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You Better Not Pout, I’m Telling You Why

by
Megan Stanish
Jan 5, 2011, 11:11 am ET

The holiday season may be drawing to a close, but repercussions of being on the naughty list are only just starting to be felt. This isn’t a reference to those snide remarks behind a friend’s back or the sick day that truly was taken to watch the season finale of Dancing with the Stars on the DVR. No, this naughty list is the one that includes any company that took advantage of the recent economic challenges to reduce labor costs through excessive downsizing and that then wrung every last bit of productivity out of their layoff survivors. Hiring figures are starting to creep up, and as employees learn to trust the uptick is solid, the great employee migration will begin.

To start on a positive note, media outlets have been ringing in the news that hiring is on the rise. On December 24, the Wall Street Journal reported an increase in job postings across a number of industries, as noted by Indeed.com, as well as a surge in hiring from such giants as Deloitte and PricewaterhouseCoopers. CNN, on January 3, said that many economists and experts believe this coming year holds the promise of dramatic hiring gains. As a follow-up, CNN reported on January 5 that “Private sector payrolls soared 297,000 in December,” marking “the 11th consecutive month of increases.” These two media organizations and others have been predicting this turnaround for months and have been noting indicators ranging from the traditional to the unconventional (a recent increase in hiring of daycare workers, for instance). The rise in job postings and the related increase in hiring portend a turnaround, albeit a slow and steady one, to the economic crisis.

However, for employers that have used the economic downturn and the scarcity of jobs to justify squeezing every drop of productivity out of workers at the expense of the employees’ mental and physical wellbeing, this turnaround sounds a death knell, not for the companies necessarily but rather for the way they have been treating their staff. The end is near for those practices as well as for the peace of mind that staff will remain loyal and in place. In fact, for employers who took this tactic, voluntary turnover is almost certain to rise dramatically as their employees learn there are new outlets for their efforts and talents. In addition, these employers likely will have a more challenging time making new hires as word of their actions gets around and impacts their reputations.

The most recent turnover information from the U.S. Bureau of Labor Statistics is very telling. The change in total separations year over year (separations is the BLS’ term for terminations) isn’t what is startling — in fact, the total number of separations has remained somewhat static over the past period of time — but rather what tells the story is the proportion of Quits to Layoffs & Discharges. Back in October of 2009, a full 50% of private sector separations were due to Layoffs & Discharges, with 42% attributed to Quits. For October 2010, those figures had flipped almost completely: 50% of separations where due to Quits and 43% were due to Layoffs & Discharges. In addition, “Over the 12 months ending in October, the Quits rate (not seasonally adjusted) increased for total nonfarm; total private; professional and business services; and arts, entertainment, and recreation as well as in the Midwest and South regions.” In other words, the exodus has begun. People know they have new opportunities, and they are leaving the employers who have kept them captive and wrung them dry for the last few years.

As the economy continues its slow return to “normal,” employers need to consider a wide range of factors that may, or rather will, contribute to a rise in their employee turnover. The relative impact of each will be determined by the actions taken by each employer, but the fact remains that these drivers exist and almost certainly will drive up self-terminations among a large number of organizations.

