More Workers Start to Quit

The Wall Street Journal

As the job market begins to loosen up, human-resource managers might increasingly be surprised by an announcement from employees they haven't heard in a while: "I quit."

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In February, the number of employees voluntarily quitting surpassed the number being fired or discharged for the first time since October 2008, according to the Bureau of Labor Statistics. Before February, the BLS had recorded more layoffs than resignations for 15 straight months, the first such streak since the bureau started tracking the data a decade ago. Since the BLS began tracking the data, the average number of people voluntarily leaving their jobs per month has been about 2.7 million. But since October 2008, the average number dropped to as low as 1.72 million. In March, it was about 1.87 million.

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And recent sentiment indicates that the number of employees quitting could continue to grow in the coming months. In a poll conducted by human-resources consultant Right Management at the end of 2009, 60% of workers said they intended to leave their jobs when the market got better. "The research is fairly alarming," says Michael Haid, senior vice president of global solutions for Right Management. "The churn for companies could be very costly."

Adecco Group, a world-wide staffing firm based in Zurich, has seen several of its clients ask for candidates for key positions after employees made surprise departures, says Vice President Rich Thompson. Although so far there haven't been widespread departures, Mr. Thompson says his company is readying itself for large-scale changes within the next few months. "We're preparing for a massive reshuffling of talent at all job levels in all industries," he says, noting that the recession earlier this decade was so short and shallow that the turnover this time around is likely to be much greater.

Recruiters and human-resource experts say the increase in employees giving notice is a product of two forces. First, the natural turnover of employees leaving to advance their careers didn't occur during the recession because jobs were so scarce. This created a backlog of workers waiting for better times to make a move to better jobs. The median monthly voluntary turnover rate in 2009 was 0.5%, half of the rate in 2008, according to the Bureau of National Affairs, a specialized news publisher for professionals.

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During the recession, even if they heard of an opening, employees were reluctant to switch employers, says Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania's Wharton School of Business. "The idea of moving when the world was already in uncertainty was quite scary," he says. But those hang-ups are disappearing, and employees are becoming more receptive to recruiter calls and beginning to tap their networks again for signs of opportunities, he says.

Another factor making it harder for companies to retain employees is the effect of the heavy cost-cutting and downsizing during the downturn on workers' morale. A survey conducted last summer for the Conference Board, a management research organization, found that the drivers of the drop in job fulfillment included less satisfaction with wages and less interest in work. In 2009, 34.6% of workers were satisfied with their wages, down more than seven percentage points from 1987. About 51% in 2009 said they were interested in work, down 19 percentage points from 1987.

"Employees feel disengaged with their jobs, which is going to lead to a lot of churn as we come out of the recession," says Brett Good, a district president of Southern California for Robert Half International (NYSE: RHI - News), an executive recruiting firm.

Mr. Good, who worked for Robert Half in the San Francisco Bay Area earlier this decade,says his company saw a "tremendous amount" of departures from technology companies that needed to be refilled when the dot-com recession ended. Already, Mr. Good says he's received calls from executives who nine months ago felt trapped because of economic conditions and didn't want to lose sure-thing positions, but now feel they're able to move on. "They feel like 'a bird in the hand' isn't good enough anymore," he says.

An increase in turnover can be costly for companies. It typically costs a company about half of the position's annual salary to recruit a person for that job, but the cost can run up to several times that if the position requires rare skills, says Right Management's Mr. Haid. Convincing employees to stay might not be cheap either. Nearly 5,400 members of TheLadders.com, a job board for positions that pay $100,000 or more, responded to an April survey that asked how much more money it would take to convince them to stay if they wanted to leave. More than 20% said it would take a raise of more than $25,000. In all, about 50% of respondents said it would take more than $15,000.

To re-engage employees, Robert Half International is advising clients to hold town hall meetings and one-on-one sessions with employees to hear grievances and try to rekindle interest in the company among workers, Mr. Good says. Some clients had made broad-based cuts in departments based solely on salary or without regard to employee tenure, damaging the trust of the employees who survived, Mr. Good says.

Florida Hospital Flagler, an 850-employee hospital in northern Florida, faced a 30% turnover rate in 2008, almost double the average for area hospitals, says Alyson Parker, director of human resources. That dipped to 20% in 2009 as the economy suppressed voluntary departures, but the hospital still spent $3 million in 2009 on covering open positions, and finding and training new employees. The average search for a new nurse, for example, costs the hospital between $52,000 and $60,000, Ms. Parker says. This year, the hospital implemented regular town hall and department meetings, and one-on-one "stay" interviews for employees to air grievances and give ways to improve the work environment. So far, the measures have helped the hospital to lower its turnover rate by about 2 percentage points. "We're trying to catch people before they even start looking for a new job, which will become even more important as the economy improves and more opportunities at competitors open up," Ms. Parker says.

Human-resource managers often have trouble getting resources from top management until employees actually start to leave, says Mr. Cappelli. In the late 1990s, companies that were losing employees started to offer concierge services, discounted lunches, and hiring bonuses in a mad scramble to keep employees and recruit new ones, a trend Mr. Cappelli says could come back if the job market continues to improve. But this time around, Mr. Cappelli says companies might try to deal with more nuanced employee requests, such as lowering stress at work, improving work-life balance, and creating more opportunities for career advancement within the company.

For some employees, it might be too late. Dice.com, a job board for tech professionals, asked members what could persuade them to stay in their jobs if they found another opportunity. More than 57% of the 1,273 surveyed said nothing could persuade them to stay. Of those who said they could be persuaded, 42% said they wanted a higher salary and 11% wanted a promotion.

Write to Joe Light at joe.light@wsj.com

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