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Good communication reduces personnel turnover in companies

When managers communicate well with employees, personnel turnover can be reduced by up to 25 per cent / field experiment in large supermarket chain

How well managers communicate with their team has a large impact on the quit rate in retail. That is the result of a research project conducted by economist Matthias Heinz, professor at the Cluster of Excellence ECONtribute: Markets & Public Policy at the Universities of Cologne and Bonn, together with Professor Guido Friebel (Goethe University Frankfurt) and Nick Zubanov (University of Konstanz) in cooperation with a large supermarket chain in the Baltic States.

Poor pay, shortage of trainees, and high fluctuation: The retail industry does not have a good image on the labour market. However, excessive stockpiling by shoppers during the coronavirus pandemic has shown how important well-coordinated teams are in supermarkets. Over a period of 16 months, the researchers analysed the quit rates in stores after the CEO wrote a letter to half of his store managers asking them to ‘do what they can’ to reduce fluctuation at their store and to take better care of the employees. As a result, the managers of 119 of the 238 stores spent more time with their employees – around 20 minutes a day – while nothing changed in the remaining stores. In the nine-month period thereafter, the employees of the contacted store managers resigned less frequently – personnel turnover fell by up to 25 per cent. After the CEO again reminded store managers of their goal after these nine months, turnover rates again dropped to the same extent. Before the experiment, an average of 80 per cent of the 5,500 employees quit their jobs each year.

The results of the study show that personnel turnover can be significantly reduced by simple communication from upper to middle management, and from store managers to employees. ‘We were surprised at how large the effect of this relatively simple intervention is,’ said Matthias Heinz, ECONtribute professor at the University of Cologne. However, the lower quit rates did not have a positive effect on sales, which remained the same. This could be due to the fact that the intensive interaction of store managers with their employees has a price: less time for customers. The researchers thus challenge results of previous literature, which assumes that lower fluctuation always leads to higher business performance.

The research project emphasizes the importance of choosing good managers. In principle, they should be able to communicate and interact well with people in order to keep quit rates as low as possible. However, even the uncommunicative, poor leadership style of some managers can be positively influenced by a simple request from the executive floor.

The study has been published by ECONtribute and will soon appear in the top international journal Management Science. ECONtribute is the only Cluster of Excellence in economics funded by the German Research Foundation (DFG). It is supported by the universities in Bonn and Cologne. The Cluster conducts research on markets at the interface between business, politics, and society. The aim of ECONtribute is to better understand markets and to find a fundamentally new approach to the analysis of market failure that meets today’s social, technological, and economic challenges, such as increasing inequality and political polarization or global financial crises.

Media Contact:
Professor Dr. Matthias Heinz
+49 221 470-7263

Press and Communications Team:
Carolin Jackermeier
PR Officer: ECONtribute: Markets & Public Policy
+49 221 470-7258