Why Your Frontline Employee Turnover Is High

Summary

Summary of "Why Your Frontline Employee Turnover Is High" – HBR On Leadership

Podcast Title: HBR On Leadership
Host: Harvard Business Review
Episode Title: Why Your Frontline Employee Turnover Is High
Release Date: April 2, 2025
Guests: Joseph Fuller (Harvard Business School) and Manjari Raman (Co-author)

Introduction: Understanding High Turnover Among Frontline Employees

In this insightful episode of HBR On Leadership, host Kurt Nickish delves into the persistent issue of high turnover rates among frontline, low-wage employees. Contrary to the common executive assumption that higher pay is the primary driver for employee retention, researchers Joseph Fuller and Manjari Raman present compelling evidence that other factors play a more significant role in why these essential workers leave their jobs.

Misconceptions About Employee Turnover

Joseph Fuller begins by addressing the widespread misconception among business leaders that low-wage employees primarily seek higher pay when they decide to leave a job. He explains, “Most employers assume that when a low wage worker quits their job, they're primarily motivated by the ability to make more at a different job. And that is a consideration about 40% of the time. But the dominant consideration... transportation issues” (02:42).

Fuller’s research reveals that nearly two-thirds of low-wage employee departures are influenced by logistical challenges such as transportation, rather than the pursuit of higher wages. This finding underscores the complexity of employee retention beyond mere financial incentives.

Profiling Low-Wage Workers

Manjari Raman provides a comprehensive overview of the low-wage workforce, highlighting that these workers constitute approximately 40-44% of the U.S. workforce. She notes, “These are workers who were at or below the 200% of the poverty threshold... a majority of them were earning below $15, below $10 and even $7 per hour” (04:21). This segment of the workforce is disproportionately composed of women and minorities, challenging the stereotype that low-wage positions are predominantly held by less-educated individuals. Interestingly, the research found that even among workers with four-year college degrees, many remain in low-wage roles.

The Myth of Pay as a Sole Retention Strategy

Contrary to the prevalent belief, Joseph Fuller argues that focusing solely on wage increases is an ineffective short-term solution. He states, “Low wage workers are people who are capable of making great commitments to companies, loyal to companies, want to stay where they're currently working” (08:09). Fuller emphasizes that low-wage workers often aspire to grow within their current organizations, a fact that frequently surprises business leaders who view these employees as transient and mercenary.

Addressing Workers' Broader Challenges

Manjari Raman outlines the multifaceted challenges faced by low-wage workers, including financial insecurity, food insecurity, and homelessness. She observes, “Few companies think about what is happening to the lives of their workers outside the company” (08:33). This broader perspective is essential for developing effective retention strategies that address the real-life circumstances influencing employee turnover.

Employer Attitudes and Their Impact

Joseph Fuller highlights a critical disconnect between executive perceptions and frontline realities. He explains, “Low wage workers are just not being viewed through the lens that they have the potential to invest in building their future in a company if opportunities are provided” (13:41). This entrenched mindset leads to a self-fulfilling prophecy where companies accept high turnover as a norm, thereby perpetuating the cycle of churn and low morale.

Best Practices for Reducing Turnover

The discussion shifts to actionable strategies for improving retention among low-wage workers. Kurt Nickish asks about effective practices, prompting Fuller and Raman to outline key approaches:

1. Mentorship Programs: Establishing mentorship relationships where supervisors provide regular, actionable feedback. Fuller emphasizes the importance of consistent and meaningful interactions, stating, “The feedback's got to be regular... comprehensible and actionable for the listener” (16:08).

2. Career Pathways: Creating clear pathways for advancement within the organization. Raman underscores the need for these pathways to be well-communicated and accessible to all employees.

3. Job Design Improvements: Enhancing job roles to make them more engaging and aligned with employees’ aspirations.

Fuller also points out a significant gap between company policies and their implementation on the ground: “When you ask executives, they believe they implement these policies effectively, but on the shop floor, the execution often falls short” (16:08). Bridging this gap is crucial for the success of any retention strategy.

