We’ve all seen a LinkedIn post or business review article explaining how ’culture eats strategy for breakfast’. Although some of us might get tired of hearing it, the claim seems to be truer than ever, as latest research out of MIT’s Sloan School of Management suggests.
Around Easter last year more than 40% of all employees played with the thought of quitting their current job. As the year progressed, workers around the world actually went through with this in never seen before numbers. In the summer of 2021, 24 million Americans left their employer – an all-time high. This retention of workers has been coined the Great Resignation. Today still, business leaders are struggling to grasp the reasons behind this mass exodus. But even more desperately needed are ways and strategies on how to hold on to valued talent, and what to avoid.
When the media covered the Great Resignation, the focus mostly laid on employees being unhappy with compensation – research by MIT senior lecturer Donald Sull, however, provides support for the fact that corporate culture is a tremendously more important factor.
Sull’s team wanted to better understand the sources of employees leaving and to help leaders respond effectively. Using artificial intelligence, the economists analyzed 34 million online employee profiles to identify American workers who left their current organisation for any reason in the summer of 2021. Their data analysis was massive – almost one-quarter of the private-sector workforce in the United States was included. Additionally, free text of more than 1.4 million Glassdoor reviews were run through the algorithm.
Their aim: identifying the top predictors of employee turnover. ‘Winning’ by a mile, toxic corporate culture was a much more reliable predictor of industry-adjusted attrition than compensation. Culture was found to be a staggering 10.4 times more powerful than compensation in predicting a company’s attrition rate compared with its industry.
The researchers’ analysis found that the leading elements contributing to toxic cultures include failure to promote diversity, equity, and inclusion; workers feeling disrespected; and unethical behavior.
Coming in second were high levels of innovation. Staying at the cutting edge of innovation typically requires sacrifices: Long hours and fast paced work are the norm.Other factors include job insecurity and reorganizations; a failure to recognize performance; and a poor response to COVID-19.
To conclude: corporate culture is a better predictor of employee turnover than experiencing burnout or bad compensation. Furthermore, A toxic corporate culture is the single best predictor of which companies suffer from high attrition. Not appreciating your high performers, be it through formal or informal praise, is yet another element of culture that predicts leaving. This is not to argue that compensation and burnout don’t influence decisions, as they most certainly do. The fact of the matter is that other aspects appear to simply matter more.
