There is something noticeably alarming going on in the North American labor market. 2021 saw record streaks of employee turnover and walkouts, the highest on record according to the U.S. Bureau of Labour Statistics. This phenomenon is aptly named the ‘Great Resignation,’ and companies are keen to understand why this is happening and to avoid losing valuable talent.
Finding and hiring the best talent to ensure organizational continuity is still a focus for companies, but the focus on talent acquisition is now being shifted to retention. HR leaders and CEOs need to do everything possible to continually assess flight risks and develop immediate plans to identify and keep key employees.
Who is at risk of leaving?
Research firms like Visier Insights have used data to understand the recent trends and help companies assess their potential risk for turnover. It turns out that “tenured, experienced
professionals, and more women than men show a dramatic increase in resignations
compared to the pandemic-ridden year 2020.” Couple that with the findings from Gallup showing that 48% of the working population in the United States is actively job searching, and there is no wonder companies are worried about the effects of a turnover tsunami.
What are the real costs of turnover?
Rising resignations are a concern on multiple fronts, in particular the direct costs to companies. According to Gallup, the cost of replacing an employee is very high – up to two times their salary or more, depending on the position. And the costs don’t stop there. There are also the indirect costs of lost productivity and the effects of increased workloads and having to hire third parties to complete work. At the same time, there are administrative processing costs. There are also costs associated with the impact on motivation and culture from losing team members and the intangible costs of losing the institutional knowledge of key long-term staff when they exit.
Should companies panic?
Regular employee turnover and attrition are part of organizational lifecycles. Companies expect a certain number of routine exits and plan accordingly. What is concerning about these recent trends and leaving HR and leaders scrambling to find solutions is how to avoid unnecessary or avoidable turnover. So yes, companies should be worried and take the necessary steps to understand the underlying currents in their workforce.
Why are employees leaving?
Typically, a large number of employees cycling in and out of jobs is a signal of a healthy economy. But since 2020, when COVID-19 changed the landscape of life and work, companies must now look more closely at why employees are leaving. The Society of Human Resources Management (SHRM) summarized its findings nicely by saying that employees are moving on from their existing companies and jobs due to pay/recognition, work-life balance, and workplace culture.
Overall, SHRM and Visier Insights list the following as key reasons why employees are resigning:
- Recognition: The desire for better compensation and recognition for work.
- Burnout: Being asked to take on more work or work faster and a lack of work-life balance, especially among employees in a leadership position.
- Workplace Culture: Overall employee experiences and issues that affect engagement and satisfaction.
- Desire to Learn: Opportunities to learn new skillsand for more training opportunities.
Added to that is the rising prevalence of remote work, where employees are no longer restricted to applying for jobs in their direct geographical area or physically going into an office.
In short, employees want to feel recognized and appropriately rewarded. They want to know their company cares about and acts to better their personal and professional well-being. They want to align themselves with teams and companies who share their values, and the rise in remote work means they have more options for alternative employment. Depending on an employee’s immediate pain points or options, any of these drivers can send your best talent straight for the door.
What can companies and HR do to avoid unnecessary turnover?
Companies cannot address all aspects of turnover by next week; however, they can take specific immediate actions to get the ball rolling. But companies must understand why employees in their particular sector and organization are staying and leaving and make a plan tailored to that information.
Look for the outliers in performance, engagement, and potential data:
Instead of relying on average scores and ratings from performance reviews, engagement surveys, or pulse surveys, companies need to look at the outliers in their data. These folks will be the ones of interest and will highlight blind spots. For years, companies have looked at ‘good’ satisfaction rates and given themselves a pat on the back. But now, and with many tenured employees eyeing options, companies need to get very granular and assess the performance, potential, and engagement of specific employees and groups to identify the most valuable team members, understand their risk of leaving, and actively avoid it where possible.
Having a centralized system for job-skill reviews and performance measurements, pulse & engagement survey data, and career assessments can help companies track the real-time measures and health of talent. This information will allow them to identify high-potential (valuable) staff more easily and work to actively retain them.
Check-in with staff immediately & regularly:
It seems obvious that the easiest way to gauge if an employee is at risk of leaving is to ‘ask,’ but many managers and companies still struggle to make the time and forge the channels for effective employee conversations. Some managers are not equipped to conduct effective discussions or have the mandated time to do so, and many companies still struggle to launch and assess vital engagement and satisfaction surveys. In addition, companies who have done away with formal performance and skills ratings are now finding it challenging to quickly identify their top talent and plan for skill and succession gaps.
HR should use this time to collect as much employee data as possible from surveys, performance reviews, and personal one-on-one interactions with staff. These touchpoints can reveal insights that will help leaders understand what is working, what isn’t, and what can be changed to avoid losing employees unnecessarily. If employees are looking for more training and skills, be prepared to offer it. If employees find it challenging to manage their workloads, consider restructuring or investing in resources. If employees are demanding flexibility, consider unwinding legacy policies to see what can be accommodated, especially when it comes to remote work. If employees find they are not adequately compensated for their work, revisit your compensation structure. Your competitors are likely doing all of this.
Look at culture & rewards:
Companies cannot typically do anything about employees who have already left; however, they can ensure they don’t repeat any of the same mistakes with new employees. They can also work to ensure existing employees see the changes they are asking for. For example, revisit compensation and rewards structures and be prepared to align them with the market and what employees deserve. Recall, it costs double an employee’s salary to replace them, and it is much easier to keep an existing employee than it is to find a new one. Next, listen to what employees are saying about perceived culture and teams and empower managers to actively find solutions.
In terms of physical policies that can affect culture, COVID-19 forced many employees to get situated working from home, only to be called back with sometimes little transition or reason by companies. With many companies accepting hybrid or completely remote work options, the employees who gained an appreciation for working from home may consider a rigid in-office policy a reason to look for work elsewhere. Determine the perception of workspace and place and revisit your policies addressing underlying concerns that may render rigid policies unnecessary.
Most employees do not expect a perfect atmosphere but want their fundamental fiscal, physical, mental, and professional needs met. COVID-19 pushed companies and leaders to pivot and make unprecedented decisions about their teams and policies. The ones who acted with a purely business mindset without regard for employee well-being and satisfaction will have more work to do to remedy the cultural damages done, but it isn’t impossible. Culture cannot be transformed overnight, but it starts somewhere and usually acknowledges that it should be a priority.
Employees will continue to leave their jobs searching for greener pastures, and companies will continue to battle to attract and retain top talent, but COVID-19 has changed the nature of employee retention altogether. Companies that can easily identify their top talent and invest in actively developing and retaining them will see the greatest results. Also, HR teams who continue to push for effective performance, engagement, and development practices will help ensure this data is woven into corporate decision-making moving forward.