One of our long-standing clients, the General Manager of a mid-sized manufacturing firm, recently shared a growing frustration. Several of his underperformers were no longer improving, yet they also were not leaving. He told us plainly, “In the past, this would have taken care of itself. These people would have moved on by now.” Instead, he now finds himself staring down the unpleasant task of firing employees who, a few years ago, likely would have resigned on their own. The situation has forced him to reevaluate his approach to performance management and, more urgently, his hiring process.
His story is not unique. Many business leaders are discovering that a lack of natural employee turnover, once an overlooked aspect of organizational rhythm, is now creating operational drag and unnecessary costs. Employees who might have previously changed jobs for more pay, more flexibility, or a better fit are staying where they are. The reasons vary, but the outcome is the same: stagnation, both in performance and culture.
This article examines what is driving this pattern, why it creates unseen challenges for organizations, and how business leaders can adapt to reduce its negative effects.
In this article, you will learn:
- Why Some Employee Turnover Is Strategically Necessary
- How Job Hugging Affects Cost and Performance
- What Hiring Best Practices Matter Most in a Low-Turnover Market
- How to Reduce Hiring Mistakes Through Stronger Selection
Why Some Employee Turnover Is Strategically Necessary
While excessive turnover signals instability or misalignment, zero turnover can be just as damaging. Every healthy organization needs a degree of natural attrition. When employees linger in roles where they are no longer effective it slows progress. It creates a bottleneck that limits growth, blocks high performers from advancement, and discourages innovation.
Historically, middle and low performers have tended to cycle out of organizations on their own. Whether through dissatisfaction, new opportunities, or poor fit, they would exit without the company having to initiate the process. This was both convenient and cost-effective. Voluntary exits required no severance, no unemployment claims, and minimal internal disruption.
Today, those same individuals are holding on longer. Managers are forced to make the difficult call: either tolerate the underperformance or incur the financial and emotional cost of termination. Neither is optimal, but only one moves the business forward.
How Job Hugging Affects Cost and Performance
When employees remain in roles that no longer suit them, costs rise in more ways than one. First, there are the direct expenses: salary, benefits, and possibly severance if termination becomes necessary. But more subtle costs accumulate over time. Team morale declines. Productivity suffers. Managers spend more time coaching or correcting than developing or scaling.
In previous economic cycles, voluntary exits often presented opportunities to reassess headcount. Teams absorbed the work of departing employees or redistributed tasks in more efficient ways. Some positions were quietly eliminated. Job hugging eliminates that flexibility. It locks organizations into a higher fixed cost structure and reduces the margin for error.
Low-performing employees who might otherwise exit on their own are now choosing to stay. And when companies must initiate termination, they face legal risks, potential unemployment liability, and the internal tension that often comes with formal separations.
What Hiring Best Practices Matter Most in a Low-Turnover Market
In an environment where fewer employees are leaving, the importance of each new hire increases. Companies no longer have the luxury of quick corrections. Mistakes stay longer. This makes disciplined hiring practices essential—not only to find the right candidate, but to avoid embedding the wrong one.
Hiring assessments, structured interviews, and behaviorally anchored role definitions are no longer optional. They are a baseline requirement for high-stakes decision-making. Relying on intuition, cultural similarity, or unstructured referrals introduces too much variability and too much risk.
At The Metiss Group, hiring assessments help ensure candidates are evaluated not just for what they know, but for how they work. Behavioral patterns, cognitive capacity, and team fit all play a role in predicting long-term success. When turnover slows, every selection becomes a long-term investment. Accuracy matters more than speed.
Organizations using the Entrepreneurial Operating System (EOS) face this challenge acutely when hiring for roles like the EOS Integrator. This position carries significant responsibility for execution and alignment across the leadership team. A poor fit here does not just impact one department, it affects the entire organization’s ability to function.
How to Reduce Hiring Mistakes Through Stronger Selection
The single most effective way to counter job hugging is to raise the quality bar at the point of entry. The more intentional and rigorous the hiring process, the fewer underperformers make it onto the team. When turnover is low, it becomes more important to get hiring right the first time.
Every new hire should be evaluated against a clear behavioral profile, not just a job description. Selection should include validated assessments and structured interviews with targeted questions tied to job success. Managers should collaborate with HR or outside search firms to ensure consistency in the evaluation process.
Employee performance reviews should also become more frequent and specific. Annual reviews are no longer sufficient. Underperformers who are unlikely to leave voluntarily must be managed more directly. This does not mean every role needs to turn over. It means underperformance must be addressed more proactively when the voluntary exit pressure disappears.
Leadership development programs play a supporting role in this model. When employees are staying longer, companies must take greater responsibility for their growth. Leadership development classes, emotional intelligence training, and executive leadership coaching all help to raise the baseline performance of those already on the team.
Takeaways
Job hugging is a product of today’s economic conditions, but its consequences are real. It shifts the balance of control away from employees and toward organizations. Yet most businesses are still operating as though natural turnover will solve performance problems. That assumption no longer holds.
Companies must now hire with greater precision, manage with greater discipline, and develop talent with greater intention. There is less room for error, fewer natural exits, and more at stake in every decision. Leaders who recognize this shift and adjust accordingly will preserve both team performance and long-term financial health. Those who wait for the market to shift back may find themselves burdened with a team that no longer reflects their standards or supports their goals.
