Unpacking the Great Resignation
While the phrase “You’re on mute” may have been the frontrunner for 2020, the new contender on everyone’s lips and laptops is “The Great Resignation”. This has been a much-discussed hot topic over the past few months, with many employers already having seen the impact first hand, and others feeling increasingly worried it is only a matter of time before they do. Having spoken to several senior HR leaders within the global ChapmanCG network, we wonder if it is better likened to a giant game of musical chairs.
Nonetheless, “The Great Resignation” is having an impact on almost every industry sector. Many employees have switched companies and even industries while on the hunt for a greater salary, better work-life balance, and exposure to career-building experiences. Some have left the professional workforce altogether. And in their wake, HR professionals have been working overtime to fill the seats left behind.
How Did It All Begin?
There is little doubt that the movement in the current market has been caused by the pandemic as it changed our way of working. Many employees were prompted to reassess what is important in their lives, and what kind of workplace they want to return to. It has left many in HR grappling to stop their business from haemorrhaging talent and many of us have asked when this trend is going to slow down.
We are seeing inflation and potential signs of recession as we supposedly emerge from COVID. Would this ease the current footfall of talent exiting businesses? Unfortunately, the data does not yet suggest this. In a recent global sample, 40% of employees surveyed were planning to leave their jobs, and another study suggested 70% of business leaders say industries will continue to struggle attracting employees throughout 2022.
The recent study by McKinsey talked about “nuances of the larger (Resignation) trend” and referred to those leaving as falling into three criteria: Reshuffling, Reinventing and Reassessing. This offers some interesting insights, and some reassurances, that not all of the employees that are choosing to resign are disappearing into thin air. Yes, some have taken the chance to leave traditional employment and start up their own businesses or take on part-time roles (Reinventing). Others have chosen not to return to the workforce at all, perhaps to retire early or to focus on other aspects of their lives like caring for children or ageing family members (Reassessing). But the larger majority (Reshuffling) have gone to new employers in completely different industries and are taking up positions elsewhere. The McKinsey report highlighted this has meant that “some industries are disproportionately losing talent, others are struggling to attract talent, and some are grappling with both”.
If you have had any experience with healthcare, retail, travel or hospitality recently, these workforce gaps are obvious to all. For all employers and their HR leaders, this means auditing and adjusting how the business attracts and retains talent in order to ride this wave of talent churn and tap into the active pool of candidates considering these moves. Arguably, taking this action now is essential if this trend is expected to be long-term, particularly with the increasing mobility between industries.
Throwing Money at the Problem… Is Everyone Doing It?
While not the sole reason, salary remains a significant factor in persuading talent to join a company. Candidates have felt the shift of power in their favor, and many are exercising this power with very clear demands… and this includes compensation. Right now, employers in certain industries (technology, financial services and pharma/healthcare in particular) are tackling their talent shortages by offering salaries that are higher than the typical market rate. But what happens in 12 months when salary reviews come around? And do you factor in raising the existing team’s compensation to match? Furthermore, an attractive salary is now even less likely to mask the negatives of bad company culture or lack of engagement that it previously may have—is that extra cash preventing attrition?
Regardless of what stance businesses decide to take in this matter, relying on salary alone to attract talent is clearly unsustainable. Going forward, other aspects of employee experience must receive our attention to garner new talent as well as maintain it.
Jennifer Garrard, Vice President of HR at Brother International Corporations, summarised this sentiment perfectly in a recent Forbes article: “Pay is often the first component, but it is certainly not the last, and often not the most important. It is not always possible for every business (particularly small and midsize businesses) to compete on salary for every position.”
The power of offering a candidate a healthy company culture and work-life balance should not be underestimated. It is certainly something HR teams should lean into regardless of whether they can afford to offer above the market rate salaries. Study after study has shown that pay really isn’t the top reason for employees leaving a company, it is more likely to be related to company culture. Lack of perceived career development, lacking meaningful work or poor leadership are all key drivers for those considering quitting their jobs. For instance, it takes a 20% pay rise or more to poach an employee who finds their manager supportive and inspiring; but conversely, it doesn’t take any increase in pay to attract an employee who is disengaged or disgruntled with their current management.
If It’s Not Money… What Do Candidates Want?
In addition to the changes in the workplace and wider society over the past two years, people’s lives have been altered. We have all had time to ask ourselves more existential questions. Is my job worth sacrificing time with family? Does the life I currently lead feel right to me? Is this workplace really where I belong? Under such introspection, many have concluded that their employer is no longer the right fit. People who find their work meaningful are more productive, resilient and loyal to the company, and this expands to include stronger employee engagement and increased likelihood to recommend the company when they feel this sense of purpose aligns with the company’s purpose.
Well-being has increasingly been a key factor for employees, and some businesses have pledged their dedication to employee well-being over the years. Yet for others, the pandemic was the first time they had to put this into practice significantly, and the effectiveness of this perceived support ranged dramatically from company to company. Employees reflection on the support (or lack of) they received from their employer during the pandemic, combined with a hot candidate market, has been a catalyst for them to seek a different employer offering a more supportive culture.
Along with this and other drivers around career development and meaningful work, some candidates have also become astute to the value that potential employers are offering to the wider society. During the pandemic, the public and media heavily assessed brands to understand whether they were taking advantage of the situation for commercial gain or were part of the efforts to help the community. This focus has likely also fed into candidates’ desires to work with brands that are overtly ethical and proactively giving back, whether that be in terms of the pandemic, diversity and inclusion, or sustainability. Lego, Google, J&J and Vodafone are good examples of companies renowned for CSR initiatives, which can be a big differentiator when competing to acquire talent.