Success Stories and Practical Examples

Manjari Raman provides examples of companies that have successfully implemented these strategies:

• Disney: Partnered with Valencia Community College in Florida to offer English and management courses to housekeepers, creating pathways to higher-paying, customer-facing positions.

• The Source in Western Michigan: A collaborative initiative where local employers provide access to case officers who assist low-wage workers in accessing essential services, such as avoiding eviction or securing stable housing (21:50).

Joseph Fuller also highlights innovative programs from small and medium-sized enterprises that maintain closer relationships between management and workers, fostering a supportive and understanding work environment.

Strategic Importance of Low-Wage Workers

Raman challenges the notion of battling for low-wage talent, suggesting instead that companies should focus on retaining and nurturing their existing workforce. She argues, “You've already got the talent in your companies. Find a way to retain them, grow them, encourage them” (24:53). This shift from a zero-sum "war for talent" to a more sustainable approach benefits both employees and employers by reducing turnover costs and enhancing productivity.

Fuller adds, “Low wage workers are disproportionately diverse... they already know your company, they already have shown commitment to your company. So rather than go into the spot market for labor, invest in upskilling who you've got” (27:24). Investing in current workers not only improves retention but also addresses diversity, equity, and inclusion (DEI) goals.

Conclusion: Reimagining Employee Retention

The episode concludes with a strong call to action for businesses to reevaluate their approach to managing low-wage workers. By implementing mentorship, creating clear career pathways, and redesigning job roles, companies can significantly reduce turnover rates. The insights shared by Joseph Fuller and Manjari Raman highlight the importance of viewing low-wage workers as valuable assets deserving of investment and support, rather than transient labor.

Joseph Fuller succinctly encapsulates the episode’s message: “If companies want to get a more engaged workforce and escape the war for talent, they need to start engaging the workers where they live and where they are” (24:53).

Key Takeaways

• Beyond Pay: Transportation and personal security are major factors influencing employee turnover.
• Comprehensive Support: Mentorship, career development, and job design are essential for retaining low-wage workers.
• Implementation Gap: Effective policies require consistent implementation at all organizational levels.
• Strategic Investment: Investing in existing low-wage employees yields better economic and social outcomes than perpetuating high turnover rates.
• Diversity and Inclusion: Low-wage workers contribute significantly to DEI efforts and should be recognized as integral to organizational success.

By addressing these areas, businesses can foster a more committed, productive, and stable workforce, ultimately enhancing their competitive edge in the market.

Transcript

[Molly Wood]

Why should you listen to the Worklab podcast for Microsoft? Because it delivers actionable insights for business leaders on how to leverage AI to access untapped value, turbocharged decision making and sharpen their competitive edge. That's W O R K L A B no spaces available Wherever you get your podcasts, smart leaders make bold strategic moves. That's why forward thinking companies are expanding into Ohio where innovation is transforming industries from technology to healthcare jobs. Ohio is your trusted partner offering workforce development programs, construction ready sites and customized incentives to set your business up for long term success. Get [e-mail] before we begin, we have a couple of questions. What do you love about HBR on leadership? What do you want less of? What would make HBR and leadership even better? Tell us. Head over to hbr.org podcastsurvey to share your thoughts. We want to make the show even better, but we need your help to do that. So head to hbr.org podcastsurvey thank you. Welcome to HBR on Leadership Case studies and conversations with the world's top business and management experts hand selected to help you unlock the best in those around you. Many companies struggle to retain low wage employees, and executives often assume they leave for higher pay. But research suggests money is only the tip of the iceberg. It has way more to do with how companies treat, support and develop these workers. In this 2023 episode of HBR, IdeaCast host Kurt Nickish speaks with Harvard Business School's Joseph Full and Manjari Raman, co authors of the HBR article the High Cost of Neglecting Low Wage Workers. They reveal how businesses underestimate the strategic importance of these essential employees and how mentorship, career paths and better job design can increase retention, performance and morale. The conversation begins with the surprising findings from Fuller and Raman's research.

