How Performance Level and Ratings Could Help Predict Voluntary Turnover

The Great Resignation of 2021 is not over. Recent labor trends suggest that in 2023, one out of five employees will resign within the first year. What if we could predict which employees were going to quit and why? Numerous factors influence voluntary employee turnover, and the reasons why are constantly changing. Two factors that can heavily influence voluntary turnover are performance level and performance ratings.

Performance Level
Performance level is measured by how well an employee is performing in their assigned role. In the case of voluntary turnover, poor-performing employees are the most likely to leave. Some common reasons for poor performance include a lack of skills, experience, or knowledge of the position they are expected to perform. Employees also quit due to a lack of job “fit” – meaning they may become frustrated by job demands or contextual elements. This is considered functional turnover, and trying to re-train and motivate this group can be more costly than the eventual turnover itself. If you have a poor performer considering leaving, let them go.

The second group that is most likely to leave is the highest-performing employees. One of the top reasons high performers leave is because they feel undervalued or underappreciated. This group is the most costly to lose and the most beneficial to keep.

Performance Ratings
Performance ratings are dynamic in that they are constantly changing for better or worse as an employee’s performance changes. Negative performance ratings will have a greater impact on turnover than positive performance ratings. 

When these ratings go down for employees, they are more likely to turnover and leave an organization. Once again, poor performers are more likely than high performers to turnover after a downward change in performance. Meanwhile, high performers are less likely to be affected by short-term changes in performance whether the ratings have decreased or increased from previous ratings.

 How do I reduce voluntary turnover?
First, who do you want to keep? High performers should be your target for obvious reasons. Consider trying to better understand and address any “fit” related triggers for employees. Can you adjust their work environment or job demands to eliminate or reduce those potential derailers? Merit or performance-based pay may lessen the effects of voluntary turnover concerning performance level and performance ratings. High performers are less likely to turnover when they are paid based on performance. However, this strategy does not affect low performers; performance-based pay does not influence the turnover rate in low-performing employees.

Recent labor research has shown that candidates are looking for more money, better benefits, an improved work/life balance, more opportunities to progress in their careers, time to address personal issues like health problems or relocations, and increased flexibility. Employees in 2023 are expecting to feel valued. Without the right compensation for these employees, an organization will risk losing its most valuable assets.