According to new research released in MIT Sloan Management Review, toxic culture is the top predictor for employee attrition during the Great Resignation. This holds true across industries – both blue-collar and white-collar – for the period between April and September 2021.
To better understand the causes of the Great Resignation and help leaders respond effectively, the authors analyzed data from Revelio Labs, looking at 34 million online employee profiles to identify U.S. workers who left their employer. They then analyzed the employer's culture using data from the MIT SMR / Glassdoor Culture 500 dataset of hundreds of the largest employers in the United States.
In their analysis, compensation ranked only #16 among all topics in terms of predicting employee turnover.
"A toxic corporate culture is by far the strongest predictor of industry-adjusted attrition and is 10 times more important than compensation in predicting turnover," stated Donald Sull, senior lecturer at the MIT Sloan School of Management and cofounder of CultureX.
Top Predictors of Attrition During the Great Resignation
The study analyzed the impact of more than 170 cultural topics on employee attrition in Culture 500 companies from April through September 2021. These five topics were the leading predictors of attrition. Each number indicates the level of importance of each topic for attrition relative to employee compensation. For example, a toxic culture is 10.4 times more likely to contribute to attrition than compensation.
- Toxic corporate culture – 10.4
- Job insecurity and reorganization – 3.5
- High levels of innovation – 3.2
- Failure to recognize employee performance – 2.9
- Poor response to COVID-19 – 1.8
What Contributes to a Toxic Culture?
- Failure to promote diversity, equity, and inclusion
- Workers feeling disrespected
- Unethical behavior
The research also identified four steps that can boost retention in the short term. Again, each number indicates the level of importance of each topic relative to employee compensation:
1. Provide lateral career opportunities – 2.5
2. Offer remote work options – 1.5
3. Sponsor corporate social events – 1.3
4. Allow for more predictable schedules – 1.2
These steps offer effective, inexpensive ways to increase retention.
Culture matters – companies with a reputation for a healthy culture, including Southwest Airlines, Johnson & Johnson, Enterprise Rent-A-Car, and LinkedIn, experienced lower-than-average turnover during the first six months of the Great Resignation.
"Leaders who are serious about winning the war for talent during the Great Resignation and beyond must do more. They should understand and address the elements of their culture that are causing employees to disengage and leave. And above all else, they must address anything that makes their culture toxic," said Charles Sull, coauthor of the article and cofounder of CultureX.
Recognition matters – employees are more likely to leave companies that fail to distinguish between high performers and laggards when it comes to recognition and rewards. Companies that fail to recognize and reward strong performers have higher rates of attrition, and the same is true for employers that tolerate underperformance.
According to Sull, ““By failing to recognize high performance, not only are you losing people at higher rates, but you’re losing people who are highly valuable to the company.”
Sources: cnbc.com; sloanreview.mit.edu; PRNewswire