[Kurt Nickish]

For your research, you looked at some broad data on jobs and wages. You also surveyed executives and you also surveyed more than 1,000 low wage workers. Why did you kind of put that combination of pictures together and what did that help visualize for you?

[Joseph Fuller]

Well, Kurt, what we've done in our project on a number of occasions is to try to understand simultaneously the way business leaders view an issue or a problem, and also the way employees or job seekers see that same problem. What we've consistently found is there are very often significant misconceptions, almost always rooted in the business community about how the labor market works, about the attitudes of workers, about what causes workers to respond to anything from offers of training to quitting their job, and that by amplifying the opinions of workers, we can help inform decision makers in ways that broaden their understanding of an issue, cause them to make different decisions. Give you a quick illustration. Most employers assume that when a low wage worker quits their job, they're primarily motivated by the ability to make more at a different job. And that is a consideration about 40% of the time. But the dominant consideration when a low wage worker quits a job are transportation issues. How easy is it for me to get to and from work? That's almost 2/3 of the explanations are it's easier for me to get the to this new job than to my current job. Employers are just not aware of that.

[Kurt Nickish]

So let's describe these workers some more. Who are we talking about here?

[Manjari Raman]

We're really talking about a rather large population of the US workforce. These are about 40 to 44% of the US workforce, which could come as a surprise to many. These are workers who were at or below the 200% of the poverty threshold, which quite simply translates into jobs and positions that had them earning. They were all hourly wage earners earning less than $20. Now, $20 sounds a lot when we are talking about a metro like Boston and San Francisco with high expenses, it's not that much. But we also looked at many, many workers. A majority of them were earning below $15, below $10 and even $7 per hour. What we saw and the pandemic highlighted actually was that these workers were essential to the business model of most companies and most industries. We were able to see that a large number of women are overrepresented in low wage workforces. And that has big implications for how we want to think about this. Also, we saw that not all the folks in low wage positions were less educated. There were folks who even had four year college degrees who were in low wage positions. The other thing we did, which was very interesting, which was pre pandemic, was we looked at a database of more than 180,000 job resumes of low wage workers. And we compared them between 2012 and 2017. And we found that over five years in, in that period, 60% of workers were trapped in these low wage positions even if they had moved in a job.

[Molly Wood]

Yeah.

[Kurt Nickish]

You wrote in your article about how hourly wage increases were kind of a short term solution. And that may underscore the misconception, right, that people are leaving for better pay. That it's really pay is just the simple motivating factor here for a low wage worker.

[Joseph Fuller]

I think it's rooted in the logic that employers apply to low wage work. Low wage workers are not really the subject of investment by companies. Many of them don't have career paths for low wage workers. Often low wage workers are in fairly large work groups where there'll be 15, 20, even more than 20 workers per every supervisor. Meaning that the next leg up in the ladder is pretty hard arithmetically to achieve because that supervisor's got to retire or leave and you have to be picked out of this group of 15, 20, 25 workers to get elevated to that role. I think the fixation on wages really betrays the fact that most companies think about this purely through the economics. They don't think about attachment to work. Low wage workers are people who are capable of making great commitments to companies, loyal to companies, want to stay where they're currently working. More than half of low wage workers aspirations is to grow with the company they're currently working with. That took many, many business people by surprise who assume that a low wage worker thinks about this in a mercenary way, which unfortunately largely is the way most employers think about it.

[Manjari Raman]

Yeah, a lot of the work, a lot of these low wage workers are actually dealing with many, many challenges. It's not simple and easy just to get to work. There's financial insecurity, there's food insecurity, there could be homelessness. And few companies think about what is happening to the lives of their workers outside the company.

[Kurt Nickish]

Yeah, that word security jumped out at me. You know, you said in the article that it's not just, you know, more pay that these workers are looking for, they're looking for security, which is a different concept. But that also gives businesses more flexibility of what they can offer to those workers.

