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gagement and turnover”is costing businesses billions of dollars a year.
Saratoga Institute estimates the average cost of losing an employee to
be one times annual salary.3 This means that a company with 300 employ-
ees, an average employee salary of $35,000, and a voluntary turnover rate
of 15 percent a year, is losing $1,575,000 per year in turnover costs alone.
If, for the sake of illustration, 70 percent of this company™s forty-¬ve yearly

Figure 1-1.
Why people leave: what managers believe vs. the reality. Source:
Unpublished Saratoga Institute research, 2003.

89% 11% of
managers believe
employees leave
of managers believe employees leave for more money. for other reasons.

12% of
employees leave
for more money.
of employees leave for reasons other than money.

The 7 Hidden Reasons Employees Leave

voluntary turnovers”thirty-one employees”is avoidable, then the com-
pany, by correcting the root causes, could be saving $1,102,500 per year.
This should be enough to raise the eyebrows of most CEOs and propel
them to take action.
Just looking at turnover costs doesn™t tell the whole story, however.
Long before many employees leave, they become disengaged. Disengaged
employees are uncommitted, marginally productive, frequently absent, or
in some cases, working actively against the interests of the company. The
Gallup Organization reports that 75 percent of the American workforce is
either disengaged or actively disengaged (Figure 1-2).4
The 15 percent of actively disengaged workers can be particularly de-
structive to morale and revenues, for these are the workers who disrupt,
complain, have accidents, steal from the company, and occupy the time
and attention of managers that would be better spent dealing with other
workers. As we know, some turnover is good turnover, and rather than
struggle to re-engage actively disengaged workers, it is usually wiser,
kinder, and more courageous to let them go.
The cost to the U.S. economy of disengaged employees is estimated to
be somewhere between $254 billion and $363 billion annually.5 The cost
of absenteeism alone, a signal symptom of disengagement, is estimated to
be $40 billion per year.6
Most of this mind-boggling cost accumulates from the loss of sales
revenue caused by customers™ disappointing interactions with disengaged
employees, many of whom are turnovers waiting to happen. Simply put,
employee disengagement leads to customer disengagement, and employee
defections eventually lead to customer defections.

Figure 1-2.
Engaged vs. disengaged workers in U.S. workforce. Source: The Gallup
Organization, 2002.


W C Aµ W T L?

So, the best reason to be concerned about understanding the root
causes of voluntary employee turnover and disengagement is an economic
one. It™s not just about being nice to employees just to be nice, although
civility is a standard of behavior to be prized in itself. It™s about taking care
of employees so they will then feel good about taking care of customers.7
Hundreds of Gallup studies reveal that, on average, businesses units
with employee engagement scores in the top half compared to those in the
bottom half, have:

• 86 percent higher customer ratings
• 70 percent more success in lowering turnover
• 70 percent higher pro¬tability
• 44 percent higher pro¬tability
• 78 percent better safety records8

If we can commit to correctly identifying the root causes of employee
disengagement, and if we can address these root causes with on-target solu-
tions that increase the engagement of our workers, we will see tangible
results in the form of reduced turnover costs and increased revenues.
Many managers will never get it. As Brad, another departed employee,
told me during an exit interview, ˜˜It seems like most managers just don™t
care enough to go to any effort to retain good people.™™ But many managers
do get it, and do care. Now what we need are more organizations that
make heroes of these managers, not just in terms of praising them, but also
in terms of measuring and rewarding their contributions.
This book is for the managers, executives, business owners, and human
resource professionals who care.

Turnover: Just a ˜˜Cost of Doing Business?™™
To review, almost 90 percent of managers believe their employees are
pulled out of the organization by better opportunities or more money,
while almost 90 percent of employees say they were pushed down the
slippery slope toward leaving by nonmonetary factors. Where lies the truth?
As with many things in organizational life, it™s all about differing percep-
tions. The question is, ˜˜whose truth?™™
Many of today™s managers still believe that turnover is an acceptable
cost of doing business. Perhaps even you have said one or all of the follow-
ing: ˜˜People come and people go™™ or ˜˜You can™t expect to hold on to