  • Exhaustion — While some companies had to let employees go in direct relation to a significant downturn in activity, others took advantage of the economy to preemptively cut labor costs by reducing staff more dramatically than business required. In many cases across the country, remaining employees were left with a greater workload than before, with fewer acknowledgments of the need for work-life balance. In addition, fear of losing a job during a recession drove many employees to be less assertive in insisting upon reasonable work limits. Although there is no promise that a new company will be more respectful of an employee’s need for a break — both daily and periodically — the fact that an employer has already proven to have little concern for an employee’s well-being will drive that employee away quickly once new opportunities arise. On the other hand, employers that have actively recognized the impact that the economy has had on their employees and that have taken action to prevent mental and physical exhaustion will reap the reward of greater staff stability and a positive employer image.
  • Pay & Disillusionment — Citing reduced profits, companies around the country froze pay rates and halted promotions. While in many cases these actions kept companies afloat, it was the rare organization that asserted with management the need to ensure employees continued to be recognized and commended for their work. People appreciate thank-yous and the occasional “great job.” Yet, in many cases, the tenor of management communications during these rough years has seemed more corrective than appreciative. How many times during the recession were individuals admonished that they should just be happy to have a job? How many times were staff told that they all needed to pull together, to suffer through the challenges and to deal with the frozen pay and greater work demands, as a form of solidarity? And in how few of those cases did managers give up bonuses, temporarily reduce their own pay, or come up with creative ways to ease tensions for their teams? During flush times, it’s easy for a company to be generous both in pay and in appreciation. When tough times occur, that’s when management’s true colors show. Those that remained positive and supportive and who tackled challenges creatively, with an eye on their employees’ needs and fears, will reap rewards in the coming months. The others likely will face dramatically increased turnover.
  • Retirement — In the years leading up to the recession, fears abounded regarding the impending nurse shortage. A large percentage of nurses were set to retire shortly with too few nursing students, new graduates and newer nurses waiting in the wings to take over. Many of those worries were put on hold when the economy slowed, because many of those more tenured nurses could not retire as planned. Retirement accounts were hit hard by the stock market slump, making immediate retirement impossible, with unexpected financial burdens added to the mix: parents whose retirement accounts were too far reduced to sustain their obligations, older children who couldn’t find jobs, spouses who were suddenly out of work. Nurses in this example, of course, represent a larger subset of the population who had to postpone retirement. With stocks creeping higher again – CNBC’s Jim Cramer predicted a market increase of 15% by year-end 2011 – as well as with the improved job market for the family members they have been supporting, individuals who delayed leaving work will again start to plan to retire soon, leaving gaps in staff as well as in knowledge.
  • Return-to-Home Parents — One surprise group of “heroes” who kept families afloat during the recession was the At-Home Parents set. Many at-home moms and dads dusted off their resumes and returned to the workforce as their spouses and partners were laid off or were forced to accept reduced hours or salaries. Some of these newly reengaged employees may happily remain in the workforce going forward. However, in many cases, before the recession these families considered a number of factors — salary being only one of many — to decide which adult would remain at home with the children, and as the original working spouse or partner becomes able to support the family again, the original at-home parent may return to his or her preferred place of work: the home.

The coming return to a solid economy is positive, without question. The unemployment rate will start to go back down as jobs become available, and then the upward spiral — the antithesis of the downward spiral of the last couple of years — will begin. Those who are employed and who are more secure will spend more money, creating greater demand, thus prompting companies to produce more products and provide more services. The greater work volume will require more staff, driving up job openings, creating more employment opportunities and more security for those who are employed. And yet, companies that have taken advantage of their employees over the past few years should be concerned. Their challenges — in the form of voluntary turnover — are only just beginning. The naughty list is about to extract its price.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  1. Howard Adamsky

    This is a GREAT article. Wonderful content and good information. We need more of these!

  2. Maureen Sharib

    I hope all that you say is true.
    Won’t it be fun watching Scrooge squirm?
    ;)

  3. Maureen Sharib

    Howard when is your book coming out and what’s it going to be about?

  4. Megan Stanish

    Thank you both so much! Yes, Maureen, couldn’t have said it better myself.

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  6. Howard Adamsky

    Maureen, my book hits between 2-1-11 and 2-14-11. Title is Employment Rage/What You’ve Lost and how to Get it Back.

    See http://www.employmentrage.com for finalized cover, intro, prerelease acclaim and other info.

    A portion of all proceeds go to the Dana Farber Cancer Center.

    Please be advised that the is a discount on bulk purchases of 10,000 or more copies.

  7. You Better Not Pout, I’m Telling You Why | FPSelectJobs.com, Job Search News and Articles

    [...] Read entire article: You Better Not Pout, I’m Telling You Why. by Megan Stanish Jan 5, 2011, 11:11 am ET [...]