[Joseph Fuller]

The nuanced picture that comes out of this research I think puts low wage workers in context that they do face, as Manjir was saying, challenges in their lives that are familiar to all of us. That you're taking care of a parent or a child, that you have to have reliable transport because you've got to be home because your kid's coming back from school and you don't want them to be alone. But that's low wage workers. Once they get in an environment where they feel that they're being productive and they feel that they've got a supervisor that maybe isn't dedicated to advancing them, but is a decent person, isn't a sexist, isn't a racist, low wage worker's skew to women, skew to ethnic minorities and racial minorities. So I'm in a community where I'm being productive I've got some friends here. I've overcome that. A learning curve effect of both learning the role but also learning basic things like how we do things around here and where do we all get lunch. Once people get settled in a comfortable environment like that, they will actually go to pretty great lengths to avoid putting themselves at risk by going to another unfamiliar environment where the workers there might not be receptive to them coming on board. Where the supervisor might demonstrate behaviors that are objectionable or frightening or otherwise demotivating to people. The notion of low wage workers as people who are prepared to invest in building their future in a company if opportunities are provided them is something we very much want to impress on businesses. Most low wage workers aspiration over 60% if to stay where I am, if there's some opportunities for me to advance.

[Manjari Raman]

The irony is that most companies have convinced themselves exactly in the opposite direction, which is high churn is a result and a constant phenomena in our low wage positions. It's almost as if managers are telling themselves we know these jobs are, we are under investing in these jobs. We are not helping support these workers. So let me just accept the idea that there's going to be a tremendous amount of churn. The research actually shows that people are keen to stay and if you were to invest in them they would stay even longer and be more productive which is then how they earn more. And it's not just about paying $1 more, it's about paying $1 more linked to higher productivity.

[Kurt Nickish]

So you've got a little bit of a self fulfilling point prophecy here where if you view them as mercenaries, they may end up acting like that rather than estimating the goodwill that those workers have. I'm curious why you think companies have misjudged this so much.

[Joseph Fuller]

In many instances it is a self fulfilling prophecy as you suggested Curt, that the policies and procedures of the company are honed. They're understood by everybody and the basic assumptions underlining their original design are not being questioned. Let's say I'm running a retailer and I regularly experience 70% turnover in my frontline retail staff. That's an eye watering number. And so now I'm saying how do I think about the job design of an entry level retail worker? Well, it's got to be very simple because it's regularly occupied by somebody who's new to the job. Am I going to make it more complex? Am I going to train that new worker up? Well, why would I invest their training when 70% of them leave every year? It'd be a foolish investment. I'd just be training my competitors, future workers, or some other company's future workers. And that whole logic is embedded in how we hire, what skills we value when we evaluate applicants, what type of feedback we create, what types of attributes we value in that worker, what types of advancement opportunities we offer them. By having this logic, we create the very high level of turnover that we blame for imposing on us the company, the obligation to have large numbers of low skill, low paid workers. It's so embedded in the thinking of managements and their business models that undoing that fundamental logic is something that never occurs to them.

[Manjari Raman]

It was quite hilarious actually, when we did a whole number of interviews with business leaders and there were those who got it and had the right logic and saw that there was much to be gained by investing in the three most important practices, which is provide mentorship to low wage workers, help them figure out their career pathways either inside the company or even outside the company, and thirdly, give them guidance on the learning and development and the skills that they needed. Most companies who get it figure out that the math on that works out much better than the hidden costs of high churn, high turnover, constant hiring, low morale, on and on and on.

[Molly Wood]

Why should you listen to the Worklab podcast from Microsoft? Because it delivers actionable insights on how business leaders can leverage AI to access untapped value, turbocharged decision making and sharpen their competitive edge in a world of rapid change and economic uncertainty. In each episode, host Molly Wood has an illuminating conversation with a thought leader who has a vital perspective on AI and the future of work. Find the knowledge you need on Worklab. That's W O R K L A B no spaces available wherever you get your podcasts. Unlike any class, book or podcast, Strawberry Me personal coaching gives you something unique. A professional partner who's 100% focused on your success. It's not about advice. Your coach will ask the right questions, helping you uncover hidden strengths, break through obstacles and move forward with confidence. If you're ready to unlock your full potential, Visit Strawberry Me HBR for a $50 credit. That's Strawberry Me HBR.

