Why High Performers Leave, and What CEOs Must Do to Keep Them

In a world where FTSE 100 CEOs earn 122 times more than the average UK worker — and their US counterparts command 285 times more — it’s easy to assume that pay must reflect value. There is a flaw in that logic, though. Relative value, productivity, and earnings are falling further out of alignment with each passing year. As a consequence, your best people are probably leaving.

Many of them are walking out quietly. No drama. No grand exit. It could be just another high performer disappearing to a competitor, a start-up, or a freelance career. It could be dropping productivity to the level just above the point that would attract attention. It isn’t because they wanted more ping-pong tables or a four-day week. It’s because your compensation model makes it impossible for them to stay.

If you think this is about generational entitlement or “quiet quitting,” you’re missing the point. What we’re seeing is the rational exodus of talent from systems that reward hierarchy instead of impact. And if business leaders don’t fix the underlying rules, they’ll keep bleeding out the very talent they rely on to win.

The Broken Compact 

There used to be a deal between employers and employees: stay loyal, do your job, and you’ll be looked after. Pensions were funded, raises came with time, and performance meant stability.

That deal is dead. 

It started in Silicon Valley, where disposable labour helped startups scale quickly. Now it’s everywhere. The new compact is clear: you’re on your own. And in that reality, the only thing that matters is bargaining power.

Throughout most of the 20th Century, the compact between employers and employees was centred on stability. However, in the 21st Century, organisations around the globe have followed the Silicon Valley model, seeking higher returns for investors and blaming the need to remain competitive for extraordinary compensation dished out to CEOs, Board members, and investors, leaving the everyday people who actually power their organisations undervalued.

If compensation were commensurate with value, chunky corporates would pay solid contributors proportionately more over time, as the predictability of their performance grows. What we observe empirically, however, is that individual workers’ earnings achieve the greatest growth on occasions in which the worker has leverage.

Workers achieve leverage by securing a competing offer with a higher salary. This puts the current employer in the position to either match the salary increase or let the worker go. Value flows to those with negotiating leverage. Data from the Federal Reserve Bank of Atlanta shows that job-switchers earned 7.6% more than the previous year, as compared to job-stickers, who earned only 5.6% more than the year before in April of 2023. In its June 2023 article on the topic, The Economist’s Bartelby Column states: “Loyalty is nice; so is bargaining power.”⁠1

Over time, this dynamic has contributed to a substantial shift in employment trends. The median tenure workers remain with their employer in the U.S. fell across nearly all age groups from 2012 to 2022, with workers over 25 having a median tenure of 4.9 years, and workers over 65 having a median tenure of 9.9 years. Workers between 20 and 24 years of age have a median tenure of 1.2 years.⁠2  The workforce has learned that stable contributors reap fewer rewards than job-hoppers.

For chunky corporates, succumbing to this trend is counterproductive. For an organisation seeking predictable performance, maintaining a stable workforce is one of the more obvious ways to achieve it:

“Even companies that have succeeded using minimalist compacts experience negative fallout, because the compacts encourage turnover and hamper employee productivity. More important, although the lack of job security indirectly creates incentives for employees to become more adaptable and entrepreneurial, the lack of mutual benefit encourages the most adaptable and entrepreneurial to take their talents elsewhere. The company reaps some cost savings but gains little in the way of innovation and adaptability.”⁠3

Quiet Quitting is the Market Responding 

A 2024 poll found that 90% of workers are disengaged from their jobs in the UK⁠4. Quiet quitting was not a fad; it’s a mindset revolution. Loyalty without reward has become resentment.

If the company wins, shareholders win. If the company loses, frontline workers may face layoffs. But either way, average employee compensation stays the same. Why should employees keep caring about company performance when they are only incentivised to do the bare minimum that avoids redundancy? Economic theory states that relative earnings will align to relative productivity on the whole, over time.  There are a couple of generations that thought if they were productive, they’d earn more. It’s what they learned in school.

It turns out, that wasn’t true. In the UK, from 1980 to 2010, GDP grew dramatically faster than wages. Real wages fell by 25%,⁠5 while productivity was growing. In the US, the period from 2000 to 2012 saw productivity increase by 25⁠6%, while workers’ wages were stagnant or in decline. Across high-income countries, while worker productivity grew by 5% from 2009 to 2013, wages rose just 0.4%, according to the ILO Global Wage Report 2014.

Bivens and Mishal summarised, in economic terms, what is happening:

“First, the increase in the incomes and wages of the top one percent over the last three decades should be interpreted as driven largely by the creation and/or redistribution of economic rents, and not simply as the outcome of well-functioning competitive markets rewarding skills or productivity based on marginal differences. This rise in rents accruing to the top one percent could be the result of increased opportunities for rent-shifting, increased incentives for rent-shifting, or a combination of both. Second, this rise in incomes at the very top has been the primary impediment to having growth in living standards for low- and moderate-income households approach the growth rate of economy-wide productivity. Third, because this rise in top incomes is largely driven by rents, there is the potential for checking (or even reversing) this rise through policy measures with little to no adverse impact on overall economic growth.”⁠7

Are you wondering what that means? I had to read it like three times before I understood it, and I was an economist for fifteen years! What it means is that the economic assumption that wage growth would naturally align to productivity growth in competitive markets either at an individual level or on average across the economy was wrong. People are extracting more value from markets than is proportional to their factor of production. In short, CEOs are getting a disproportionate share in the spoils, and the penny has dropped for those from whom they’ve been taking it.

