Toxic Culture Is Driving the Great Resignation

Companies with a reputation for a healthy culture, including Southwest Airlines, Johnson & Johnson, Enterprise Rent-A-Car, and LinkedIn, experienced lower-than-average turnover during the first six months of the Great Resignation.

More-innovative companies, including SpaceX, Tesla, Nvidia, and Netflix, are experiencing higher attrition rates than their more staid competitors. The pattern is not limited to technology-intensive industries, since innovative companies like Goldman Sachs and Red Bull have suffered higher turnover as well.

Much of the media discussion about the Great Resignation has focused on employee dissatisfaction with wages.

How frequently and positively employees mentioned compensation, however, ranks 16th among all topics in terms of predicting employee turnover. This result is consistent with a large body of evidence that pay has only a moderate impact on employee turnover.

A toxic corporate culture is by far the strongest predictor of industry-adjusted attrition and is 10 times more important than compensation in predicting turnover.

Research found that the leading elements contributing to toxic cultures include failure to promote diversity, equity, and inclusion; workers feeling disrespected; and unethical behavior.

Employment instability and restructurings influence employee turnover. Managers frequently resort to layoffs and reorganizations when their company’s prospects are bleak. Previous research has found that employees’ negative assessments of their company’s future outlook are a strong predictor of attrition.

When a company is struggling, employees are more likely to jump ship in search of more job security and professional opportunities. Past layoffs, moreover, typically leave surviving employees with heavier workloads, which may increase their odds of leaving.

Staying at the bleeding edge of innovation typically requires employees to put in longer hours, work at a faster pace, and endure more stress than they would in a slower-moving company. The work may be exciting and satisfying but also difficult to sustain in the long term.

When employees rate their company’s innovation positively, they are more likely to speak negatively about work-life balance and a manageable workload. During the Great Resignation, employees may be reconsidering the personal toll that relentless innovation takes.

Employees are more likely to leave companies that fail to distinguish between high performers and laggards when it comes to recognition and rewards. Companies that fail to recognize and reward strong performers have higher rates of attrition, and the same is true for employers that tolerate underperformance.

High-performing employees are the most likely to resent a lack of recognition for their results, which means that companies may be losing some of their most productive workers during the Great Resignation.

Our analysis identified four actions that managers can take in the short term to reduce attrition:

• Provide opportunities for lateral job moves.
• Sponsor corporate social events.
• Offer remote work options.
• Make schedules more predictable for front-line employees.