Retention by fear decreases engagement, leads to turnover risk when economy improves: experts
The latest Gallup workplace polling shows confidence in the job market has slumped, with just 28 per cent of US workers saying now is a good time to find a quality job, down from about 70 per cent in mid-2022.
In Canada, recent Express Employment Professionals–Harris Poll research finds three-quarters of jobseekers expect it will be difficult to find work in the next six months — up from six in 10 in 2024 — with eight in 10 believing that employers have the upper hand in the market.
On paper, that looks like good news for organizations. For HR leaders, it could be a warning that “retention by fear” may be growing – and that it could backfire when the cycle turns, according to Janet Bray, Director, Human Resources, at Pier 4.
False comfort in a weak labour market
A soft labour market can tempt executives to assume they have more power and more stability than they actually do, says Bray, and that outlook clashes with what most HR leaders say they are trying to build.
Bray argues that most HR leaders “want people to be here because we’re giving them good, meaningful work.”
“[External fear of the weak labour market] may make people stay when they might not otherwise want to stay and be less open to sharing where change is necessary or required, and I think that’s so unfortunate for cultures and organizations because we want to be able to create environments where people can do their best,” she says. “And if they’re staying is fear-based, then they don’t win as employees and we don’t win as employers.”
Bray’s distinction between staying and thriving echoes the Gallup poll’s findings: while fewer people feel confident about moving, only 31 per cent are engaged at work, a reversal of results from 2023.
The message is that a lower quit rate doesn’t automatically mean a healthier workforce, says Bray.
Who is staying – and should they be?
Nita Chhinzer, associate professor of leadership and organizational management at the University of Guelph, says HR needs to read a weak market through a performance lens, not just a retention lens.
“When individuals feel that their opportunities for employment elsewhere are low, they are more likely to stay with an employer, even if they are disengaged, demotivated, or a poor fit,” says Chhinzer.
Research has long distinguished between functional turnover — when poor performers or people in obsolete roles exit — and dysfunctional turnover, when strong performers and critical talent leave, according to Chhinzer. In a discouraged job market, she says, it’s easy for leaders to celebrate lower turnover without asking whether they’re losing the right people.
“What you would see immediately is your metrics around voluntary departures, quits, and resignations go down when there are perceptions of lower alternative available options,” says Chhinzer. On a dashboard, that line trending down can look reassuring, but inside a business unit, it can mean poor performers are clinging to their roles while high performers quietly test a “hidden” job market through networks and referrals, Chhinzer says.
“The question from an HR perspective is really trying to educate your or team to those kinds of shifts in how people show up to work, and try to address that appropriately,” says Bray. “We have to be able to have conversations with managers, which doesn't mean you're going to get everything you want, but if we aren't getting the productivity from people who hate their jobs, and people who hate their jobs are getting no value other than a paycheck, that's not sustainable on either front.”
Chhinzer believes that it’s important to monitor the organization’s trends on whether lower turnover is masking an increase in high performers leaving while more poor performers are staying due to a lack of options. “If we see an increase in the number of poor performers who are staying and our natural attrition rates drop, that might indicate a need to rebalance, trigger more exits, or take a look at our HR plan,” she says.
Culture risk today, brand risk tomorrow
The biggest danger in a soft market may be cultural, not numerical, says Bray, who believes that when leaders lean into the idea that employees have nowhere to go, they send a message that will be remembered when conditions improve.
She warns that a short-term power grab can quickly become a long-term brand problem.
“Once you say it out loud, you can’t take it back, so I think that’s something really important that leaders have to remember — markets come back, and those types of phrases or reactions in a weak labour market are going to be out there, and it changes the culture and the employer brand if that’s the mentality of the people at the top,” says Bray.
“Just like in financial markets, the brave ones hold on and that’s what leaders have to do in environments like this — remember the culture of the organization and the employer brand that you’re trying to build because if you shift your strategy to ‘We have all the power,’ when the tables turn, you will see a mass exodus.”
A 2024 survey by Dayforce reinforces Bray’s argument, revealing that three-quarters of Canadian workers have or would turn down a job if the employer’s culture didn’t feel like the right fit, and nearly one-half link improved culture with increased motivation.
Seeing beyond the dashboards
In a weak labour market, the role of HR is to use evidence and influence to counter the illusion of security and keep leaders focused on quality of employment, not just headcount stability, says Chhinzer.
That starts with pairing labour market data with internal analytics on who is staying, who is leaving and why — and then testing that story on the ground.
“Executives speak in terms of metrics or evidence, so the role of HR here is to use the evidence to develop a context-specific understanding,” says Chhinzer. “When we're speaking to the organization, it's a big responsibility to say that if we have too many employees, our labour costs go up, and when we don't have functional turnover, we might be hoarding people who don't necessarily need to be employed, and do we take those strategic steps to adjust our employment levels because they're not naturally adjusting?”
It also means treating engagement and safety data as early-warning signals. If incident reports, absenteeism or psychological safety scores are drifting the wrong way while turnover looks stable, it’s a clue that retention may be driven more by fear than by commitment.
Making people want to stay when things improve
A soft job market doesn’t change the fundamentals of good talent and people management, it simply makes the risks of cutting corners easier to ignore in the short term, says Bray. She believes that the opportunity in this moment is for HR to show that the organization values commitment over compliance — which may involve hard conversations with leaders who see a weak market as permission to pause culture investments or tolerate lingering performance problems.
Most of all, it means staying consistent and honest in the organization’s messaging, says Bray.
“When the economic environment is poorer and the pressure is higher, things land differently and people get more sensitive to strategies or elements of the culture that have always been there,” she says. “If this is who we've always been, don't put a new lens on it because the economic environment is different now — we want you to have a good job that makes you happy because, at the end of the day, we need to make our investors happy.”