  8. Keith Halperin

    (With apologies to Charles Dickens)

    Ebenezer:
    [to the Spirit of Employment Rates Yet To Come] I am standing in the presence of the Spirit of Employment Rates Yet To Come? And you’re going to show me the shadows of things that have not yet happened but will happen? Spirit of the Future, I fear you more than any spectre I have met tonight!…. Are these the shadows of things that must be, or are they the shadows of things that MIGHT be?

    http://web.rollins.edu/~wseyfried/forecast.htm

    Recent Forecasts

    CNN-Money survey (Dec 22): lists forecasts of key economic variables by 23 economists; average forecasts for 2011 – unemployment in Dec 2011 = 9%, economic growth = 3.3%, inflation = 1.8%; average forecasts for 2012 – unemployment rate = 8.1% in Dec ’12; economic growth =3.4%; inflation = 2.1%

    Economic forecasting survey, Dec 2010 (WSJ): economic growth = 2.6% in 2010Q4, 3% in 2011; unemployment at 9.4% in June 2011, 9% at end of 2011; inflation = 1.8% in 2011

    Wells Fargo Securities Economic Forecast (latest forecast: Annual Forecast, Dec 2010): economic growth = 2.6% in fourth quarter, 2.6% in 2011 and 3.3% in 2012; core PCE inflation = 1% in 2011 and 1.5% in 2012; unemployment rate rises to 10% in the first quarter of 2011; declining to 9.6% in the fourth quarter of 2011 and 8.8% by the end of 2012; Fed begins to raise interest rates in the third quarter of 2012

    Livingston Survey (latest survey – Dec 2010): economic growth = 2.5% in first half of 2011 and 2.9% in second half of 2011; unemployment rate = 9.4% in June 2011 and 9.2% in Dec 2011; inflation (CPI) = 1.6% for 2011 and 2% for 2012

    Fed Forecast as of Nov, 2010: economic growth = 3-3.6% in 2011 and 3.6-4.5% in 2012 (note: these are from 4th quarter to 4th quarter while other forecasts compare yearly averages); unemployment rate = 8.9-9.1% in 2011 and 7.1-7.5% in 2012 (estimates are for 4th quarter of the respective year); natural rate of unemployment = 5 to 6% (range = 5 to 6.3%); inflation as measured by core PCE index of 0.8% to 1% in 2010, 0.9 to 1.6% in 2011 and 1 to 1.6% in 2012

    NABE (Bloomberg, Nov 2010): forecasts for 2011 – economic growth = 2.6%, core inflation = 1.3%, unemployment rate = 9.2% at end of year, 10-year Treasury = 3.25% at end of 2011

    Univ. of Michigan Economic Forecast (executive summary – Nov 18, 2010): economic growth = 1.9% in Q4 of 2010, 2.3% in 2011, 3.3% in 2012; core inflation (CPI) = 1% in 2010, 1.2% in 2011 and 1.7% in 2012; unemployment rate averages 9.6% in 2011 and declines to 9% by end of 2012

    Survey of Professional Forecasters (latest survey Nov 2010): economic growth = 2.2% in Q4, 2.5% in 2011, 2.9% in 2012, 3% in 2013; core inflation (PCE) = 1.2% in 2011 and 1.6% in 2012 (overall PCE inflation = 1.2% in 2010, 1.7% in 2011, 1.8% in 2012); unemployment rate = 9.6% in fourth quarter 2010, 9% in 2011Q4; average unemployment rate = 8.7% in 2012

    Bloomberg (Nov 11, 2010): economic growth = 2.2% in fourth quarter 2010, quarterly growth rises to 3.2% in fourth quarter of 2011; unemployment averages 9.3% in 2011

    Quarterly economic survey (USA Today – Oct 2010): economic growth = 2.2% in fourth quarter, 2.8% in 2011; unemployment = 9.7% at end of 2010, 9.2% in fourth quarter of 2011; inflation = 1.1% in 2010, 1.7% in 2011

    Associated Press Survey (Oct 2010): unemployment declines to 9% by end of 2011; economic growth = 2.7% in 2011, inflation = 1.7% in 2011

    NABE forecast (Oct 2010): economic growth = 2.6% in 2010 and 2011; unemployment = 9.5% in summer 2011, 9.2% by end of 2011; core inflation = 1% in 2010, 1.4% in 2011, fed funds rate = 0.5% by end of 2011; budget deficit = $1.2 trillion in 2011

