When Layoffs Occur, Who Else Leaves?

Source: Moneycontrol.com

Lisa Ward of the Wall Street Journal reports today on a fascinating new study by Sima Sajjadiani, John D Kammeyer-Mueller, and Alan Benson.  Their research paper is titled "Who Is Leaving and Why? The Dynamics of High-Quality Human Capital Outflows." The scholars studied more than 1 million employee records from a two-year period at a major retailer with more than 1,600 stores.  

The scholars found that layoffs can trigger a loss of highly talented individuals.  They found that the attrition rate of high-performing employees increases after layoffs of underperforming peers. Ward writes:

Why? High-performing employees typically have more employment options, says Sima Sajjadiani, an assistant professor at the University of British Columbia’s UBC Sauder School of Business and one of the paper’s co-authors. As a result, when layoffs are announced, these individuals might pre-emptively begin job searches to secure new roles rather than wait to see if they would be included in the layoff.

What about when an employee is dismissed for cause?  Interestingly, they again found a disparity in subsequent attrition rates.  Higher performing employees tended to stay, but low performers left in larger numbers after a peer was dismissed for cause.  Sajjadiani explains:

“High-performing employees may view the dismissal of a low-performing colleague as the organization maintaining standards, which can be seen as a positive sign about the organization’s commitment to performance,” Sajjadiani says. “On the other hand, low-performing employees might perceive the dismissal of a similar peer as a warning sign that they might be next, leading to an increase in voluntary turnover among this group.”

Finally, what about voluntary departures?   Well, high performers follow fellow high performers who leave.  Low performers follow fellow low performers.  However, high performers do not leave in greater numbers when low performers depart.  Instead, stars are more likely to stay.  Apparently, our judgements about our performance relative to peers matter a great deal when we decide whether to leave a job.