The Great Resignation: How Employers Can Hold on to Talent
February 9, 2022
The start of the year usually gives everyone a chance to take stock of their lives and plan changes. And in 2022, a lot of people are thinking about changing their employer or job. Whether it’s remote work expanding workers’ employment options, the chance to increase salary or, in many cases, employee burnout, the Great Resignation continues with employees leaving their jobs in record numbers.
“The Great Resignation is quite real,” says Stefan Gaertner, partner at Aon’s Human Capital Solutions. “It’s not just hourly employees or retirees leaving the labor markets; it’s also professionals and senior leaders leaving jobs.”
The numbers speak to the trend. The U.S. Department of Labor reported a record 4.5 million workers voluntarily quit their jobs in November. That broke a record set just a month before, when 4.2 million U.S. workers headed for the exit in October.
Not all of those quitting their jobs are leaving the workforce. “Part of the story is the mobility of talent in the current situation,” says Mina Morris, partner at Aon’s Human Capital Solutions. “A lot of people have used the opportunity to move from being a front-line worker to get skills and find a different job.”
Employers are recognizing that pay alone may not be enough to retain workers in the current environment. To succeed, employers need to focus on improving workplace culture, understanding workers’ priorities and helping managers lead remote or hybrid teams.
The COVID-19 pandemic has changed not only the way many employees work, but where their priorities fall. At the same time, the opportunity to work remotely broadens the field for many workers as they consider potential employers.
Employee survey results shows that many workers care more about an employer helping them save and build wealth than pay or bonuses. Data from surveys conducted during the pandemic also highlight the high value workers place on health benefits and time off — and they want more of it.
“Companies have to think about how employee attitudes are shifting,” says Gaertner. “We need long-term strategies to address this issue.”
The Importance of Culture and Leadership
The Great Resignation is bringing issues of culture and leadership to the surface at many organizations, says Morris. Among other effects, remote working has raised questions about how to lead in virtual environments.
“We’re hearing from a lot of clients about a big gap between staff and employees and leaders,” Morris says. “Some managers don’t trust remote employees, and those employees say, ‘Why am I putting up with this? I’ll change my job. I’ll change my environment.’ It’s really put the capabilities of managers to manage in this environment under the microscope,” says Morris.
“Many managers are simply ill-equipped to manage in this kind of environment,” says Gaertner. “It requires a different mindset when it comes to managing.”
In response, organizations need to reskill leaders around core capabilities, says Morris. “You need to think about how to coach and motivate someone,” Morris says. “That’s a difficult skill anyway, but virtually is even more difficult.”
Businesses also need to increase their focus on the physical, emotional and financial aspects of employee wellbeing. “How can we make sure, if we are working in this environment for the foreseeable future, that this is a sustainable way of working — a healthy way of working,” says Morris.
Understanding culture and what makes an organization unique, then communicating those characteristics to employees, is an essential element of what gives an employer the edge over others.
Hiring in the Right Regions
Another strategy for employers able to hire remote workers: hire in regions where employee turnover levels are lower.
Gaertner says an analysis of one client’s employee turnover data led to a recommendation to hire outside of the tightest labor markets. “One way to reduce turnover is to start hiring in places where turnover is just not that high,” he says.
The Matter of Money
While workers’ decisions to leave employers aren’t all about pay, money can be a factor, particularly in terms of a “new hire bonus” — that uplift in salary employees usually enjoy when they switch jobs and employers.
“It’s not all about the money. But we’ve noticed for some time that incumbent employees are being punished in their paycheck for being incumbent employees,” says Gaertner. “If you’re an incumbent employee, you make 10 percent to 15 percent less than new hires.”
In fact, that new hire bonus has been growing since the Great Recession, according to Gaertner.
With the combination of the current labor environment and inflation, employers should rethink their budgets for merit raises, says Gaertner. While 3 percent has been a standard merit budget for decades, in the current climate employers should probably budget 6 percent or more, he says.
“If you want to retain people you have to make it clear to them that you really value them,” Gaertner says.
The Rise of Human Resources
One good thing to come out of the Great Resignation will be an elevation of the human resources profession. Gaertner says that while there’s been talk for years of HR becoming more strategic, the current labor market might force such a change to finally happen.
“Today, ‘strategic’ means being forward-looking, understanding your culture and determining how to equip your managers to represent your culture in this new environment,” he says.
The current labor climate isn’t likely to change soon, so HR professionals will need to address today’s challenges while also helping their organizations position themselves for the future.
“It’s critical that leaders manage both the immediate fallout and the strategy,” says Gaertner.
Riding Out the Great Resignation
Changes brought by the pandemic include significant transformations in both the workplace and the workforce. Both appear likely to last for some time, meaning the Great Resignation might not be ending soon.
Employers must realistically assess the current labor market and take a strategic approach to successfully retaining and attracting talent in a challenging environment. Those that succeed in crafting effective employer value propositions will position themselves well to thrive.