    IMF (Oct 2010): includes global forecasts; US economic growth = 2.6% in 2010, 2.3% in 2011

    OECD forecast (see p3 – Sep 2010): economic growth = 2.6% in 2010 and 2011; unemployment rate 9.7% by end of 2010, 8.5% by end of 2011, inflation =0.8% in 2010 and 1.1% in 2011

    CBO (Aug 2010): note – assumes all Bush tax cuts expire and other policy changes that are unlikely (need to make forecast assuming current policy; results in weaker forecast); economic growth (end of year comparisons) = 2.8% in 2010, 2% in 2011; unemployment = 9.3% in fourth quarter 2010, 8.8% in 2011Q4, core PCE inflation = 0.9% in 2010 and 1.1% in 2011; growth in potential GDP = 2.1% from 2010-2014 and 2.4% from 2015-2020

    OMB (July 23, 2010 – see p9): economic growth (end of year comparisons) = 3.1% in 2010, 4% in 2011; unemployment = 9.6% in 2010, 8.7% in 2011 (declines to 6% at the end of 2014); inflation = 1% in 2010, 1.6% in 2011; natural rate of unemployment = 5.2%, growth in potential GDP = 2.5%

  9. Brian Kevin Johnston

    Megan- Great stuff, well written, and thought provoking….

    “And yet, companies that have taken advantage of their employees over the past few years should be concerned. Their challenges — in the form of voluntary turnover — are only just beginning. The naughty list is about to extract its price.”

    This should be keeping CXO/HR EXECS “up at night” at this stage of the game…. Best to ALL, Brian-

  10. John DePolo

    Megan-

    This is a very well-researched and well-reasoned article.
    Organizations that have not gotten close to their employee base will soon pay the price. It’s really the time for excellent talent engagement and management practices to be employed. In some organizations, a ‘reach out’ might just stave off turnover, in others, I see a rush for the doors.
    Thanks for the thoughtfulness and thanks for sending a warning shot.

    All the best for the New Year!
    John DePolo

  11. Megan Stanish

    Thank you so much, Brian and John. The hope, really, is that those with the influence to make a difference now will choose to do so.

    Keith — No matter what, I have to say I love the Dickens reference!

  12. Vicki Lauter

    Companies ALWAYS take advantage of downturns. Remember the tech bubble? What they FORGET is that people remember HOW they were treated during the downturn whether they were kept or let go.

    Companies will once again be AMAZED that people are leaving for other opportunities. They’ll think “how could they leave us, we let them keep their job.” It’s the same song different tune.

    I like to call it Corporate arrogance and bad employee relations. Just like Ebenezer Scrooge THEY have the power to change those perceptions.

  13. Michael Moore

    I have been telling clients for 6 months that if they don’t take care of their loyal employees and high level performers who stayed with them through the downturn, that their best employees will leave as soon as the economy begins to get better. Guess what? The economy seems to be getting better and the exodus of high level performers has already begun.

  14. Keith Halperin

    @Megan: Thanks, Megan.
    Spirit of Columns Past: “Bear but a touch of my enter key, and your column will be upheld in more than this.”

    @Vickie: IMHO, most companies and recruiting within them are run on the GAFI Principles: Greed, Arrogance, Fear, and Ignorance/incompetence/inefficiency.

    @John, @Michael: IMHO: 20% raises and a 3 year “no layoff without cause” employment contract would be good to hold most superior employees or get new ones. It’s funny how managers worry about retention/attracting the best people from stable companies, but don’t consider something like this….

    @Everybody, remember churn is good and retention bad for recruiters. Tell everyone you meet to quit their jobs! Better yet, quit yours!

    ;)

    Keith

  15. Gerry Crispin

    A balanced and well written article. You put some serious thought into this Megan. From your article, I’m now interested in a slide showing the proportions of quits versus layoffs over a decade or two.

  16. Megan Stanish

    Thank you very much, Gerry. Interesting idea about the slide. I just might put one together…

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