How a Bank Learned to Predict and Manage Employee Retention
By Associate Prof. Radvan Bahbouh, Ph.D., Rudolf Kubik, Ph.D.
One surprising way to improve a company’s profit margin is better employee retention.
Low retention has costs – both the direct costs of recruiting or training new people and indirect costs like business lost because you were short-staffed. According to a study by the Centre for American Progress, the average costs to replace a midrange employee (earning $30,000 to $50,000 a year) are 20% of their annual salary. And we must not overlook the cost of reduced morale among the team members left behind. Not only must they cover the workload of the employees who leave, but their resignations often also leave painful ripples within a team. Even a single departure hurts morale: managers must quickly dispel rumours and anxiety to stabilize their teams.
That’s why we were asked to study retention at a major bank – but before moving on to that, let’s look at how retention can sometimes be tricky.
When striving to keep our most valued people, we often look outward to training, titles and salaries. But research shows that it may be wise to look inward first and consider the psychological constructs that make a team’s environment more stable. Identifying the issues that are keeping your most valued employees from feeling psychologically supported at work will go a long way toward retaining them.
What does the data say about the key triggers why people leave?
According to Gallup, the no. 1 reason is bad managers – in Gallup’s research, 75% of workers who left their jobs did so because of their boss.
And yet… this is sometimes rightly called one of the biggest HR lies!
You see, the truth is usually much more complex, with a combination of different reasons. Research by Culture Amp based on a comparison of 175 teams showed that the percentage of people whose decision to leave an organisation was driven only by a manager was roughly 12%.
The Quality of (Managers’) Communication
Also previous research performed with NASA and ESA on teams involved in space flights and isolation experiments has proven that a team’s productivity usually depends not only on the quality of its members but also on the quality of their interactions. In particular, the quality of communication is tightly connected to the number of a team’s misunderstandings and conflicts, which are also a key factor in quitting decisions (see more on how to manage team conflicts)
As many past studies have shown, the quality of the communication in a team is also very connected with its overall satisfaction, engagement and productivity (e.g. Marlow 2018, Organizational Behaviour and Human Decision Processes).
And our recent study of bank office managers and directors echoed these results. Bankers – 3,560 of them – evaluated the quality of the communication in their teams and (especially) with their managers. The results showed that the quality of communication perceived in a team was positively correlated with key performance indicators – both the employee retention rate and the average revenue that a bank office team generated. This supported our previous findings that effective information sharing methods in a team are essential. Yet this is not just a job for managers. Encouraging every single team member to speak up and participate in consensus-building about the rules of communication and cooperation is the key to making it happen.
If you are a team manager, you may also find it interesting that people tend to be especially sensitive regarding the quality of your communication about their personal development. For most of the 3,560 bankers studied, the perception that their manager was showing sufficient interest in their personal development was important. If that perception wasn’t there, people were more likely to leave. The study’s regression analyses suggest that providing a team with sufficient development possibilities can improve team stability by up to 14%.
Can you predict when people will want to leave?
No, of course not. But… yes!
We are most often asked if we can not only manage, but also predict when people might quit their jobs. Well… not surprisingly, a person who is considering quitting usually has lower participation in what’s happening in their team. Take a look at the chart below.
As we’ve noted above, interaction among a team’s members is highly important not only for its performance, but also for its members’ satisfaction. That’s why we gather and quantify individual perceptions of the intensity and quality of team members’ communication. As the chart shows, people who are sitting on an unannounced decision to leave tend to communicate less with others, already a few weeks in advance. The intensity of their communication is about 20% lower than that of “more-permanent” staff. And it’s even 5% lower than the average intensity for a newcomer to the team. Therefore, focusing on the intensity and quality of interaction not only with the manager but among all a team’s members can be very important for understanding why people consider leaving a company.
So how should managers approach their teams to foster stability?
Based on this study, the bank in question has begun to encourage their managers to change how they interact with their teams and what they focus on. After all, when a manager shows interest in people’s personal development, attentively focuses on how people interact with each other, and consciously shapes the quality of the communication they provide, it can work wonders.
Sociomapping of team communication quality
A project including sociomapping analyses has helped the bank’s managers to find the main ineffective interactions in their teams. And feedback for managers has been bolstered with facilitated feedback for all team members about their communication’s quality, which is making teams stable long-term. Talking openly about team processes is helping team members to communicate more openly and bridge manager/team gaps.
Do you want to develop your team effectiveness?
Get in touch with us and find out more details about sociomapping programs for your company.