Over the last several years, increasing demand for labor has created a more fluid job market. The factors fueling the demand include international expansion and the introduction of new products, changes in organizational strategy and a general upsurge in the willingness of employees to pursue opportunities at other organizations.

Far more organizations have increased hiring activity over the last year than have cut back — 48% versus 15% — and attrition or turnover has increased more often than not — 35% versus 18%, according to recent research. As a result, more than half of all organizations globally report having difficulty retaining some of their most marketable employee groups — including high-potential and top performers.1 These retention challenges loom even larger in emerging markets, where top talent can be especially scarce and wages have been rising rapidly. Employees recognize these challenges, as only 42% say their employer does a good job of retaining talented employees.

While improving economies and greater corporate profits have prompted an increase in demand for labor generally and certain skills in particular, the question remains: How do we identify those employees who represent the highest retention risk or are most available for poaching?

Measuring employee retention risk

To assess retention risk, we look at employees’ own assessments of the likelihood of leaving their employers within two years and whether they would prefer to stay or leave given a comparable opportunity in another organization. The first attribute addresses the self-reported likelihood of leaving, while the second reflects desire to stay or to leave. We categorize the combinations of responses into four categories of retention risk (Figure 1).2

Figure 1. Fewer than half of all employees are Stayers
Figure 1. Fewer than half of all employees are Stayers

Source: Towers Watson 2014 Global Workforce Study

Stayers have the lowest retention risk. They have no intention of leaving their employer in the immediate future and, even if a comparable opportunity became available elsewhere, they would still prefer to stay put. To lure them to another company would probably require a much better opportunity. Fewer than half of all employees are Stayers. 

While employees in the Soft Stays group have no intention of leaving anytime soon, their inaction does not signal a strong preference to remain with their employer. Rather, while these employees are not actively looking, those with the right skills or in the right situation who were offered an attractive opportunity elsewhere might well jump at it. Soft Stays are too large a group to ignore — they are over one in four employees — and even if they remain with the company, their attitudes may present productivity challenges. 

The Leavers and the At Risk are the high-retention-risk groups. These employees — who number more than one of every four workers — say they are likely to leave their employers within the next two years. Employees who leave their organizations for another firm typically come from one of these groups. A would-be job applicant who initiates contact — rather than being sought out — is probably a Leaver or an At Risk. 

Either way, the question is:

Who are the Leavers and the At Risk?

With Leavers and At-Risk workers making up about one-quarter of the employee population — and the need for most organizations to increase their recruiting and retention efforts to support their business objectives — it is important to understand these people and what makes them tick. Every organization has to determine which of their employees represent high retention risks and which employees they should target for hiring based on their business strategy and employment deal. Nevertheless, it can be helpful to start with a general understanding of the characteristics of employees who are more likely to have one foot out the door or to submit their resume in response to an opening.

Here are seven things to know about the Leavers and the At Risk (hereafter high retention risks):

1. They are not lemons.

Picture this scenario. Someone wants to sell a car and advertises in the newspaper and online. The advertisement attracts a potential buyer’s attention and the two discuss terms. As you would expect, the seller extols the virtues of the car. 

What is the one question running through the potential buyer’s mind? That’s right:

“If this car is so great, why are you selling it?”

This is what economists often refer to as moral hazard, which occurs in any situation in which the seller knows more than the potential buyer about the product, a very common occurrence. What often happens is that potential buyers assume the car, or any product for sale, has problems and discount the price they are willing to pay to reflect that assessment. But because that price is too low for a good car, the only sellers are those whose cars have problems (often referred to as lemons), thus justifying the buyer’s initial skepticism. The used car market thus becomes what is known as a “lemons market.”

As an employer interviews applicants for open positions, that same suspicion may come into play. If these would-be employees are so great, why are they available? What do their current employers know that the interviewer will only find out after they’re on the job? Contrary to such misgivings, however, roughly one-third of high-retention-risk employees received a rating of “exceeds” or “far exceeds” expectations in their most recent performance review, while only one in five got a review below “met expectations” (Figure 2). These numbers are not that different from employees generally.