[Kurt Nickish]

So let's talk through some of those things that companies can and should be doing. When you talk about providing mentorship to a low wage worker and having career advancement discussions, what can that look like? And maybe we can talk about some companies that have some success stories Here.

[Joseph Fuller]

The best practices are, first of all, that there's a supervisor that's giving regular, actionable feedback. The feedback's got to be regular, chronologically not strictly limited to when there's an annual performance review cycle. And it's got to be comprehensible and actionable for the listener, for the worker. Don't do it this way, do it that way. Let me show you. Or if you had knowledge of these two additional processes, did you know that you might get promoted? Or we're going to be changing the work environment here, let's say adding a new technology. Here are some ways for you to get familiar with that before we make the changeover. It's very important also that companies have some set of pathways for people to advance, to become more productive, to be worthy of earning more, or to be qualified for promotion when opportunities exist or when the company expands. Now, those pathways, they can't just exist in a binder. They have to be communicated regularly in a way that the workers understand both that they're there, what they require, how to access them. And if you do those things, you're signaling that worker that you're committed to their improvement, that you care about their outcome, and you're providing workers with specific mechanisms for being in a position to deserve to earn more, to be earning more, because they're more productive, they're more flexible, they're a worker that is adding more value to the enterprise. One thing that we found that was quite startling in the research, Curt, is that when you ask executives, managers and frontline supervisors, they have very different understandings and beliefs about how effectively their company implements the types of policies I just talked about. The C Suite is absolutely adamant that they do a very good job. But what they're really saying is we have policies, we have practices, we have binders, we tell supervisors to give good feedback. But when you get closer to that shop floor and you're actually asking someone to execute those policies, the falloff is dramatic. And that disconnect between intentions and implementation is a big driver of the high turnover, low wage cycle that actually damages the prospects of workers and their employers simultaneously.

[Manjari Raman]

It's ironic, but a lot of times these practices are being implemented in the company for higher skills, higher wages, jobs, and the implementation is weak for low wage workers. You know, in our interviews we often heard, we interviewed workers who had grown within the organization in the last three years and those who hadn't. And the ones who grew were folks where somebody, a mentor on the shop floor reached out and said, I think you can do this, I think you're capable of doing this. Even a little piece of positive feedback and a little bit of guidance went a long way. Many managers on the other hand said, well, if a low wage worker wants to grow within the organization, why don't they just speak up? But it's actually very difficult to speak up and ask for a promotion or a pay raise if you're living day to day, check by check, and you're petrified that you lose the job you currently have. So one of the key things that we need to fix in all of this is break down the assumptions that let people ask us, just like higher skill, higher wage workers would do it. No, I think in this case you have to work top down and create the mechanisms, as Joe pointed out, for feedback to be given, for input, for the worker to be inspired and taken down a pathway of career enhancement.

[Kurt Nickish]

Are there companies or businesses that have successfully overcome this perception gap and have done good things that you think are good examples for other companies to look to?

[Manjari Raman]

Well, yes, we're starting to see that very large employers, companies like Disney, Walmart and Amazon, are putting in a lot of effort in terms of thinking about how they attract low wage workers, retain them, train them while they are in employment for better positions either within the organization or outside the organization. Disney, for example, has partnered with Valencia Community College in Florida. And imagine you have Haitian housekeepers. Now housekeeping is a very difficult job and usually has very high turnover. But Disney will offer such a person the ability to perhaps take English courses, to learn the language better, perhaps take front office management courses. And so they have created pathways where you might see housekeeper move on to a front office customer facing position, which is no longer an ali position and actually pays much better benefits and wages.

