets', Administrative Science Quarterly, 63: 4, 848–878
2 Dlugos, K., & Keller, J. (2021). 'Turned down and taking off? Rejection and turnover in internal talent markets', Academy of Management Journal, 64: 1, 63–85
3 Lykins, L. (2016). Talent mobility matters, Seattle, WA. Retrieved from https://www.i4cp.com/surveys/talent-mobility-matters.
4 Gardner, T. M., Munyon, T. P., Hom, P. W., & Griffeth, R. W. (2018). 'When territoriality meets agency: An examination of employee guarding as a territorial strategy', Journal of Management, 44: 7, 2580–2610