Figure 2. Over one-third of high-retention-risk employees exceed performance expectations
Figure 2. Over one-third of high-retention-risk employees exceed performance expectations

Source: Towers Watson 2014 Global Workforce Study

Moreover, many desirable employees fall into higher-retention-risk groups. More than one in four employees who have been formally identified as high potential are also in a higher retention risk group. Between 25% and 30% of employees in such critical positions as engineers, nurses, sales professionals and IT professionals also fall into these high-risk groups.

Too many high-retention-risk employees are top performers, high potentials or have critical skills to ignore or downplay the retention challenges they represent.

2. They may come from unexpected sources.

There is a common perception that turnover risk is high at certain key points over a worker’s career and very low at others. While high-retention-risk employees are more likely than low-risk employees to have at least one year of experience but less than five (42% versus 27%), the evidence suggests that people can be high retention risks at any point in their tenure (Figure 3). For example, one of 10 high-retention-risk employees has been with their current employer less than a year — highlighting the value of re-recruiting employees from their first day on the job. Likewise, almost one out of four high-retention-risk employees has been with their employer for 10 years or more.

Figure 3. Retention risks do not drop dramatically until employees have been with their organization over a decade
Figure 3. Retention risks do not drop dramatically until employees have been with their organization over a decade

Source: Towers Watson 2014 Global Workforce Study

3. They feel blocked in their careers.

Among all employees, a lack of opportunities for career advancement is the second most frequently cited reason for leaving an organization, although employees generally believe their opportunities for career advancement have been improving.3 Nonetheless, more than 70% of high-retention-risk employees say they have to leave their organization in order to advance their careers, compared with only about 30% of low-risk employees. 

Employees who feel unable to move up may be especially likely to leave because career advancement often holds the key to a higher income and improved financial position. This is particularly important to the high-retention-risk group because:

4. They are worried about their finances.

Most people worry about their financial situation now and then. This can be productive if it prompts changes in behavior, such as reviewing current financial status, checking the adequacy of retirement savings, reducing unnecessary expenses, paying off debts, saving for future purchases or retirement, or taking advantage of discounted employer-provided services. But recent Towers Watson research4 as shown that low pay or minimal pay increases are a significant source of work stress for employees, and excessive stress and worry can undermine health and performance at work.

Most employees who are high retention risks say they often worry about their current finances as well as their financial future. This may be a reasonable response to their financial status, or their concerns might overstate the facts or reflect a tendency to worry. Regardless of the mix of causes, the outcome is that high-retention-risk workers are about 70% more likely to say that financial concerns and worries are keeping them from doing their best work (Figure 4). In addition to being a retention risk, these employees are also likely to be a productivity risk.

Figure 4. High-retention-risk employees are more likely to have money concerns affect their productivity
Figure 4. High-retention-risk employees are more likely to have money concerns affect their productivity

Source: Towers Watson 2014 Global Workforce Study

But there is another reason to view high-retention-risk employees as a potential productivity risk:

5. They are less engaged.

There is a strong correlation between retention risk and employee engagement (Figure 5).5 Highly engaged employees score high in all three elements of sustainable engagement — engagement, energy and enablement — while scores for disengaged employees are below average in all three. Previous Towers Watson research has shown a relationship between higher levels of sustainable engagement and better organizational performance.6

Figure 5. High-retention-risk employees are less engaged
Figure 5. High-retention-risk employees are less engaged

Source: Towers Watson 2014 Global Workforce Study

Moreover, at the individual level, higher levels of engagement are associated with greater productivity and, as we see here, lower retention risk. The data also point out a common fallacy. Many organizations believe that the At Risk are predominantly disengaged and thus view their possible departure as a potentially good thing. However, only 36% of high-retention-risk employees are disengaged, while over one-fourth of them are actually highly engaged.

While the intention to leave (or the decision to remain) with one’s employer can affect engagement, it is more likely that sustainable engagement drives retention risk, or at least that engagement dominates. As a result, an effective strategy for the key drivers of sustainable engagement can also significantly reduce retention risk, especially when combined with effective programs to help employees deal with their financial concerns. 

