5 Myths About Employee Retention

There are three things that should matter most to hiring professionals right now — retention, retention, retention.

A cost-of-living crisis coupled with a herky-jerky economy in which resignations far outnumber workforce reductions is causing a surge in employee turnover. And that’s bad for a variety of reasons: Productivity declines, morale suffers, and attracting star candidates can become increasingly difficult.  

But mostly turnover is expensive. It’s estimated that the price tag for employee churn runs between 90% and 200% of a worker’s total salary. Some of those costs are hidden — that is, they don’t appear in a company’s profit and loss statement — but when you factor in recruiting and training expenses and the loss of experienced staff, it’s clear that too much turnover can negatively impact your business.

Attitudes about employee retention can vary depending on the industry and the whims of the job market. But the first step to truly understanding its importance is to dispel some of the myths that surround it. Here are five common misconceptions about employee retention. 

1. Hiring has nothing to do with retention

It’s tempting to think of employee attrition as solely a managerial problem — you know the old adage, “people don’t quit jobs, they quit managers” — but the truth is recruiters have a profound influence over whether or not someone sticks with a job. After all, they’re usually the first point of contact. A positive hiring experience, from outreach to onboarding, can work wonders for a candidate’s perception of a company, while a negative one could have them hitting the eject button before the ink dries on their offer letter. 

According to research by the Human Capital Institute, 20% of new hires resign within the first 45 days. One of the top reasons: “unmet expectations created during the recruitment phase.” And the quick-to-quit aren’t just leaving a hole in the org chart; their actions can cause team members to feel confused and dejected and leave them wondering whether the grass really is greener someplace else.

2. Company culture doesn’t matter

When it comes to why people leave their jobs, money usually matters most. Robert Half’s 2022 Job Optimism Survey found that 65% of respondents cited a salary boost as the main reason they’re seeking other employment. A lackluster perks and benefits package was the No. 2 reason for job-hopping. However, one of the other commonly cited reasons that has little effect on a person’s purse strings: dissatisfaction with the company culture. 

In a study he coauthored on employee attrition, Donald Sull, a senior lecturer at the MIT Sloan School of Management, explained that a company’s “corporate environment” ranked as the top factor in employee retention. In fact, he told The New York Times that toxic corporate culture was “10 times more predictive of having a higher-than-industry-average attrition rate than compensation.” Some of the elements that contribute to workplace toxicity include unethical behavior, failure to promote DEI, and disrespected workers. 

3. Workers won’t stay unless they get promoted

While promotions can certainly improve employee satisfaction in the short term, they’re not necessarily a slam dunk for retention. Many workers today have little interest in shimmying up the corporate ladder as quickly as possible and instead favor a squiggly career journey where they can learn new skills and try different things without always taking on additional responsibilities. “Upward is just one direction of growth,” writes Lila MacLellan for Quartz, “and not always the best one.” As Canva recruiting leader Amy Schultz has predicted: “Work is going to be more like a rock-climbing wall than a ladder.”

Sideways might actually be the better trajectory. According to the MIT attrition study, lateral career opportunities are 12 times more predictive of employee retention than promotions. The takeaway: If you want to hold on to your top talent, make sure they have plenty of room to move. 

4. Focusing on employees will take care of attrition 

Well, yes and no. Engaging your employees and understanding their needs and motivations is crucial to retaining them. But you don’t get there unless you’re fully committed to supporting your managers. 

That means providing them with the proper training, guidance, and modeling so that they’re set up for long-term success. It sounds like an obvious retention strategy, though it’s often the most ignored. The Society for Human Resource Management reports that being treated fairly by a supervisor is the most important determinant of employee retention (people don’t quit jobs . . .). 

What better way to ensure your workers are in good hands than by taking care of the ones who manage them? 

5. Pay transparency has caused the floodgates to open

For decades, companies resisted salary transparency because, in part, they feared it would send their lowest paid workers packing. Now that more and more states and municipalities are adopting pay transparency laws, we’re learning that the reality is quite the opposite. Besides helping shrink pay gaps and increasing job performance, there’s evidence that lifting the secrecy around pay has had a positive impact on employee retention. 

A study by compensation data firm Payscale shows that employees are more likely to leave their job in the first six months if pay transparency isn’t adopted. And guess which cohorts are most eager to be shown the money? A survey conducted by Adobe found that 85% of Gen Z workers said they’re “less likely to apply for a job if the company does not disclose the salary range in the job posting.” 

In short, talking openly about pay can build trust in your workforce and help employees visualize a long-term career with your company, instead of running off to a competitor.