Office Hours: Brooks Holtom Examines the Financial Impact of Retaining Employees Who Prefer to Leave

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Company culture is powerful — so powerful that it can impact sales, profits, and employee morale, whether positively or negatively. Engaged employees create innovative products, deliver extraordinary customer service, and drive sales and profits. According to Gallup, only about 40 percent of U.S. workers are actively engaged. As employee disengagement grows, so does the risk of talent loss, but what happens if disengaged employees actually stay as is likely in a recession or period of high unemployment? Brooks Holtom, senior associate dean for strategy, finance, and organization and professor of management at Georgetown University’s McDonough School of Business examines the financial impact of employees reluctant to stay.

How has the pandemic created a shift in morale and workplace environment, and how does this negatively affect employee productivity?

As we’ve seen the last few months, the pandemic has upended notions of well-being and happiness, especially around work and its intersection with our personal lives. The stress of coronavirus challenges even the very best employee, often leaving many feeling overworked, overwhelmed, burned out, and fatigued. The high unemployment rate during the pandemic has created a scary reality for many who may want to leave their organization, but feel they cannot. In my research, I call these people “reluctant stayers.”

What is the difference between a reluctant stayer and an enthusiastic stayer, and how is this relevant to your research?

An enthusiastic stayer will remain at their current job because they genuinely want to for various reasons including high satisfaction, commitment, embeddedness, and engagement. A reluctant stayer wants to leave but may not be able to at the present time. Our research uncovered two predictors of reluctant stayers which are 1) their current level of satisfaction and 2) the trend of their satisfaction over time. Put differently, people who have low or declining levels of satisfaction, but who perceive few alternatives to leave for a better job are likely to become reluctant stayers.

Can you explain how your recent research sheds a light on what happens when employees stay instead of leave and what are the financial impacts of retaining those employees?

Because of the pressures of the pandemic, nearly all organizational leaders need to assess the possible consequences of their employees feeling burned out or unhappy.

We worked with two nonprofits to see if we could quantify the cost of reluctant staying by examining a subset of employees who work in fundraising. There are certain factors that can be looked at to predict who is likely to stay and who is likely to leave based on performance and our thinking was that fundraisers who are burned out or disengaged would make fewer phone calls, visits, and solicitations.

While all positions in an organization are valuable for overall performance and departments are highly interdependent (e.g., executing successfully on the mission of the organization makes fundraising easier), this particular function plays a central role in these organizations and, thus, presents a meaningful example of the costs and benefits of having a highly satisfied and embedded workforce. Our research showed that across both organizations, enthusiastic stayers on average raised $3,155,190 whereas reluctant stayers on average raised $2,238,134. In sum, enthusiastic stayers generated nearly a million dollars per year more for their employers than reluctant stayers. 

Is there anything organizations can do to better understand their employees during turbulent times?

With stress, anxiety, and uncertainty at high levels right now, it is important for businesses to understand the drivers of happiness in their workforce. Leaders have the chance to be proactive and focus on improving work morale to increase the odds of enthusiastic stayers, rather than reluctant stayers.