In the absence of effective programs in these areas, it is important to know two additional things about high-retention-risk employees:

6. They are more likely to embrace change.

There is a difference between being disengaged and expressing a desire to work somewhere else, and actually doing so. It’s easy and low cost to say one is ready to go, but actually finding another job involves significant effort, change and disruption. So, many people who say they intend to leave may not actually go. This would be especially true for individuals who prefer routines and like to stick to traditional ways of doing things.

Some employees, however, express a general preference for change and, as a result, are much greater retention risks. Most employees in the high-retention-risk group say they enjoy new experiences, embrace change and are happy to take risks to get more out of life. 

Some of this may be posturing — especially since many people consider these qualities as desirable. Even many low-retention-risk employees claim to share these traits. But the desire to see oneself as happy to take risks to get the most out of life — even risks that might come with a significant downside — can also make it easier to leave your current employer if another opportunity arises. Having a self-image as someone who enjoys taking risks may be priming the pump to transform disengagement and a desire to leave into action.

And that points to another particularly important fact about high-retention-risk employees:

7. They are already looking for a new job.

Not all of them, but enough to be worried. Over the last month, 46% of employees in these high-retention-risk groups have used an online or mobile app to look for a new job, compared with roughly 13% of employees in the low-risk groups. High-retention-risk workers are also more than four times as likely as other employees to report that one way they cope with work stress is to look for a new job.

Conclusion

The global financial crisis did not put an end to the long-term tightening of labor markets or the scarcity of talent — it just gave organizations some breathing room to adapt. But the time for complacency has passed, as hiring activity and turnover have ticked up. More than one-quarter of employees fall into a high-retention-risk category, and many of them are top performers or high potentials and possess the critical skills necessary for hard-to-fill positions.

Employers will find it useful to understand the characteristics of these employees: They are not necessarily young or in that one-to-five years of experience slot. Many of them feel that their career has stalled and the only way to move up is to move on. Others are worried about their financial situation and that worry is affecting their productivity. Many are also disengaged. Almost half of workers in high-retention-risk groups are already looking for a new job and are open to — perhaps even excited by — the prospect of a fresh start. Time might be running out for keeping these employees. But, even if they stick around, employers still need an engagement strategy to keep their productivity from flagging.

A successful engagement strategy is fueled by a deep understanding of employee attitudes and needs. Employers can obtain such an understanding through focus groups, a total rewards optimization analysis, an employee engagement survey or microsegmentation tools that open a window into areas outside the work experience. This employee research should be linked to predictive analytics to develop models that help the organization understand the factors associated with lower productivity or increased turnover levels.

Organizations can also calculate the financial return of these investments by modeling the financial cost of turnover.7 Other analyses can examine the relationships among employee characteristics, program features, use of and satisfaction with health and wellness programs, and retirement savings behavior that are important to help address employee well-being. Together, these tools can give organizations a leg up on recruiting new employees, boost retention and productivity for current employees, and lead to better financial performance.

About the study

The Towers Watson 2014 Global Workforce Study covers more than 32,000 employees selected from research panels that represent the populations of full-time employees working in large and midsize organizations across a range of industries in 26 markets around the world. It was fielded online during April and May 2014. The study is designed to help companies better understand their diverse employee segments and the factors that influence employee performance on the job by gauging changing attitudes that affect attraction, retention, engagement and productivity.


Endnotes

3. See Towers Watson, “Career Management: Making It Work for Employees and Employers,” October 24, 2014.

4. This research also shows employees’ financial priorities and the impact of recent economic events on their worries about their finances and preferences for security. See “Global Uncertainty Fuels Workers’ Desire for Retirement Security,” Towers Watson Insider, July 23, 2014.

6. See “The Power of Three: Taking Engagement to New Heights,” Towers Watson, February 2015.

7. To get an estimate of the financial cost of turnover at your organization, go to this survey at Towers Watson.