Setting the Tone for Turnover

Research produced by America's best business schools

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With a slowing economy, many employers no doubt are looking to slash payrolls to cut costs. But a study in the Academy of Management Journal argues that doing so might lead to further loss of prized employees. Charlie Trevor and Anthony Nyberg of the University of Wisconsin School of Business looked at the downsizing and turnover rates of 200 companies. They found that when a company lays off workers, it often experiences an exodus of even more employees. For example, the study showed that a company that downsized 5 percent of its workforce also experienced an average 14.9 percent turnover rate, compared with only 10.4 percent at companies that didn't cut staff. So the more people you lay off, the more likely it is that other employees will quit.

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