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The New Exodus

New research finds voluntary separation rates are moving up to pre-recession levels after years of decreases -- with high performers leading the way out the door. How can HR keep its talent from taking off along with the recovery?

Tuesday, August 2, 2011
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As the economy struggles to build some sort of sustained momentum after a lengthy recession, new research suggests that some key employment indicators are beginning to point in the right direction.

And while that may be good news for the country, HR leaders should know now -- if they weren't already aware -- that their most-talented workers may be looking for greener pastures.

Voluntary separation rates for key employee segments -- such as high performers -- have begun to trend upwards, according to PwC Saratoga's 2011/2012 U.S. Human Capital Effectiveness report, which draws its findings from more than 300 U.S. companies in 12 industry sectors. The average company in the report has about 19,000 employees and averages $5.3 billion in revenues.

The high-performer turnover rate increased to 4.3 percent in 2010, from 3.7 percent in 2009, according to the report, which finds that overall turnover is moving in the opposite direction.

The overall voluntary separation rate -- which includes both retirements and resignations -- is continuing to trend downward, from 10.4 percent in 2007 to 7.0 percent in 2010.

"People are continuing to not ... move as much," says Scott Pollak, a PwC Saratoga partner based in San Jose, Calif.

"But we're seeing the trend to be the opposite among high-performers, aka the top 20 percent of the workforce ... so those people who are 'the best' in their company are finding greater opportunities to move than they did last year," he says.

He adds that workers in pivotal roles -- roles that have a disproportionate impact on the revenue generated by a company, such as sales -- are also starting to switch jobs, with a voluntary separation rate rising to 9.8 percent in 2010, from 8.9 percent in 2009.

"The turnover trend is shifting," Pollak says. "We're certainly not where we were pre-recession, but the trend of decreasing turnover is shifting in those two instances."

As further proof of a possible exodus of talent, Philadelphia-based Right Management recently released a survey which finds that 75 percent of 268 organizations had "involuntarily lost top talent in the past year," up from 54 percent the year before.

"We found that most organizations are finding it tough to hold onto their best people even when there are relatively few job openings," says Bram Lowsky, the organization's executive vice president for the Americas.

"Previous research findings tell us there's a furious war for top talent under way, constant poaching of high performers by competing companies, and overall, a very restive workforce," he says.

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"The latest survey shows organizations losing the employees they need," Lowsky says, noting that the "erosion ... may accelerate once the job market picks up."

In order to stem that tide, Harry Osle, the global HR transformation and advisory practice leader at Miami-based The Hackett Group, says HR leaders must focus on strategic workforce planning.

"In addition to focusing on the employee and their careers, HR needs to truly understand the needs of the business," he says. "That means knowing who the key talent are, what the critical roles are within their company both today and in the future, what skill sets are required, and how to get from where they are today and where they want to be."

Ravin Jesuthasan, global leader of the talent management practice and a managing director at Towers Watson's Chicago office, says he's not surprised by the findings of the reports.

"Back in 2009, we predicted there would be organizations that would end up paying a price for turnover because of their more short-term cost-cutting actions," he says. "What you're seeing now are individuals prepared to make the jump now, so it's interesting to see the start of what we expected to happen."

He says the results can be viewed as an encouraging sign of economic progress, but with one big caveat.

"Maybe this is the start of a long-term trend, but the big unknown is how the economy will continue to recover," he says.

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