Compensation does not follow productivity as previously assumed. Over several decades, that has left nearly all the people in the middle or at the bottom of the org chart behind. That reality hit me hard, ironically, when I reached the top of the org chart. All of a sudden I was making significantly more than hardworking people in my team were making. I was making multiple times what I had made in previous years. But was I worth more?

I mean, sure: I was good at my job and had a lot of relevant experience. I was adding more value to the organisation than I had in previous roles, but I was not adding five times more value than the people on my team on any given day, despite being paid five times more. I was not adding ten times more value than colleagues at the bottom of the ladder.

The magnitude of change in my earnings did not match the magnitude of my productivity change. Similarly, my CEO wasn’t adding 122-285  times more value than our front-line employees. I could look around the Board room and see that the compensation of the people around the table was disproportionate to the value they added to the organisation. In other words, it wasn’t just me.

The entire system created opportunities and incentives to shift value from the bottom and middle of the org chart to the top. And my colleagues could see it, too. They’ve looked at the system. They’ve done the maths. And they’ve realised that effort beyond expectation rarely changes anything. This isn’t a cultural issue. It’s an economic one. Rent-seekers beware.

Pay for Value, Not Just Title 

Forward-thinking organisations are already building systems that reflect contribution, not just hierarchy. Here’s how they’re doing it:

1. Create Parallel Progression Paths
   Not everyone wants to be a manager. Not everyone should be. Introduce dual career ladders that allow individual contributors to progress in title, status, and pay without managing people. In tech, this model is already common: “Senior Engineer,” “Staff Engineer,” “Principal Engineer.” But it works just as well in finance, marketing, and operations.
2. CEOs and leaders, get over yourselves
   Stop treating budget control or headcount as a proxy for value. A solo contributor who delivers breakthrough insights or innovations can be worth more than a middle manager with a large team. Reward impact, not span of control. You may not like it, but that means evaluating your own exorbitant compensation when you align compensation to value.
3. Enable Market-Based Compensation Adjustments
   Top performers know their worth. So does the market. If you won’t pay them what they’re worth, someone else will. This doesn’t mean blowing your budget; it means being strategic. Invest in your outliers before they become someone else’s competitive edge, even if it means redistribution from compensation previously reserved for top-of-the-org-chart roles.
4. Don’t Cap Recognition
   If someone delivers 10x results, why are you rewarding them with a 3% raise and a generic thanks? Recognition should be as exponential as contribution. Bonuses, equity, public acknowledgment, they all send signals. Use them wisely.
5. Rethink What You Measure
   If your performance metrics focus on “leadership potential” or “visibility,” you’re likely under-rewarding introverts, specialists, and deep thinkers. Start measuring outcomes: revenue influenced, problems solved, risk mitigated, innovation delivered.

But What About Pay Equity? 

Fair question. Equity matters. But equity doesn’t mean sameness; it means fairness. Treating unequal contribution equally isn’t equity, it’s avoidance. Instead, build a framework, and treat everyone in the organisation equally under the framework, even the leadership team:

• Transparent: So employees understand what’s being rewarded
• Data-informed: So decisions are based on outcomes, not opinions
• Flexible: So managers can recognise great work in real time, not just annually

It’s not about favouritism. It’s about measuring and rewarding proportionately based on merit.

The Risk of Doing Nothing

Doing nothing isn’t neutral. It’s a decision, and one that risks handing your best people to your competitors on a silver platter. When high performers leave:

• Morale suffers
• Institutional knowledge vanishes
• Client confidence wavers
• Productivity declines

You can’t afford to keep managing compensation like it’s 1995. The talent market has changed. The nature of work has changed. So must your systems.

Final Thought

There’s an uncomfortable truth at the heart of all this: The rules that got you here won’t get you there.

If you want to win the next phase of the talent war, you need to break some of the old rules. You may find yourself with a smaller team of high-performing, highly compensated individuals dedicated to the organisation because they are valued appropriately.  Because the real risk isn’t overpaying the best. It’s underestimating the cost of losing them.

References:

1 Bartleby Column. “The Perils of Being Loyal at Work.” The Economist, June 10, 2023. https://www.economist.com/business/2023/06/08/why-employee-loyalty-can-be-overrated.
2 “Employee Tenure Summary,” September 22, 2022. https://www.bls.gov/news.release/tenure.nr0.htm.
3 Hoffman, Reid, Ben Casnocha, and Chris Yeh. “Tours of Duty: The New Employer-Employee Compact.” Harvard Business Review, June 2013. https://hbr.org/2013/06/tours-of-duty-the-new-employer-employee-compact.
4 https://www.cnbc.com/2024/06/13/a-staggering-90percent-of-uk-employees-are-quiet-quitting-gallup.html
5 “The Great Wages Grab.” Trades Union Congress (TUC), September 9, 2012. https://www.tuc.org.uk/sites/default/files/tucfiles/TheGreatWagesGrab.pdf.
6 Shierholz, Heidi, and Lawrence Mishel. “A Decade of Flat Wages: The Key Barrier to Shared Prosperity and a Rising Middle Class.” Economic Policy Institute (EPI), August 21, 2013. https://www.epi.org/publication/a-decade-of-flat-wages-the-key-barrier-to-shared-prosperity-and-a-rising-middle-class/.
7 Bivens, Josh, and Lawrence Mishel. “The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes.” Journal of Economic Perspectives 27, no. 3 (2013): 57–78.

Written by Katie Tamblin. Have you read?
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