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The Good and the Bad of the Great Resignation

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By

Jeff Phipps,

Managing Director,

ADP.

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A fluid labour market

The recent pandemic has caused people to reassess their lives and we are seeing people move jobs in record numbers. In the US, 4.3 million workers (2.9% of the national workforce) left their jobs in August 2021, the highest number on record. This side of the pond, the number of open jobs surpassed 1 million for the first time ever in the same month.

This fluid labour market has been dubbed the great resignation. But who is it that are resigning? Interestingly, whilst staff turnover rates are usually highest among younger employees, during the pandemic resignations decreased for workers in the 20 to 25 age range. The great resignation is, rather, being driven by mid-career employees in the 30 to 45 age range, with an increase of more than 20% year on year.

Performance management problems

So, what can be done to limit the bleeding? Many businesses, especially those exceeding Dunbar’s number of 150, have sought to make performance management part of their approach to retention. They strive to build a clear view of who their most talented people are, and then reward and promote them accordingly. At the same time, they look to “manage out” poor performers. However, this approach is not infallible as managers often struggle to be objective. This means good people often fall through the net, and vice versa.

The other problem with this approach is that the focus tends to be on the individual, not the team. It is wrong to assume that the best performing teams always have the best managers. Often the whole can be far greater than the component parts. Top teams are made by not just improving leadership but by understanding how to blend different strengths together to get the best outcomes for the business. This shouldn’t be sniffed at. By building teams that find their job rewarding, employee churn markedly decreases. Staff innately love to be part of a winning team that has clear purpose.

Know your star performers

For many organisations, if a specific group were to quit, the viability of the entire company would be in doubt. In sports teams, this can be an individual and is often open to conjecture. Imagine Liverpool without Mo Salah, or the Tampa Bay Buccaneers without Tom Brady. It is important that organisations don’t become overly dependent on a small number of people. It is also important, though, that leaders not only know who those people are but have plans in place should the worst happen. This will lead to greater resilience in the long run.

A question of balance

Of course, while employee retention brings with it obvious economic benefits, no company survived for long by standing still. Sometimes, people resigning can be the catalyst to bringing in fresh blood and ideas. It is a question of balance. What the right level of employee turnover is to maintain culture while avoiding complacency differs from company to company. Seasonal businesses, for example, can withstand far higher levels of turnover as they will likely have swift training and recruitment processes in place. However, for many businesses it is best to aim to get the number between 8% and 12% per annum. Below that and you can become stale. Above it and you start to see engagement and client experience suffer as the knowledgebase is lost.

Leaders must be coaches and remind teams that stagnation is like putting all your savings into an account that bears no interest. Over time, the value of the business will go down and that only ever ends badly. A good leader will not allow the situation to reach a point where drastic action is required.

If drastic action is required, though, there is a moral obligation for employees to handle redundancies and firings sensitively. Heavy-handed firings can not only have negative implications for a company’s culture but can cause untold damage to reputation. Only recently, Better.com had to deal with a huge media fall out after its CEO insensitively laid off 900 workers during a Zoom video call just three weeks before Christmas.

Time to readdress the balance

The great resignation is not a myth. It is important that organisations do all they can to retain their most talented individuals and teams. The biggest IP in any business is the staff. Businesses should strive in 2022 to create a learning culture where staff are incentivised to expand and improve.

Having said that, the great resignation is not all bad. One benefit is that it is enabling organisations to swiftly readdress the diversity and gender balance. And not before time. My hope is that we see more organisations adopt diversity and inclusion programs during 2022. Not just because these programs are morally right, but because more diverse teams lead to better teams.