Great Resignation, Great Reshuffling – many labels are being applied to the latest labor challenge – the growing rate of talented professionals who are resigning their positions. Numerous surveys reflect the root causes and severity of the problem:
- Robert Half’s biannual Job Optimism Survey reports that 41% of workers plan to search for a new job in the first half of the New Year. Six months ago, results estimated a 32% voluntary attrition rate. Those most likely to change jobs include Gen Z professionals (52%), employees with two to four years tenure in their current position (49%) and technology workers (47%). Survey results also indicated that more than one quarter of those surveyed would resign their current position without first securing a new one.
- In a joint study conducted by Fiverr Business and Hibob, more than half of the 1,000 participating HR professionals and hiring managers said that many workers leaving their companies are choosing to work for themselves as freelancers, founders or small business owners.
- A study conducted by the Society for Human Resource Management (SHRM) showed that among workers who remained at their jobs, 52% took on more work and responsibilities and 55% wondered whether they were underpaid.
- More than half of those who were actively job searching cited “better compensation” as their top reason for doing so.
There appears to be a disconnect between employers and workers regarding the causes for high levels of voluntary attrition. In the table below, research conducted by Fisher Philips reflects employer perspectives on worker resignations. In contrast, the right-hand column indicates reasons cited by workers in research conducted by Robert Half.
|Employer Perspectives on Resignations||Resignation Reasons Cited by Workers|
|Compensation (53%)||Secure a salary boost (54%)|
|Stress (36%)||Unclear path for advancement (41%)|
|Family care responsibilities (35%)||Greater benefits (38%)|
|Better work/life balance (33%)||Ability to work remotely permanently (34%)|
|Greater benefits (29%)||Ineffective managers (34%); lack of support for professional goals|
|Vaccine mandate (12%)|
To secure and retain needed talent, companies are employing several strategies:
- Compensation. Pay increases and bonuses have been widely used as an incentive tool. A WorldatWork survey of nearly 1,000 respondents showed that four out of five organizations offered sign-on bonuses to candidates within the past 12 months, while others used referral, spot and retention bonuses. In struggling industries like retail, hourly wages in excess of $15 became widespread during the pandemic, while competitors offered benefits covering child care assistance, college tuition payments and other areas. HR consulting firm Mercer estimates that employers’ compensation budgets will rise 3.3% for merit budgets and 3.5% for total budgets in 2022, a slight increase from the increases that went into effect in 2021. The increases do not rise to the level of inflation, however, which was at 6.2% for the year at the end of October. Mercer research indicates that one-time cash payout incentives will significantly increase, with 25% of employers planning a 10% increase in their overall bonus pool.
- Ability to work remotely. A new World Economic Forum report says 84% of employers plan to expand remote working. The Fisher Phillips Flash Survey indicates that 30% have already done so, while 35% have increased flexibility in terms of hours, schedule, dress code and more.
- Reduce dependence on employees. In the same World Economic Forum survey, 43% of responding leaders plan to reduce the workforce through increased technology investments and another 41% say they’ll use contract workers for task-specialized work through 2025.
- Improved candidate and worker experience. The Fisher Phillips survey also polled respondents on quality of experience. Three out of ten or 29% are improving HR processes to speed up the recruiting and hiring process, one quarter are providing mental health support and/or EAP offerings, and 23% are enhancing workplace safety initiatives.
An interesting point of note in the Fisher Phillips survey is that only 21% of employers indicated that they are currently surveying or auditing employee satisfaction. In our experience, the absence of direct input from workers results in significant financial and personnel effort that yields limited results. As we enter the new year, many companies offer year-end bonuses and raises. Knowing this, employees often delay their job source until they receive the new compensation, and then use it as a bargaining chip with potential future employers.
So, what does encourage worker retention? Experience gleaned from working with hiring managers and employees for more than two decades indicates that it is the relationship established with one’s managers. While equitable financial compensation is essential, the increased compensation packages being offered today will have limited impact on retaining talent.
The Predictive Index survey of Employee Management reinforces this conclusion. It found that two-thirds of the 2,000 respondents pointed to “bad managers” as the number one motivation for considering other employment. They defined “bad manager” as one who is weak in effective communication, building team morale, or asking for feedback. The one-third of respondents who said “My manager seems burned out at work” also indicated the highest likelihood of changing jobs in the next twelve months.
- The best deterrent to resignation is better management. Regularly conduct satisfaction surveys and feedback sessions, soliciting and acting on employee suggestions for enhancing the worker experience. Provide leadership training to managers – building their communication and administrative skills – and include an assessment of their managerial effectiveness in each performance review.
- Address the needs of your entire workforce. Temporary personnel are a critical component of your labor force, with contingent talent comprising as much as 40%. Workforce planning should be holistic, determining needed skills instead of simply focusing on roles. For each skill, assess the benefits of developing/maintaining in-house vs. utilizing external talent for the required task or time period. However, be sure to avoid legal risks associated with regulations for the management and administration of external workers by considering outsourcing that responsibility to a qualified third party who will work in partnership with your HR team.
- Use compensation as a tool, but not the only tool. Base compensation packages on actual market rates, recognizing that you are competing for talent across industries that need similar skills. Develop compensation schemes that include long-term incentives that take time to vest, such as 401(k) matches. When utilizing contingent talent, encourage the payroll provider or staffing agency to offer competitive 401(k) plans and benefits.
- Workplace flexibility continues to be a “must have” for most workers. For many, that equates to the option to work remotely. While remote work was a necessity in 2020, during the past year many companies actually increased the number of positions to be filled with remote workers. While a hybrid model in which the worker spends some time each week in an office is becoming commonplace, research conducted by LinkedIn last summer indicates that hybrid work was found to be the “most emotionally exhausting” arrangement. Companies must assess each position to determine the most effective option, then institute policies and procedures that enable remote work while maintaining work-life balance.
- Make strides to build a diverse and inclusive workforce. Numerous studies have shown the benefits of a diverse, equitable workplace for business performance, innovation, customer loyalty, and employee trust. In its research, LinkedIn found that 78% of job seekers on its site expect to find DEI information on a company’s LinkedIn page.
- However, only one-third of companies communicate DEI goals and/or progress on an annual basis. As a result, companies viewed as unwilling to “walk the talk” experience less success when achieving diversity goals and removes access to large populations of talented professionals.
- Although family care responsibilities are a significant factor contributing to the reduction of women in the workforce, few companies are offering greater support for family care. In addition, while most companies are impacted by workers leaving for retirement, few have formal programs for retaining or re-engaging workers. Accommodations may include flexible work hours, job sharing, a hybrid work environment, flex days, and/or subsidized access to pre-screened back-up childcare providers.
To learn more about how we help clients develop and implement effective strategies for sourcing and retaining talent, read the other articles in this issue of Working Knowledge and reach out to us for a “no obligation” assessment of ways in which we can help you.