The 7 Hidden Reasons Employees Leave

everyone forever™™ or ˜˜Good people get better offers and move on.™™ There
is a healthy realism in all these statements.
Let™s also not forget that many of today™s managers joined the manage-
rial ranks in the 1980s and early 1990s, when there was a surplus of baby
boomers in the workforce to take the place of employees who quit. Ever
since the ¬rst boomers entered the workforce in 1968, the labor supply had
always exceeded the demand. Then, around 1995, there came a tipping
point. For the ¬rst time in recent memory, the number of jobs started to
exceed the supply of workers. The end-of-the-century ˜˜war for talent™™
had begun.
For the next six years the war raged”companies made liberal use of
signing bonuses and stock options to attract new employees. Some organi-
zations vied to become ˜˜employers of choice™™ by offering everything from
concierge services, to massages, to take-home meals, even letting their em-
ployees bring their pets to work. Employees had moved into the driver™s
Yet, a 1998 survey reported that although 75 percent of executives said
that employee retention was one of their top three business priorities, only
15 percent had any plan in place to reduce turnover.9 It was apparent, by
their failure to act, that the majority of managers and executives were stub-
bornly hanging on to the mindset that had served them so well in their
formative years: ˜˜Turnover is acceptable as a cost of doing business.™™ Those
who held on to this mindset soon found themselves competing for talent
and losing to a minority of companies whose mindset”˜˜Every turnover is
a disappointing loss to be analyzed™™”was very different, re¬‚ecting the
same attitude about losing a valued employee as about losing a valued cus-
tomer. Many of these companies were located in the Silicon Valley, where
the war for talent was ¬ercest.
These companies formed the vanguard of employers across America
who believed their people came ¬rst, built cultures of mutual commitment,
lowered their tolerance for bad managers, and came up with clever and
innovative best practices for keeping and engaging talent.10 They were
companies like Sun Microsystems, Cisco Systems, Southwest Airlines, SAS
Institute, MBNA, Edward Jones, Rosenbluth Travel, Synovus Financial,
Harley-Davidson, and many others. They were in the minority, as the best
always are.
Then came the economic slowdown of 2001, when employees began
˜˜tree-hugging™™ their jobs and when replacements for those who quit were
plentiful again, at least in most industries. CEOs began ˜˜high-¬ving™™ one
another in celebration of the fact that the war for talent was over. Employ-

W C Aµ W T L?

ers had moved back into the driver™s seat. One Fortune column featured the
headline, ˜˜The war for talent is over . . . talent lost.™™11 Once again it
seemed entirely appropriate that managers and executives would re-adopt
that comfortable old belief: ˜˜Turnover is acceptable as a cost of doing busi-
It is understandable that managers™ attitudes toward employees change
as the employment market changes. It is also easy to see why managers
would be less worried about employee turnover when there are plenty of
unemployed or underemployed job seekers from which to choose. And
when managers are not as worried about employees leaving, they are also
not as likely to be concerned about why they are leaving.

When the Tide Turns, Mindsets Must Change
But what about when the economy improves, the rate of job-creation revs
up, the 75 million Boomers start retiring, and the 45 million Generation
Xers are too few to ¬ll the available jobs? This is the scenario the U.S.
Department of Labor (see Figure 1-3) now predicts at least through 2012.12
If this prediction of dire worker shortages holds true”and most labor
economists agree that it will”the war for talent will rage again. Employers
of choice will once again ¬ght hammer and tong for available talent, and
the losers will not survive.
This means that no manager can afford to maintain outdated attitudes
about turnover, especially when it is regrettable and preventable. Competi-
tive managers will need to adopt a new mindset: that every voluntary
avoidable employee departure is a disappointment to be analyzed, learned
from, and corrected. Maintaining that mindset means managers can no
longer just accept employees™ super¬cial answers about why they quit, even
though in some cases ˜˜better pay™™ or ˜˜better opportunity™™ may be the real
reasons. Managers and senior executives need to know the truth about why
they have lost valued talent, and they need to accept that maybe it was
something they did or didn™t do that pushed the employee out the door.
Of course there will always be managers who are too preoccupied,
self-focused, or insensitive to notice the signs that employees are becoming
disengaged while there is still time to do something about it. And when
employees eventually do leave, managers may be too uncaring or in denial
to confront the real reasons. Many cannot handle the unpleasant truth that
the real reason employees are leaving may be linked to their own behavior.
These managers are actually choosing not to see or hear the evil that plagues

The 7 Hidden Reasons Employees Leave

Figure 1-3.
Projected growth of jobs vs. workforce. Source: U.S. Bureau of Labor
Statistics, 2004.

165 Million
162 Million
cte ow
oje eG
Pr rc
kf o



2002 YEARS 2012

We cannot hope to keep all our valued talent. But good managers care
enough to try to understand why good people leave, especially when it
could have been prevented. Over the next several years, organizations must
do everything they can to coach and train their managers in how to engage
and keep re-engaging talented people.

What About HR™s Role in Exit Interviewing?
Some managers may ask, ˜˜What about the human resources department”
isn™t it their responsibility to do the exit interviews, analyze the data, and
report on the reasons employees leave? Traditionally, these certainly have
been the responsibilities of HR departments.


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