The ‘big resignation’ is a trend that started before the pandemic – and bosses need to get used to
Finding great employees has always been a challenge, but these days it’s more difficult than ever. And it’s unlikely to get any better anytime soon.
The so-called quit rate – the share of workers who voluntarily quit their jobs – hit a new high of 3% in September 2021, according to the latest data available from the Bureau of Labor and Statistics. The rate was highest in the leisure and hospitality sector, where 6.4% of workers left their jobs in September. A total of 20.2 million workers left their employers from May to September.
Businesses are feeling the effects. In August 2021, a poll found that 73% of 380 employers in North America were struggling to attract employees, three times the proportion saying so the year before. And 70% expect this difficulty to persist until 2022.
Observers have blamed a wide variety of factors for all the turnover, from fear of contracting COVID-19 by mixing with co-workers to paltry wages and benefits offered.
As a professor of human resources management, I examine how jobs and the work environment have changed over time and the impact this has on organizations and communities. While the current quitting behavior may seem like a new trend, the data shows that turnover has increased steadily over the past decade and that they may just be the normal new employers they will need to be. ‘get used to.
Seismic changes in the economy
The United States – alongside other advanced economies – has for decades moved away from a focus on productive sectors such as manufacturing to a service-based economy.
In recent years, the service sector accounted for about 86% of all jobs in the United States and 79% of all economic growth.
This change has been seismic for employers. The majority of jobs in service industries only require generalizable occupational skills, such as computer and communication skills, which are often easily transferable from one company to another. This is true across a wide range of professions, from accountants and engineers to truck drivers and customer service representatives. Therefore, in service economies, it is relatively easy for employees to move between companies and maintain their productivity.
And thanks to information technology and social media, it has never been easier for employees to discover new employment opportunities all over the world. The growing prevalence of remote working also means that in some cases employees will no longer need to physically relocate to start a new job.
Thus, the barriers and transition costs incurred by employees when changing employers have been reduced.
Bigger options and lower moving costs mean employees can be more selective and focus on choosing jobs that best suit their personal needs and wants. What people expect from work is intrinsically shaped by their cultural values and their life situation. The US labor market is expected to become much more diverse in the future in terms of gender, ethnicity, and age. Thus, employers who cannot offer more flexibility and variety in their working environment will find it difficult to attract and retain workers.
Employers now have a greater obligation than in the past to convince current and potential employees of why they should stay or join their organization. And there is no evidence to suggest that this trend will change in the future.
What businesses can do to adapt
It has been estimated that the cost to the employer of replacing a departing employee is on average 122% of that employee’s annual salary in terms of finding and training a replacement.
Thus, companies are strongly encouraged to adapt to new labor market conditions and to develop innovative approaches to keep workers happy and in their jobs.
A May 2021 survey found that 54% of employees surveyed globally would consider quitting their jobs if they didn’t have some form of flexibility about where and when to work.
With the increased priority that employees place on finding a job that matches their preferences, companies need to take a more holistic approach to the types of rewards they offer. It is also important that they tailor the types of financial, social and development incentives and opportunities they offer to the preferences of each employee. It’s not just about paying workers more. There are even examples of companies offering their employees the choice of just being paid in a cryptocurrency like bitcoin as an incentive.
While personalizing the set of rewards that each employee receives can potentially increase an organization’s administrative costs, this investment can help retain a highly engaged workforce.
Managing the new normal
Companies should also anticipate that high employee mobility will be endemic and reframe their approach to managing their workers.
One way to do this is to invest deeply in external relationships that help ensure constant access to high quality talent. This may include improving the relationships they have with educational institutions and former employees.
For example, many organizations have adopted alumni programs that specifically recruit former employees to join them.
These former employees are often less expensive to recruit, provide access to the necessary human capital, and possess both an understanding of an organization’s processes and an appreciation of the culture of the organization.
The dropout rate is likely to remain high for some time to come. The sooner employers accept and adapt, the better they will be able to deal with the new normal.
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