We began our study by surveying over 700 employees at a large multinational IT firm. We asked them to assess their manager’s leadership quality by indicating how much they agreed with five statements that are widely used in leadership research, including I know where I stand with my manager; my manager understands my job problems and needs; and my manager uses his or her power to help me solve work-related problems. Responses were then combined to obtain a composite score of leadership quality for each employee’s manager.
Eighteen months later, we went through the list of survey responders to see who had left the company. An independent consultant then interviewed these former employees, 128 in total, to find out why they left the firm, how their new job was different from their previous one, and — most importantly — if their perceptions of their prior employer had changed.
What we discovered was surprising. Good leadership doesn’t reduce employee turnover precisely because of good leadership. Supportive managers empower employees to take on challenging assignments with greater responsibilities, which sets employees up to be strong external job candidates. So employees quit for better opportunities elsewhere — better pay, more responsibility, and so on.
There is a silver lining, though. Former employees with good bosses are what we call “happy quitters.” When the consultant company asked them about their feelings toward their former employer, their responses were overwhelmingly positive. Questions included Do you hold positive opinions about your former company? Would you refer employees to work for the company? and Do you see yourself as a potential boomerang employee? Good leadership, then, is an important tool for building goodwill with employees, which they are likely to retain as alumni, in turn becoming sources of valuable information, recommendations, and business opportunities later on.
The upside to losing well-led employees, however, comes with an important caveat. Our research finds that good leadership generates alumni goodwill only for those employees who experience good faith retention efforts when they quit. So managers should go to bat for their employees and counteroffer if they can. Our findings indicate that such retention efforts are critical for preserving the goodwill created by good leaders with employees, which can then be translated into a continuing relationship with them as alumni.
Our research has three key implications for managers and companies:
- Leadership does not beget retention. Although good leadership has many virtues, it may not help as much with reducing employee turnover because one benefit of working for a good manager is better external career options. Thus, companies should thoughtfully design other retention mechanisms to retain the talented employees that good leaders develop.
- Good leaders build strong alumni relationships. In an age of constant job hopping and multifirm careers, many firms now have very sizable populations of former employees and should proactively seek to build and leverage relationships with alumni as a strategic constituency. Good leaders help companies do precisely that.
- Off-boarding is very important. To more fully realize the benefits from alumni, companies should carefully design off-boarding processes that build bridges with employees and build on their positive experiences in the company. Instead of perfunctory HR-driven exit interviews, manager-led retention and exit procedures should signal the employee’s value to the company and seek to continue the relationship even if they choose to leave and become alumni. This approach also requires a change in the mindset of managers who might otherwise be good leaders but respond negatively when talented employees leave them to continue their careers elsewhere.