[Joseph Fuller]

It's also we're seeing some innovations, Kurt, that are very encouraging from small and medium enterprises as well, smaller companies and medium sized companies. Management is closer to the workers, literally and physically, and they have a better appreciation often of the stories behind the job description and the paycheck. A very innovative program in western Michigan called the Source is a good illustration of this. The Source is a confederation of local employers that have banded together to create essentially what amounts to case officers who can help the low wage workers that work for those companies access all the various services that are available to them. In Western Michigan, they could be services offered by a not for profit or social entrepreneur. They could be state or local programs. But it's designed to help workers solve problems that the HR department isn't equipped to solve, doesn't understand, doesn't have the resources to address. So if you go to the HR manager of your factory and say, I, I think I'm about to get evicted, what are they going to say? I feel badly for you, but if they can say, here's a local social entrepreneur that both helps people avoid eviction, but also helps people who are about to be evicted find a place to make a smooth transition to stable living circumstance, that of course, is very much in the interest of the employee, but this is doing well by doing good for the employer. Because that worker isn't sleeping in their car, that worker isn't spending all their time on the job being worried about their kids having nowhere to go anymore after school. That worker isn't preoccupied by having the sheriff come up with an eviction notice. And so a lot of it has to do with companies saying, I understand these workers, where they are, what their life is like, the role work plays in their life, and I can get a more productive worker more likely to stay, more likely to speak well of me in the community, more likely to be anxious to perform well if I make investments that really speak to their needs and their ambitions.

[Kurt Nickish]

I mean, one thing you found in your research is that companies sort of disregard the strategic importance of what we've called here essential workers, which is counterintuitive, right? It's essential, but they're overlooking the strategic importance of this labor force. Do you think that companies need to sort of step back and approach this as kind of like a war for low wage workers that they have underestimated up until this point?

[Manjari Raman]

That's a great point. The war for talent is a zero sum game where everybody's fighting to get to the bottom of the barrel. What we are saying is you've already got the talent in your companies. Find a way to retain them, grow them, encourage them. They will put word out that you're a great place to work and bring in more friends, families, neighbors, applying to your open positions. Because if you don't do that and you have open positions, you have hotels that don't have housekeepers, you have airlines that don't have baggage handlers, you have restaurants that have to shut down early, you have pharmacies that can't deliver. Basically, you're not able to deliver your business model. So instead of going to war, it's much better to think about this in a constructive way in peace times and say, what could I be doing constructively to retain the talent? I already have the workers who have already signed up and say they want.

[Joseph Fuller]

To work with me as a manager. It's a safe assumption that any process that you're supervising is perfectly designed to create the outcomes it regularly creates, not the outcomes you want it to create. So if companies are very satisfied with 70% turnover, with low levels of engagement with workers with poor performance on diversity, equity and inclusion, they should just keep executing their current policies because that's what they're getting. But if they want to get a more engaged workforce, if they want to escape the war for talent, what they need to start doing is engaging the workers where they live and where they are. And they need to be revisiting fundamental elements of the policies and procedures they use to hire, retain, train, upskill, manage low wage workers. Low wage workers are disproportionately diverse, so they're an instant pool of talent for responding to DEI challenges. They already know your company, they already have shown commitment to your company. So rather than go into the spot market for labor to meet your needs, invest in upskilling who you've got and you're going to have better all in economics than the churn and burn model you're currently operating with.

[Kurt Nickish]

Joe and Manjari, thanks so much for coming on the show to talk about your research and sort of open our eyes here.

[Manjari Raman]

Thanks a lot.

[Joseph Fuller]

Pleasure to be with you, Kurt.

[Molly Wood]

That was Harvard Business School's Joseph Fuller and Manjari Raman in conversation with Kurt nickish on HBR IdeaCast. We'll be back next Wednesday with another handpicked conversation about leadership from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues and follow our show on Apple Podcasts, Spot, Spotify or wherever you get your podcasts. While you're there, be sure to leave us a review. And when you're ready for more podcasts, articles, case studies, books and videos with the world's top business and management experts, you'll find it [e-mail] this episode was produced by Mary Dew and me, Hannah Bates. Kurt Nickish is our editor. Music by Coma Media. Special thanks to Ian Fox, Maureen Hoch, Erica Trutzler, Ramsey Kabaz, Nicole Smith, Ann Bartholomew and you, our listener. See you next week.