Talent retention in the age of the Great Resignation

March 2022  |  COVER STORY | LABOUR & EMPLOYMENT

Financier Worldwide Magazine

March 2022 Issue

The coronavirus (COVID-19) pandemic has had significant repercussions for many aspects of our working lives. While many have been forced to adapt to new ways of working, others have reframed the unique circumstances as a catalyst for change.

Globally, people have used the pandemic as the springboard to a new life, with a huge number of employees quitting their job. According to McKinsey, between April and September 2021, more than 19 million US workers resigned. In November 2021, 4.5 million people left their roles, according to the Bureau of Labor Statistics. The rate of those voluntarily quitting, as opposed to being laid off or fired, reached a record high in November 2021.

Certain industries have been more affected than others. For example, around 6.9 percent of those working in the accommodation and food services sectors quit in November, compared to only 1.7 percent in finance. The number of private sector resignations, which excludes government and farm employees, hit a new all-time high of 3.4 percent, or 4.3 million workers, according to the Bureau of Labor Statistics.

There are key differences between the Great Resignation and other downturn-and-recovery cycles, notes a recent McKinsey survey, which found that 36 percent of employees who had quit in the prior six months did so without having a new job in hand.

Chasing change

Of course, there are lots of reasons so many workers have sought new jobs, in a trend that economists have called the ‘Great Resignation’. For some people, the COVID-19 pandemic triggered a shift in priorities, spurring them to pursue a ‘dream job’, for example, or to become stay-at-home parents. Many are in search of better work opportunities, working conditions or higher pay, or even the prospects of self-employment. Some skilled and knowledge workers are quitting due to burnout. For others, the decision to resign was a response to how their employer treated them during the pandemic.

Health concerns driven by COVID-19 and exacerbated by ongoing variants have contributed significantly to the phenomenon. In the initial period of the pandemic, employees were faced with uncertainty and fear, while the harrowing events that followed led many to contemplate their options. They questioned their employer’s values and their relationship with the company.

“The Great Resignation is the apparent desire employees have to make changes to their world of work,” explains Barry Stanton, a partner at Boyes Turner. “It is being driven by the changes forced upon the workforce in general by the pandemic, which has resulted in employees working in different ways.

“The changes brought about by the pandemic have caused many to reflect upon either what they do or who they are doing it with,” he continues. “Some are changing careers, while others are changing employer because of the way in which they have been managed or treated over the past 20 or so months. It is not just a phenomenon among the young, but is evident through all tiers and categories of the workforce.”

Another issue driving the Great Resignation is the paradigm shift in which many employees have had their first taste of remote working and do not wish to return to an office environment. “Many polls have shown that the majority of employees who have been working remotely wish to continue to work remotely at least part of the time, going forward,” says Howard Levitt, a senior partner at Levitt Sheikh. “Equally, some employees have moved residence and can no longer return to their former office.

“Other employees have decided that they no longer wish to work in their former profession, or for their former employer, and government subsidies have demotivated employees to return to work as long as those subsidies continue,” he adds.

Putting people first

With the Great Resignation undoubtedly disruptive for companies, there are many lessons about talent retention and recruitment which companies should take away from the crisis. Nurturing the right culture is a good place to start.

“Employees want to be in environments that make them feel comfortable and want to be in jobs that allow them to feel like they are making a positive contribution to something bigger than themselves,” says Rena Andoh, a partner at Sheppard Mullin. “Anecdotally, a lot of people have decided to move for reasons other than just a bigger paycheque. They are looking for an inclusive company culture, and for companies that prioritise diversity, equity and inclusion as part of their core values. If these employees do not find what they are looking for, they will move again as long as the job market supports those continuing moves.”

With many employees feeling disaffected, burnt out or in need of a fresh start, talent retention in an already competitive marketplace has become even more challenging for companies. For many organisations, the Great Resignation has been so confounding because they have failed to truly understand the root cause, or causes, of why employees are leaving.

While improved financial packages are a welcome bonus, many employees are actually seeking a new, revised sense of purpose in their work, and a more fulfilling experience. Although financial compensation will always be a significant factor, a lot of the value difference goes beyond paycheques, according to Ms Andoh. “For example, law firms that are successful at retaining employees are prioritising inclusion, wellness and community service or pro bono opportunities,” she points out.

Clearly, the working world has changed. Yet many employers are also failing to meet demands for more autonomy and less rigidity. “What was once inflexible has become flexible,” notes Mr Stanton. “Given there are fewer job seekers than roles available, employers must focus on what it is that makes them special. Why should someone want to work for them? What is it that makes them more appealing? In the tech sector, people will want to be working on the latest development; in other sectors, they will want to know what the benefits to them are, what flexibility is there?

“Culture has become one of the key issues,” he adds. “Employees can now ask: ‘Why should I work for X?’ Many businesses will not be at the cutting edge, may not pay at the top of the market and will need to offer something more intangible. A culture which fosters personal growth, as opposed to just getting the work done, is more likely to be attractive to job seekers and those already in work.”