What are HR Leaders in the ChapmanCG Network Seeing?
If a business is experiencing talent gaps, it is not necessarily due to any wrongdoing. Many are adhering to recruitment best practices. However, candidate expectations have changed and that means what was once considered best practice must also adapt for a business to remain competitive. So how can HR professionals facing a very different talent market ensure their business is the right fit culturally? And what are some of the HR leaders we spoke with seeing?
One Global HR leader within Professional Services shared that they have seen the “reshuffling” aspect with people quitting not to join competitors, but to go into different careers altogether—many to set up their own or family businesses, join a friend’s start-up, etc. A vast majority were linked to moving out of their city center altogether. The realities of living in a city during lockdown made many people long for more space—and with flexible working becoming commonplace, this has become possible.
Another Regional CHRO we spoke with confidentially shared that a lot of the churn they had seen recently had been attributed to the ongoing virtual environment. In one instance, they had noticed up to a 40% turnover within 12 months of new people joining. They put a lot of this down to the gap between the expectations of the employees versus the business around what flexible working means, combined with management style and the nature of virtual onboarding that many businesses are still forced to do for now. Even with a hybrid return-to-office model, most of their employees were still not back in the office. Without that face-to-face human connection, it’s easier to resign from a manager and a team you have never met if something more attractive comes along.
One Global Talent Acquisition leader in the pharma industry has said that while the company’s business is seeing some attrition due to the competitive nature of the sector, rather than throwing money into retention bonuses, they are focusing on development and growth from within. They are identifying critical roles within the business and where they can make market adjustments to ensure salaries are aligned. Noting that it typically costs more to hire externally than retain existing talent, they are being creative and changing the career progression discussions business. Rather than relying on the more traditional career ladder where promotional opportunities can narrow as someone nears the top of the organization, she likened it to a “rock wall” of progression, where lateral moves into different parts of the business can be equally rewarding in terms of career development.
Becoming an Employer of Choice
Clearly it is as challenging as it has ever been to attract and retain talent. Business and HR leaders need to do their best to assess potential areas of discontent or friction within the company culture and attempt to address the varying demands of different generations, business populations and individuals. The multitude of research surfacing around the Great Resignation topic shows candidate requirements are similar in some areas but can also vary dramatically. Furthermore, once the talent is through the door, HR professionals must ensure they continue meeting employee needs and expectations as they adapt.
It is a lot to take on, but HR leaders should consider:
- Being explicit in their expectations of the role. What needs to be done now? And what will the responsibilities be 12 months down the line? And are the line managers on the same page?
- Shorten recruitment processes. Candidates tire of lengthy processes and not putting them through as many assessments could be a key differentiator for you, particularly if they are in multiple processes.
- Offer salary increases, retention bonuses, and equity grants if possible. At least ensure that critical roles within the business are competitively compensated within the market.
- Provide permanent remote/hybrid working options. Yes, there are challenges that come with this, but both employees and candidates are making career decisions based on these policies.
- Benchmark benefits against other organizations to ensure what you are offering remains attractive to candidates.
- Succession planning and transparent career paths: notifying key employees about the opportunities that may be available for them within the organisation, now and in the future. Consider building marketing and communications within the HR team to showcase Learning & Development opportunities available to employees (L’Oréal does this very well with separate Learning & Development teams within HR).
- Conduct regular anonymous engagement surveys to keep HR’s finger on the pulse when it comes to developing employee expectations.
- Think regionally about how candidate and employee expectations may differ, e.g., candidates in the US may prioritise health insurance more than those in regions that can access health services without insurance.
- Look after the HR teams. After the past two years of dealing with the pandemic, and as the challenges of The Great Resignation continue, they are not immune to burnout themselves, and many are struggling to shoulder the burden of unprecedented employee turnover.
Reality Sets In
While quitting the 9-to-5 sounds ideal to many of us, unfortunately it is just not realistic for the vast majority, and even more so in certain countries (for example in France where due to national pensions, you cannot retire before 65 years without significant penalties). Companies are seeing people return to the workplace having realized they need the money, but these candidates can afford to be more vocal in their demands and more discerning about job offers in a market that favours the employee. It is also not just the younger generations—the “Great Unretirement” is unfolding as older people are driven back to work by cost-of-living increases and inflation thinning out state pensions.
No doubt talk of inflation and impending recession is also already having an impact as we see employees think twice about leaving a stable job for the unknown. Despite this, the Great Resignation is a critical opportunity for leaders to take time to understand why people are leaving and work to fix some of those issues. As McKinsey Quarterly said in March, “Focusing only on compensation or only on cultural factors will not stem the tide of attrition. Business leaders must pay constant attention to both”. Creating a more positive company culture and reassessing key employee drivers in turn creates the potential to not only attract new employees but also reopen the office door to welcome back “boomerang” employees (those who return to a company after leaving)… a situation mutually beneficial for both parties. Unsurprisingly in this tight talent market, 2022 has already been predicted by some to be the year of the boomerang worker.
Perhaps HR teams can also take some comfort from the increasing number of people who quit their jobs thinking the grass was greener elsewhere, only to regret being so impulsive—up to 42% of those who have landed a new role have found it doesn’t live up to their expectations. Would candidates sharing this disappointment with friends and colleagues bring about a slowdown in attrition? Possibly. But to whatever degree the Great Resignation is affecting your workforce, learnings from this movement are certain to benefit your entire organization in the long run.
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