What Caused the Great Resignation and How Should Employers Respond?
The past 19 months have been interesting, to say the least, for the labor market as record numbers of workers quit their jobs. However, this trend isn’t as “new” as many news reports would have you believe. The data suggests what we’re calling the “Great Resignation” actually started the year before the COVID 19 Pandemic. 2019 was a pre-COVID banner year for resignations; more US workers quit their jobs than at any time since December 2000.
Then just a few months later when the pandemic hit, many employers laid off workers. And at the same time, more and more workers decided to rethink what was really important to them and determined that it was time for change.
I’ve read and heard many “reasons” for this mass exodus of workers. Some say extended unemployment benefits make it easy for people to avoid work; others say “today’s generation” is lazy and doesn’t want to work; there’s chatter about a worker “revolution.” Yet, as the unemployment benefits expired, there wasn’t much positive change. The problem merits a deeper look at what’s really going on, because I believe the Great Resignation began back in 2019 and was expedited by the COVID 19 pandemic rather than caused by it.
Top Reasons for the Great Resignation
1. Supply & Demand
In December 2019 there were 5.9 million open jobs and 5.8 million unemployed workers. In November 2021 there were 10.4 million open jobs and 6.9 unemployed workers. Thus, it was obviously more of an employer’s market in 2019. In 2021 with so many job openings, employees have more leverage. They’re seeing their peers leave for jobs that are paying more and offering more flexibility. They hear their boss mention having to pay more to attract new workers while denying raises to their current people. This makes employees feel like a fixed cost more than a valued member of the team. Why wouldn’t they want to leave? This is what I call the Great Realization of today’s workforce, rather than a revolution.
In a recent Indeed survey of over 1,000 workers who recently quit their jobs, 48% said they left for more pay. Many workers have left more than one job over the past 19 months. Employees are leaving their current job to position themselves for the job they are really seeking at the best compensation they can get. This is what I call the Great Raise. Employees know they are in high demand in today’s market.
3. Work Culture & Management Style
In the Indeed survey, 92% of workers who quit said that life was too short to work in a bad culture or for a poor manager. Many cited being micromanaged and disrespected by their direct manager. Another 40% of workers who quit said their managers didn’t support their work-life balance when they needed to either take time off or work from home to care for their kids or attend school activities and/or when a family member needed assistance for health reasons.
4. Remote Work Options & Flexible Hours
The Indeed survey also found that 45% of workers who quit did so because their current employer offered no remote work options, and 34% said their employers did not offer flexible work hours. Growth in remote working enables employees to look for opportunities beyond their current geographical market, and it’s even causing them to look outside the industry they’ve been in. 82% of the people Indeed surveyed said they are pursuing jobs outside of the market they live in, and 85% said they are looking for jobs outside their current industry.
In sum, the main reasons for the Great Resignation are increased options and freedom of choice for workers. Any company with poor culture, inflexible or disrespectful managers, or low compensation is not helping itself through this time of change.
December sees the disbursement of year-end bonuses for many employers. Wait and see what January 2022 brings—it would be no surprise to see even more workers grab their bonuses and head for new jobs. Let’s look at some effective strategies your company can implement to counter the mass exodus of workers and hold on to valuable talent.
How to Retain and Attract Workers in 2022
1. Increase Compensation
Don’t make the mistake of assuming cost-of-living is enough for raises. Analyze and understand the current market rates for the job titles you employ. Inflation is a huge problem with widespread effects, including upward pressure on salaries. You can’t ignore the reality staring at you in salary surveys. Yes, it’s more work to have your human resources department look at what it would cost to replace someone than it is just to allot a small percentage to everyone. But if you don’t do it, you’ll not only lose more employees, you will also end up paying more for their replacements.
What if you don’t have money for raises?
Many businesses are struggling and handing out big raises to keep employees is not a realistic option. What do you do? Choose honesty. Let your employees know how much you appreciate them, explain the problem, and ask for their solutions. They may have cost-cutting ideas you haven’t thought about. You may need to restructure your company. But whatever you do, don’t hide from this reality. Your competitors are waiting to poach your best employees, so be up front. It can save some people.
2. Consider Long-term Incentives
Employees like year-end bonuses. We all know everyone has had a tough time over the past two years and could use the bonus. If there’s no perceived reason to stay over the long term, people will be more likely to leave right after they get the bonus. Make sure you have compensation that takes time to vest (stocks or 401(k) matches, for instance). If your company is structured to enable it, you may even consider offering equity to top performers as a personal incentive for them to stay and help the company be as profitable as possible. If you make that incentive valuable enough, you can increase your employee loyalty and help keep your best-performing employees over the longer term.
3. Develop Strong Managers and Culture
The best deterrent to employees resigning is great managers and an awesome culture. While people undoubtedly want more money, it’s often poor management that spurs them to start looking. This is a remedy that is more difficult but less expensive to implement than direct financial incentives. Put real effort into increasing the skill level of your managers, and you may find turnover dropping instead of increasing. Enroll all of your people managers in a leadership development course that covers critical conversations, manager-employee communication, and how to motivate people.
Your aim should be to build a culture focused on nurturing relationships. The core philosophies of some of the greatest sports coaches in history all emphasize the importance of developing trust by building relationships and eliminating silos within the organization.
Ask yourself these key questions about your people managers and culture:
Do our people managers build strong relationships and trust with their people?
Do our people managers have high emotional intelligence to handle stress?
Do our people managers have critical conversations in a timely manner and in the right way so that their people feel respected?
Do our people managers communicate clearly their expectations and also hold their people accountable in a respectful way?
Do we have a culture of trust and transparency?
Do we have a culture that is supportive and sensitive to the needs of our people?
Do we have a culture that is consistent and fair?
Do we have a culture that promotes and supports growth, development, and greater opportunities to advance careers?
4. Provide Remote Working Options and Flexible Work Arrangements
I’ve talked to numerous leaders over the last 19 months, many of whom are still struggling to adapt to their employees working remotely. Most say they feel like their people aren’t doing what they should be doing when they work at home, and they fear losing productivity. This is a fear that can paralyze a company from implementing change. But the way companies and teams used to meet and work is a thing of the past. It’s time to embrace remote working options.
Remote work has several benefits for employers as well as employees. It expands the geographical region where you can source candidates; it can save on office lease costs and other expenses; and the improved work-life balance is a morale boost for employees.
Yes, remote work means new challenges for team meetings and communication in general, but that doesn’t mean these changes are all negative. I’ve heard from many employees and leaders over the last few months who say communication has actually improved because it makes team members more deliberate about their conversations when they meet, and it eliminates some of the “pop in” or “drive-by” meetings that naturally occur (and consume productive time) when everyone is working in the office.
A two-year study by Great Place to Work® looked at more than 800,000 employees at Fortune 500 companies and measured productivity using survey statements that examined the degree to which people are willing to give extra to get the job done, as well as their ability to adapt quickly to changes needed for their company’s success. This study found that most managers reported stable or even increased productivity levels after employees started working from home.
With daily commutes and lengthy in-person meetings eliminated, employees in this study probably found they were able to get more done. However, the biggest impact on remote work productivity came from the same factors that influence in-person productivity: company culture and leadership.
Staying Competitive in 2022 and Beyond
It could be argued that the Great Resignation would have happened with or without COVID-19. Certainly, some of its key drivers were in place even before 2020. Either way, the trend is here to stay for a while, and simplistic or politicized “causes” won’t help employers adapt. If you want to attract and retain the best talent and preserve competitive advantage in 2022 and beyond, add these four core priorities to your arsenal and win the war for talent by going all in on developing strong leaders and a great culture, and rewarding your valued employees.