Surprising Links Found between HR Practices and Quit Rates

Some researchers and managers assume that people-centered human resources practices will cut down on employee turnover, but the scientific results have been mixed. Using data from the Canadian government's Workplace and Employee Survey (WES), University of Montreal researchers broke out 14 specific practices and compared them to the likelihood of people quitting their jobs. The WES is a powerful tool because those contacted are legally required to respond, making its results more likely to reflect what happens in most Canadian businesses than would surveys where only a small fraction respond. For this study, 4,160 workplaces with 10 employees or more were included, from a broad range of industries. Workplace practices in 1999 were compared to voluntary turnover in 2000, suggesting (though not proving) that the practices affected the turnover rates (see article on correlation).

The biggest surprise to some readers may be that training was linked to a higher likelihood of someone quitting. The authors, citing previous studies, say this may be because increased skills make it easier for a worker to find a job in another company. They point out, however, that their results can't separate classroom versus ongoing training. (Editor's note: They also do not separate technical or job skills from people-skills training. So it is possible some types of training raise "quit rates" and others lower them.)

Having a standard individual-focused pay system was tied to higher quit rates, whereas group-compensation plans such as profit- or gainsharing had no significant effect, and merit or skill-based systems had a mild positive* link to turnover. This study could not differ between good and poor performers, however; under merit systems poor performers might be more likely to leave, raising the average impact. Turnover was not lower in workplaces with higher per-person pay compared to other firms within a company's industry, reinforcing scientific evidence that amount of pay is not a primary motivator. Higher employer-paid benefits did have a moderate link to lower turnover, however.

For reasons the authors do not explore, having an employee suggestion program was related to higher voluntary turnover. However, higher levels of information-sharing by managers with employees and the existence of "formal dispute-resolution systems" seemed to decrease the quit rate. These practices allow employees "to voice their concerns and thereby reduce their dissatisfaction… rather than quit," the researchers write. Information shared included "firm's performance, colleagues's wages, technological or organization changes, and so on. This implies that employees have some feedback on policies," the article says.

In the raw data, the use of self-directed work groups and a tendency to promote from within also reduced the likelihood of turnover. But including the size of the company, presence of unions, and existence of a separate HR department in the analysis muddled the results such that the researchers could not show a clear link. Other practices that might seem to impact voluntary turnover, but did not, included the existence of problem-solving teams and flexible job design such as "job rotation… broadened job definitions" and "increased skill variety or autonomy of work."

An interesting side result is that the various practices were not adopted in any pattern. That is, using any one practice did not increase the likelihood of a company using any other practice. This suggests companies did not take a comprehensive approach in their use of HR practices as a management tool.

As the researchers point out in several places, these results were focused on turnover only. There may be other compelling reasons to adopt practices that increase or have no effect on the quit rate. The authors write, "reductions in training investments or hiring talent from competitors may have worse consequences still. For instance, the workplace may stagnate or experience retaliation from competitors."

Source: Haines, V., P. Jalette, and K. Larose (10), "The Influence of Human Resources Management Practices on Employee Voluntary Turnover Rates in the Canadian Non Governmental Sector," Industrial & Labor Relations Review 63(2):228.

*"Positive" is used in the popular meaning of "good." In scientific terms the relationship was "negative," meaning if one number was higher, the other was lower.