Chart of the Week: Employees are leaving? Blame your leadership.

By Simpplr Research
Leadership - man in suit walking away from office building

Simpplr Research just concluded our latest report, State of Internal Communications 2019. The goal of the survey was to gauge the state of internal communications (IC) profession and help organizations gain insights on how to improve their IC programs. This week, Simpplr Research shares why strong leadership is critical for employee retention.

Chart of the Week:

Leadership - chart showing percentage of employees who are likely to leave based on ceo ratings

Data Paragraph: Data from this chart is derived from the 2018 Simpplr State of the Intranet Survey. Respondents were anonymously asked, “how likely they were to leave the company in the next 12 months?” This data was then merged with data, pulling Overall, CEO, Senior Management, Culture and Values, Work-Life Balance, and Compensation ratings for each company in the Wilshire 5000. K-means clustering (k = 3), an elementary machine learning technique used to minimize the sum of squared distances within (k) clusters, was then used to separate companies into three distinct groups based on CEO rating. The chart above shows the proportion of respondents indicating they were “very likely” to leave the company in the next 12 months (the strongest indication they could have given for leaving the company) broken out by CEO cluster. One can see that there is a strong decreasing trend in likelihood to leave work with CEO rating. Companies in the highest CEO cluster (far right) were less than 50% as likely to have employees indicate that there were very likely to leave the company in the next 12 months than companies in the lowest CEO cluster (far left). Companies in the middle group were about 25% worse than the high-rated cluster and 25% worse than the low-rated cluster, suggesting a linear trend.

New workforce, new demands

Leadership - woman sitting and working at outdoor table

It’s an employee’s market. We’re experiencing an all-time unemployment low in the United States, and the job market has primarily shifted to millennials. The new face in the workforce demands new expectations, and it is no longer enough to offer bonuses at the end of the year. Because of these trends, it’s never been as important to focus on employee engagement and retention.

First, all employers must recognize that old incentive and bonus programs alone are no longer enough to attract and retain employees. In the above chart, compensation is no longer a priority. Second, because unemployment is at an all-time low, it’s never been more important to retain talent. The cost and time it takes to re-train employees are much more taxing than it is to retain people. SHRM estimates that replacing an employee costs 50-60% of an annual salary. To put it into perspective, it would cost between $40,000 and $48,000 to replace an employee with an annual salary of $80,000 – it’s not cheap!

The CEO’s impact on employee turnover

This paradigm in the workforce has made it harder to hire and retain talent, and employee turnover is at an all-time high, but there’s hope. Based on Simpplr Research, employees at companies with lowly rated CEOs are almost 3x likely to leave their company than those working in companies with highly rated CEOs. Here’s what’s surprising: employees who work at companies with mid-rated CEOs are just as likely to leave their company as employees who work at companies with lowly-rated CEOs! In contrast, employees who are happy with their CEOs are twice as likely to stay compared to those employees who rated their CEOs average. These findings are significant to companies who do not have a highly-rated CEO. A mediocrely-rated CEO is not enough to keep talent. The challenge is getting the CEO to understand his or her impact on employee retention.

3 things CEOs must do to win over employees

Simpplr Research (and many others) show that culture is critical to retain employees. Based on Chart of the Week: Want internal communications success? Engage your executives., we know that leadership or the CEO is responsible for defining and shaping culture. Employers (namely CEOs) need to understand the shift and what the new workforce prioritizes so they can align their strategy accordingly. Leadership needs to be directly accountable for employee retention, regardless if they agree or not. There’s ample data to prove this.

Here’s the good news – there’s an opportunity to turn this around, and it’s all interconnected. Simpplr Research has identified the top three necessary levers a CEO can pull to begin improving culture:

  • CEOs need to reinforce purpose

    CEOs need to drive their organizations to focus on the “why” of the company. They need to beat the drum and remind employees why they come to work every day. Employees don’t do their best work when they lack a sense of purpose. Part of improving culture and employee retention is getting CEOs to continually remind employees why the company exists, what it stands for, and why everyone comes into work every day. When employees share an identical purpose, they start to feel more connected and unified.

  • CEOs need to focus on company alignment

    CEOs need to align the workforce. As the leader of the company, CEOs have the responsibility to align their employees with their company objectives. You can’t expect an organization to flourish if an organization isn’t unified with company goals. Neither can you expect employees to be engaged when they can’t even recite company priorities. Surprisingly, employees don’t even realize themselves that they need to know priorities to feel engaged. Because of this, it’s even more critical for leaders to communicate vision and strategy to employees.

  • CEOs need to create community

    Similarly, CEOs need to take the lead on building community within the organization. This doesn’t mean leaders need to go out and start creating clubs to connect employees. Community means creating an environment where employees feel safe, connected, and supported. For example, leaders can encourage community by promoting diversity, inclusion, and unity. It’s leadership’s responsibility to create an environment where all employees feel secure. People, regardless of their background, flourish and do their best work when they feel comfortable.

What culture has to do with employee retention

Simpplr Research ran an in-depth study on what culture has to do with employee retention. We found three key drivers that organizations must focus on to engage employees and improve company culture. Check out Glassdoor Data: Impact on Employee Communication and Retention (Infographic) to learn more.

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