Contributor, Korn Ferry Institute
This Week in Leadership (Sept 20 - Sept 26)
Why job switchers aren't getting that much more money. Plus, leadership lessons from Angela Merkel and her very long tenure.
See the new issue of Briefings magazine, available at newsstands and online.
In the decade since graduating college, Stacey has had four jobs at three different companies in three distinct industries. She started her career as a communications associate at a large global brand before making a lateral move to the marketing department. From there, she jumped ship for a consumer-facing tech start-up. But, seeking more purpose, she left after four years to become the chief culture officer at a media company transitioning to a digital-first operation. Now, guess what: she’s back to looking again for something bold.
Obviously, Stacey brings a lot of skills and experience to the table. But she’s also a flight risk. So is she worth hiring?
Leaders are increasingly asking themselves to what extent career nomads like Stacey—talented individuals who switch jobs, organizations, and even careers at a faster rate than others—are an asset or a liability. “There’s a tension [in] hiring and managing embedded employees and career nomads that will always be there,” says Professor Scott Seibert, chairman of the human resources department in the School of Management and Labor Relations at Rutgers University.
(click image below to enlarge)
Korn Ferry research estimates that career nomads are in the top quartile of job movers and account for 25 percent of voluntary quits within industries. Other studies show that people change jobs 12 times or more in a career on average, and that around 27 percent of all wage-earning and salaried employees over the age of 20 have tenures of less than two years. With job-hopping increasingly becoming the career norm, “companies are looking for ways to optimize the impact of career nomads while minimizing the risk,” says Evelyn Orr, vice president and chief operating officer of the Korn Ferry Institute. For some companies, she says, career nomads can be revenue drivers, while other firms would be better off financially minimizing exposure to them. For example, according to a Korn Ferry analysis of Fortune 500 companies, 44 percent see an average cost of $58 million each year due to career nomads. But 56 percent see a net benefit of $46 million.
The financial calculus that determines all this comes from a complex equation that includes the firm’s industry, its number of employees, annual revenue, turnover, and other factors. For Fortune 500 companies, for instance, the cost of replacing talent can range from 50 to 75 percent of the position’s annual salary, but this amount can be offset by the added productivity that highly adaptable and creative nomads can bring.
As an example, take a large banking institution with 250,000 employees, a 20 percent turnover rate, and $100 billion in annual revenue. By Korn Ferry estimates, career nomads account for 13 percent of the turnover, costing the company $525 million due to shorter tenures and rehiring costs. Yet as high performers, they will also generate a $480 million benefit for the company. That, in turn, reduces the net cost of career nomads to the company to only $45 million.
But if the company can retain these career nomads by enhancing talent management strategies, then the net cost may turn into a net benefit. Improving career-advancement opportunities, for instance, can significantly reduce the turnover rate—thus decreasing the cost of replacing career nomads. Companies can also rethink the mix of long- and short-term incentives, offer the ability to move around internally, and increase nonfinancial rewards as ways to keep nomads.
Ultimately, the revenue per employee that an organization generates is a key determinant of whether career nomads are producing a net benefit or cost. Organizations that make more than $1 million per employee are most likely to benefit from career nomads, while those that earn $500,000 or less are most likely to see costs, the research found.
The firms that benefit are the ones with enough assets to take more risks on the career nomads, says Tom McMullen, head of global total rewards intellectual capital at Korn Ferry. “They either keep them challenged long enough to extend their tenure or capitalize on their ideas while they have them.”