Though it is easy to highlight the deficiencies of employers, the COVID-19 pandemic has been a unique point in time, creating unforeseen issues at every turn. However, opportunities have emerged amid the chaos. By making a concerted effort to understand why employees are leaving and taking meaningful action to retain them, companies could gain an edge in the race to attract and develop talent within the post-pandemic economic landscape.

Companies seeking to use the crisis to their advantage must ask themselves several key questions, according to Mr Stanton. “They must have a clear focus on what they want to achieve, how they are going to achieve it and what their offering is going to be,” he says. “Will it be great benefits and pay? Better culture? Offering work on cutting edge technological solutions? Will they offer demonstrable and clear-cut career opportunities, with both career and personal growth? Will they provide a focus on employee wellbeing? Businesses need to focus on what it is that they want to be known for as an employer.”

Companies can take other practical steps, too. One is to conduct retention interviews with employees, asking what it would take for them to stay. Employees may say they want to be given the opportunity to grow their skills and advance, for example. According to Boston Consulting Group, 68 percent of workers around the world, both blue- and white-collar alike, are willing to retrain and learn new skills.

Another step is to reinforce the company’s values and purpose, which may encourage employees to remain. This may involve proving to employees that there is more to the organisation than the bottom line.

Employees’ physical and mental wellbeing should be a priority. Accordingly, companies should improve the mental health resources available to employees and acknowledge the personal sacrifices everyone has made during the pandemic. Employees have faced the challenge of balancing both personal priorities and work responsibilities throughout the crisis, and companies need to ensure they feel supported. For example, human resources may need to do a better job of communicating the existence of employee assistance programmes and mental health resources. Educational programmes which address mental health and financial planning may be offered to employees. Companies also need to think about connecting staff and building relationships, even with the challenges of working remotely.

Flexibility will be an important watchword in the post-pandemic era. Companies will need to asses ways of providing a more flexible work environment, in terms of location, time, job description and career path. Creative solutions might be necessary. But offering employees the opportunity to help create their own optimised work conditions may tip the scales when employees start looking elsewhere.

Companies should also seek to incentivise loyalty. For instance, they may offer employees a one-time bonus to help them pay down student loans, or issue work-from-home payments. Some organisations have also made efforts to re-hire recently departed employees on improved packages.

Another retention strategy is to outline clear career paths and develop mentorship programmes for employees. These not only make it easier for organisations to remain competitive among job seekers, but also help to build the company’s talent pipeline and advance its succession plans.

Long- or short-term issue?

Of course, there are questions around the duration of the Great Resignation. Is the present movement a knee-jerk response to prevailing circumstances, or is it the start of a substantial reorientation of working expectations and practices?

“The ripple effects of the Great Resignation will last for a generation in many skilled workforces,” believes Ms Andoh. “There is some analogy to be found in 2007-08, when law firms let many junior and mid-level associates go. Many of those associates left the industry altogether, and there are still gaps today as a result – those workers were not replaceable because of their skillsets.

“In the short term, many people will leave simply to try something different or test the waters elsewhere,” she continues. “The ‘grass is greener’ may drive many immediate moves. In the long run, those who move to the companies that cultivate and prioritise positive, inclusive working environments will be more likely to grow roots and stay.”

For others, however, the Great Resignation is likely a short-term response to a short-term situation. “Employees who might normally have been tempted to move over the last year will have stayed put,” suggests Mr Stanton. “Over the course of the various lockdowns, more employees will have become disaffected or want a change. The easing of restrictions has released the pressure valve. It might therefore be a short-term phenomenon – but equally, changing modes of work and opportunities for more hybrid working may drive further moves.

“For example, in the UK, businesses that were London centric, paying London salaries, may be more willing to employ remote employees on similar terms, which will attract recruits from a talent pool that may previously have been shut off from them, enticing people away from local businesses that may not have been affected by the ‘pull’ of London,” he adds.

Avoiding exodus

Employees will almost always hope for – if not demand – higher wages, better working conditions and greater mobility. Such requests should be considered under normal circumstances – but through the prism of the COVID-19 pandemic they take on additional weight and meaning. Moreover, the pandemic has caused a wave of anxiety and uncertainty, but the Great Resignation could be a symptom of underlying forces that are affecting labour market participation beyond COVID-19.

“The threat is not existential, but it is a real and prescient threat to business,” says Mr Stanton. “While not an effect of the Great Resignation, many hotels and restaurants have not fully reopened, not because there is not the demand, but because they are unable to fully staff their establishments.

“Those businesses impacted by an exodus of employees may find it difficult, if not impossible to recruit, given the number of positions for which employers are trying to recruit,” he continues. “If they are starved of new talent, their ability to grow and develop will be impacted, but more importantly, the ability to meet existing customer demand will also be affected. This is likely to lead to more pressure and stress being placed upon those who are left behind, further fuelling reasons for people to leave.”

To be sure, COVID-19 caught employers and employees off guard. Businesses have been required to adapt to a new normal, provide a framework for remote working and refine their culture to attract and retain talent. The persistence of such changes might be one of the prevailing legacies of the pandemic.

© Financier Worldwide

BY

Richard Summerfield