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Heads I win, tails you lose! – What does the Great Resignation mean to the workforce market & the economy?
It’s been more than two years since Anthony Klotz, a psychologist and professor of business administration at Texas A&M University, coined the now-famous phrase when he said “the great resignation is coming. The words like Goodbye… Farewell… Sayonara…Adieu…are filling the bosses’ ears lately.
The ‘Great Resignation’ is an unending talent surge, what experts call the ‘talent boom’, that has broken the demand-supply equilibrium, compelling organizations to focus on both talent acquisition and retention strategies at the same time. The primary cause of the Great Resignation is likely intense competition for workers as reflected in a high number of job vacancies and a lower unemployment rate. Sectors hit hardest by the COVID-19 pandemic, such as accommodations and health care, have tended to have the most job openings.
It’s not uncommon to see a surge in quitting jobs when (i) the workforce market is tight and (ii) there are a plethora of vacancies. Only in the current situation that the latter Is absent. The pandemic-era trend known as the “Great Resignation” is still affecting businesses the world over, as workers enjoy the perks of record-high demand for their talented labor. However, economic headwinds mean those benefits may not last much longer.
In a recent working paper by the UC Berkeley economist ‘Ulrike Malmendier’, there has been a view that there’s something existential behind the Great Resignation: The pandemic and the rise of remote work have changed the way we view our lives and the world. The basic picture that experiences shape choices is rarely radical. And ‘Malmendier’ isn’t alone among scholars in suggesting that workforce hunting during the pandemic helps deliberate the surge in quitting. Psychologist Anthony Klotz credits ‘pandemic epiphanies’ with motivating many workers to depart their jobs for greener pastures. But the ‘experience effects’, as Malmendier puts, remain remarkably disregarded in economics, which tends to be more focused on the incentives that influence our behavior.
To explore exactly who has been driving this recent shift, an in-depth study was conducted consisting of more than 10 million employee records from more than 5,000 companies. This global dataset included employees from a wide variety of industries, functions, and levels of experience. It revealed two key trends.
● Resignation rates are highest among mid-career and below-board level employees.
● Resignations are highest in the tech and healthcare industries.
Resignation rates are highest in mid-career and below-board level employees.
Employees between 30 and 45 years old have had the greatest increase in resignation rates, with an average increase of more than 20% between 2020 and 2021. While turnover is typically highest among younger employees, the study found that over the last year, resignations decreased for workers in the 20 to 25 age range, likely due to a combination of their greater financial uncertainty and reduced demand for entry-level workers. Interestingly, resignation rates also fell for those in the 60 to 70 age group, while employees in the 25 to 30 and 45+ age groups experienced slightly higher resignation rates than in 2020.
There are a few factors that can help to explain why the increase in resignations has been largely driven by these mid-level employees. First, the shift to remote work may have led employers to feel that hiring people with little experience would be riskier than usual since new employees won’t have the benefit of in-person training and guidance. This would create greater demand for mid-career employees, thus giving them greater leverage in securing new positions.
It’s also possible that many of these mid-level employees may have delayed transitioning out of their roles due to the uncertainty caused by the pandemic, meaning that the boost we’ve seen over the last several months could be the result of more than a year’s worth of pent-up resignations.
And of course, not to mention the psychological factors: many of these workers may have simply reached a breaking point after months and months of high workloads, hiring freezes, and other pressures, causing them to rethink their work and life goals.
Resignations are highest in the tech and healthcare industries.
There have been dramatic differences in turnover rates between companies in different industries. While resignations decreased slightly in industries such as manufacturing and finance, 3.6% more health care employees quit their jobs than in the previous year, and in tech, resignations increased by 4.5%.
In general, resignation rates were higher among employees who worked in fields that experienced an extreme increase in demand due to the pandemic, likely leading to increased workloads and burnout.
Surprisinglthe y, the monthly resignations in 2021 were well above the recent average of 3 million monthly. These trends highlight the importance of taking a data-driven approach to determining not just how many people are quitting, but who exactly has the highest turnover risk, why people are leaving, and what can be done to prevent it.
The details will look different in every organization, but three steps can help any employer more effectively leverage data to improve employee retention.
● Analyze the problem.
● Understand the causes.
● Develop attractive retention programs.
Analyze the problem.
The underlying causes of turnover at every organization, it’s critical to quantify both the scope of the problem and its impact. As simple as it seems it can be understood by knowing the retention rate using the following
Number of Separations per Year ÷ Average Total Number of Employees = Turnover Rate
By gaining visibility around exactly where the retention problem is coming from. Next, is to determine the impact of resignations on key business metrics. When certain employees leave an organization, remaining teams often find themselves without key skill sets or resources, negatively impacting everything from the quality of work and time-to-completion to bottom-line revenue. It’s vital to track how increased turnover correlates with changes in other relevant metrics to get a full picture of the costs of resignations.
Understand the causes
Once the scope of the retention problem is identified, it’s essential to conduct a detailed data analysis to determine what’s causing the staff to leave.
Which factors could be driving higher resignation rates?
Exploring factors such as compensation, the time between promotions, organizational politics, size of pay increases, tenure & bonds, performance, and training opportunities can help to identify trends and blind spots within the organization.
Also by classifying employees by categories such as location, function, and other demographics to better understand how work experiences and retention rates differ across distinct employee populations. This can help identify not just which employees have the highest risk of resigning, but also which of these employees can likely be retained with targeted interventions.
Develop retention programs.
Now that the root causes of the employee fallout have been identified, creating highly customised programs aimed at correcting the specific issues that a workplace struggles with most can assist not in just retaining employees but as well make the workplace a better place to be in.
If found that time between promotions correlates strongly with high resignation rates, it may be time to rethink the advancement policies. Importantly, the lack of effective data infrastructure hampers the ability to make data-driven decisions. One higher-level intervention may be necessary before one can begin any sort of targeted campaign to invest in an organised, user-friendly system for tracking and analysing the metrics that will inform the retention efforts.
Adopting a truly data-driven retention strategy isn’t easy, but it’s worth the effort to do it right, especially in the current market scenarios. With greater visibility into both how serious the turnover problem is and the root causes that drive it, it will be possible to attract top talent, reduce turnover costs, and ultimately build a more engaged and effective workforce.
Globally, digitization of the hiring process to accommodate remote hiring and staffing, flexible policies, hybrid work environments, additional attractive pay perks, and strong benefits will all play a crucial role in any company seeking top talent. Adapting recruit-and-retain practices to the evolving labour market tends to provide the best insulation from the current labour shortage headwinds.
The great resignation is a passing phase, but the learnings out of it is a phenomenon that is to stay, leveraging organizations to be stronger, uplift the morale and ensure the targets are set right in configuring the apt team at the right time.
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