Understanding Employee Expectations to Reduce the Massive Costs of Turnover

By Bill Fonvielle and Lynda Joeman

In what is being referred to as the “Great Resignation” of 2021, extraordinary numbers of employees have been changing jobs or thinking about resigning in the near future. Expectations of work have been transformed during the Covid-19 pandemic and this is reflected in the statistics. Between April and August 2021 alone, an almost unprecedented 20 million US employees left their jobs. Worldwide, a survey of more than 16,000 workers across multiple countries and industries revealed that more than half are considering leaving their current employers if not provided with post- pandemic flexible working arrangements.

Despite these stark trends, the response from employers is at best muted and at worse is of the “head in the sand” variety. For example, CIPD research revealed that 41% of large organizations surveyed have an ad hoc, unplanned approach to recruitment. In another UK study, only about a quarter of HR managers interviewed said that talent retention is a current priority for their organization. The complacency of many organisations when it comes to staff retention is not only misguided but likely to prove extremely costly as resignation rates soar, not least because of the hidden costs of employee turnover.

Pre-pandemic research by The Society for Human Resource Management (SHRM) estimated that, on average, annual employee turnover is around 19% and that a business with 200 employees will incur turnover-related costs of $638,324 annually. The percentage varies by industry. This figure takes into account the costs of covering unfilled vacancies, those associated with recruitment, onboarding and orientation, and productivity ramp up costs. The post pandemic average costs of employee turnover, reflecting higher than usual resignation rates, are likely to skyrocket beyond this estimate. Do CEOs know what these costs are? Usually no; they do not appear in the P&L.

As a result, most employers are unaware of the huge costs of employee turnover. Critically, many employers are also unaware of the real reasons why staff are currently leaving their jobs in droves. This missing piece of the jigsaw can be addressed. A commonly used approach is to conduct exit interviews. Although sometimes useful, the information these provide is by definition out of date, and its relevance to other employees is an unknown factor. Moreover, some exiting employees will be less than candid about their reasons.

Our more forward-looking approach to employee research explores the expectations employees have of an ideal employer in their industry, and how well they feel their current organisation measures up. If their employment expectations are largely met, it is reasonable to assume that they will be less likely to leave the organisation. We often hear managers ask, “How can we afford to meet expectations? After all they will want the sun, moon, and stars.” The right question is, “How can you afford not to, given the costs of turnover?” Decades of employee research have demonstrated that most respond candidly, in realistic and often modest ways, when asked for their expectations of an ideal employer.

Employers may feel that as long as they meet basic employee needs, such as a reasonable salary, comfortable working environment, or manageable workloads, their staff will be happy and loyal to the organisation. Yes, you do need to meet these basic needs. They have not changed, and will no doubt persist post-pandemic. What has changed dramatically as a result of the pandemic and continues to do so, based on the findings of numerous studies, are expectations of the total employee experience. How well organizations adjust to and meet these changing expectations can be expected to drive retention and turnover in the post-pandemic world.

McKinsey research revealed a major disconnect between employers’ perceptions of the factors that are important to their employees and the factors actually important to them. Employee expectations have been influenced in various ways by their experiences of working from home during the pandemic. Some want to continue with flexible working patterns and a better work-life balance than before; others long to feel more valued by their managers or to have a greater sense of belonging to their organization, for example.

In the face of this challenging dynamic environment, what should organizations be doing? The first step is to compute the actual costs of turnover to get an understanding of the magnitude of the problem and to establish a baseline against which to measure progress. Many guides on how to do this can be found online using, for example, calculations developed by The Society for Human Resource Management.

Concurrently, data on employee expectations should be gathered. In our approach, we do so by asking carefully formulated questions aimed at providing an in-depth picture of the ideal employer. Once collected and collated, the expectations are assembled in an “expectations map”, or a blueprint of the composite ideal employee experience specific to that organisation. Employers find these bespoke maps insightful and greatly useful. But we don’t stop there. The most important expectations become the core of a survey that asks employees to rate their employer’s performance against these, along with their ideal score and minimally acceptable score for each one. This “3-point” method allows us to determine the size and direction of the gap between ideal and actual performance for each expectation and overall. It also highlights specific areas needing improvement and the priorities for remedial actions. Innovative and intuitive displays such as the “Zone of Tolerance” are used to present these findings, and we apply advanced statistical methods to uncover the likely drivers of turnover, allowing for precisely targeted remedies.

Traditional employee satisfaction surveys and standardized questionnaires miss the mark. They are rooted in old methods and models that are not relevant today, let alone in the post-pandemic era. They lack the ability to determine expectations and the ideal experience for a specific organization. They are insensitive to critical differences between organizations and assume that “one size fits all”. And when it comes to determining why turnover is rampant, they are likely to be misleading at best.

Our approach to employee research avoids the pitfalls of traditional methods while providing deeper insights and pointers to actions that can reduce turnover and its massive costs. It can align management’s and employees’ perceptions of the most important aspects of the employee experience. Using a powerful combination of qualitative and quantitative data collection and analysis tools we are able to generate robust evidence of the key change levers likely to affect employee behaviours today and tomorrow, including turnover, efficiency and productivity. For a fuller discussion of our methods, see our article, “The Art of Employee Surveys.”

There is little doubt that the experiences of the pandemic have had a major impact on employee expectations of work and employers. Employees’ needs haven’t changed, but their expectations are evolving dramatically. The ability to understand and meet these fluid expectations is likely to become a key competitive differentiator in most business settings, with major cost implications for those organisations who fall behind. Employee surveys will play an increasingly important role in this, but traditional employee satisfaction surveys are likely to come up short in delivering the insights needed to thrive in the new business environment.