Why do people leave?

When people leave an organization, the explanation is often reduced to simple causes: pay, workload, market pressure, or “better opportunities.” Those reasons are often true and easy to name, but they often don't tell the whole story.

People don’t usually wake up one morning and decide to leave. They leave after months or years of small grinding everyday experiences that slowly convince them that staying no longer makes sense. Retention, is therefore at its core, a leadership outcome.

The hidden cost of high turnover

The visible costs of turnover, i.e. recruitment, onboarding, training etc. are well documented and are in general estimated to be 30% and 200% (yes, you read this correctly) of the annual salary of the person leaving, depending on role complexity (U.S. Department of Labor).

More damaging, however, are the hidden costs:

• Workflow disruption

• Reduced trust in team stability

• Loss of informal mentoring

• Increased work load on remaining team

• Slower decision‑making and execution

Research on team dynamics shows that instability reduces cooperation and learning, as individuals shift from contributing to protecting themselves (Kahn, 1990). Over time, this creates a culture of short-term compliance rather than long-term engagement.

High turnover also damages employer reputation. Studies on employer branding show that perceived instability reduces applicant quality (Bauckhaus & Tikoo, 2004).

Experience is easy to lose, hard to regain

Experienced employees carry institutional memory, contextual judgment, and informal networks. This allows them to anticipate second-order effects that newly onboarded employees typically cannot yet see.

Research on organizational learning shows that performance improves when teams retain experienced members long enough to convert individual learning into collective routines (Argote & Miron-Spektor, 2011). High turnover disrupts this process, forcing organizations to repeatedly rebuild the same knowledge base rather than compounding it over time. When experienced people leave, the organization doesn’t just lose capacity—it loses continuity.

Additionally, long-tenured employees tend to show higher discretionary contribution. Studies indicate that employees who feel established and psychologically safe are more willing to share ideas, challenge assumptions, and experiment, all of which support innovation and continuous improvement (Edmondson, 2018).

Retention is therefore not opposed to change; on the contrary, it enables meaningful change. Organizations that repeatedly lose experience do not just lose people, they lose momentum.

People rarely leave because of policies

Exit interviews often cite compensation or workload, but longitudinal studies show a different picture. Gallup’s meta-analysis of engagement drivers consistently identifies the direct manager as the strongest predictor of voluntary turnover, outweighing pay, benefits, and organizational prestige.

Academic research supports this finding: employees disengage when they experience lack of respect, unpredictability, or limited growth (Hom et al., 2017).

Common triggers include:

• Inconsistent treatment

• Lack of feedback or recognition

• Absence of development opportunities

• Unmanaged stress transmitted from leadership

• Blame‑oriented reactions to mistakes

Research on emotional contagion also shows that leaders transmit emotional states to teams, shaping morale, cooperation, and effort (Barsade, 2002). Leaders under chronic stress can unintentionally increase turnover, not through strategic decisions, but because emotional pressure becomes the team norm.

In short: people leave environments, not contracts. That environment is shaped every day by how leaders show up, react, listen, and decide.

This is where leadership enters the picture

The decision to leave is rarely triggered by dramatic events. It is shaped quietly by recurring negative interactions. Research on abusive supervision (Tepper, 2000) and destructive leadership consistently shows strong correlations with emotional exhaustion, reduced trust, and disengagement.

Importantly, toxic leadership is often not loud or obvious. It shows up in ordinary moments: sarcasm instead of feedback, impatience instead of curiosity, or public correction instead of private coaching. These behaviors rarely violate policy, but they steadily erode psychological safety and commitment.

Counterintuitively, toxic environments can sometimes appear high-performing in the short term because fear drives compliance. However, longitudinal studies show that performance eventually collapses as talent drains away and remaining employees disengage cognitively (Einarsen et al., 2007).

Research also confirms that employees do not need perfect leaders, but they do need predictable and respectful ones. When leadership behavior is inconsistent or emotionally volatile, people shift into self-protection mode. That is when learning stops and exit planning begins.

Promotion from within as retention tool?

One of the strongest predictors of retention is perceived opportunity for growth. Employees who believe their skills are developing and their future is viable inside the organization show significantly lower exit intent (De Vos, Van der Heijden & Akkermans, 2020).

Promoting from within is therefore one of the strongest retention signals, not because it guarantees promotion, but because it demonstrates commitment to development.

The Peter Principle, the idea that people get promoted to their level of incompetence, is often used as a counterargument.

Are we then promoting the very people who will later drive others away?

Companies are well aware of the Peter-Principle, however research and practice have shown that the benefits of internal promotion generally outweigh the downsides of the Peter-principle.

The Peter Principle is about competence, not behavior. It explains how people can be promoted beyond their technical or managerial capability, but it says nothing about how they behave as leaders day to day.

People rarely leave because their manager lacks expertise; they leave because of inconsistent, disrespectful, or emotionally reactive behavior. In that sense, the Peter Principle does not contradict the importance of leadership for retention, it reinforces the need for leadership development.

If people are promoted into roles that exceed their leadership skills, it becomes even more critical that they are supported in learning how to lead.

A leadership reality check

Ultimately, retention is shaped by the environment leaders create through their behavior. Leadership sets the emotional, behavioral, and cultural baseline others orient themselves around. What leaders tolerate, how they react under pressure, where they invest attention, and how they handle responsibility become norms long before they become policies. Over time, these signals shape the decision to stay or leave.

So the next time you speak with your team, ask yourself: “What is it like to work with me, day after day?”