October 7, 2022
I became aware of the “Great Resignation” in 2021, as a COVID-related phenomenon that may or may not continue beyond the (eventual) end of the pandemic. In chats with entrepreneurs, we discussed anecdotal reports of higher-than-usual bouts of resignations, and of tough challenges in recruiting. That was then, and I had the feeling things had gotten better and easier through 2022.
Apparently, well, not so much. I heard in September about a medical clinic that lost 10% of their employees in one week, and a legal practice still searching for the replacement of a professional who left 6 months ago. With their current staff, this practice is now fully booked for the next four months; they can’t take on any new projects until then, even for their best clients. After looking and asking around, I realized the situation isn’t abating. There doesn’t seem to be any signs of improvement in sight. I then started a quick survey on LinkedIn and, sure enough, about two thirds of respondents said that yes, the Great Resignation is still a thing today.
Defining the Great Resignation
What is this Great Resignation anyway? According to Wikipedia, it’s an ongoing economic trend in which employees have voluntarily resigned en masse from their jobs, beginning early 2021 in the wake of the COVID-19 pandemic. The term was coined by Dr. Anthony Klotz, a professor of management at University College London’s School of Management. Dr. Klotz saw a backlog of resignations building up in 2020, when a lot of people who might have otherwise left their jobs decided to stay because of the pandemic (see 1 on the chart below). As the economy recovered, he predicted that some of those people would enact their plans to leave, creating a sudden jump in voluntary departures (see 2 below). Interestingly, monthly quits had been trending upward for 10 years prior to the pandemic (see 3 below), and the 2022 numbers from the United States Bureau of Labor Statistics look pretty much aligned with that trend (4 below).
Looking at this chart, one cannot doubt there are long-term forces at play. These forces may or may not have been exacerbated by COVID, but for sure they won’t magically subside any time soon.
The Costs of Employees Leaving a Company
Before delving into what these forces are, I’d like to put in perspective what the numbers mean for the economy at large as well as for businesses and organizations. Quit rates trending towards 3% may not seem like that much, but keep in mind these are monthly numbers. Over 12 months, a company that fits this trend can expect to lose more than a third of their staff every year. Now consider that many studies are evaluating the cost of replacing an employee at somewhere between half and twice that employee’s annual salary. And that’s only accounting for the recruiting fees, the training costs, and paying the new hire until they get up to speed in productivity. I suspect the actual impact is much higher when you tabulate the opportunity cost caused by not being able to service customers during the hiring and ramping-up period. Looking at the United States economy as a whole, Worqdrive recently published a report estimating the total cost of people quitting their jobs in 2021 at more than two trillion dollars. That’s two followed by… twelve zeroes!
Common Causes of Resignations
What, then, are the causes of this troubling trend?
- Wages have stagnated for a long time, and they’re still not catching up with the increasing inflation. A study in Australia found that workers who switched jobs saw their salary jump by up to 10%.
- Many jobs offer no or limited advancement opportunities. Not everyone is interested in the rat race, but most need a sense of direction and progress in their career.
- A hostile work environment is a huge drain on the spirit of anyone subjected to it. A toxic corporate culture is by far the strongest predictor for a high rate of turnover. Studies have found its effect to be ten times greater than compensation alone.
- Inflexible remote work policies are increasingly difficult to justify. People now expect and demand options, and they’re ready to leave when none are provided.
- Schedule flexibility and achieving some level of work-life balance is also becoming one of the primary reasons to consider leaving. This is a double whammy when people leaving and delays in replacing them lead organizations to put more pressure – mandatory overtime, canceled vacations, inflexible scheduling, increased workload – on those who stayed, leading to even more resignations. It’s a vicious circle all too familiar to many if not all healthcare facilities across the world. Even in China, a lifestyle and social protest movement called “tang ping” (lying flat) began in April 2021 as a rejection of societal pressures to overwork, such as in the 996 working hour system (9 a.m. to 9 p.m., 6 days a week).
- Heightened levels of burnout are seen across the economy, leading to the creation of yet another new term: turnover brought by burnout now has its own label, it’s burnover.
- Older workers are withdrawing from the labor force, a phenomenon known as The Great Retiring. The Baby Boomers – the generation born between 1946 and 1964 – are heading into retirement in droves. Changes in the nature of work and the fact that boomers live longer and healthier may have stayed the impact on the workforce for a while, but fallout from COVID certainly reversed that. One in four workers in the United States is a boomer, and 10,000 of them are reaching the age of retirement… every day!
- There’s also an earth-shattering shift in identity that’s going on. The pandemic seems to have triggered an epiphany of sort, a realization by many that the path they were previously on wasn’t for them after all. This led to a slew of new and invented terms starting (always!) by Great. Here’s a set collected by Forbes: the Great Reprioritization, the Great Reshuffle, the Great Recognition, the Great Re-Invention, the Great Realization, the Great Questioning, the Great Change-Up, the Great Contemplation, the Great Awakening, the Great Re-Evaluation. As they mention in their article, naming a trend reflects a desire for meaning and patterns in a changing and unsettling world.
Another recent incident brought home to me the striking shift of power in the labor market. An acquaintance of mine asked for a reference call concerning a position she was interviewing for. Since I had previously dealt with one of the senior managers of that organization, I assumed she wanted me to speak to that individual on her behalf. Instead, she wanted to know if I would recommend them to her. What an interesting twist, a complete reversal of the tables!
Ways to Reduce or Avoid Resignations
Reduce the toxicity of the work environment. Toxicity is often the primary trigger for resignations, especially the contagious kind where one person leaving encourages others to follow suit.
I once had a toxic leader in my organization. Although he was a good individual contributor, keeping him on board was immensely damaging to the team, and we ended up losing good people because of this individual’s abrasive behavior. Thinking back, I should have acted on my instincts and let him go at the first hint of his negative impact.
Other elements contributing to toxic cultures include making workers feel disrespected, and a failure to promote diversity, equity, and inclusion. Thankfully, there is a growing awareness of the importance of these issues, and tools are coming out to help address them.
Needless to say, adjusting pay and benefits has to play a role in any plan to stave off resignations. It may not be the biggest driver to the trend, but there’s no denying that employees’ share of revenue has been going down and that their salaries have not kept up with inflation.
Benefits like health insurance, paid vacation, and mental health support are now increasingly – and rightly – expected by the workforce.
A 2021 survey by EY found that nine in ten employees want “where” and “when” they work to be flexible. “Where” of course primarily means working remotely versus in the office, an expectation that can no longer be denied. The “when” part is also important. It can mean condensed hours (putting in the same hours in fewer days), flexible hours (not just stop and start time, but also extended breaks to, for example, take care of the kids, go on a long walk or occasionally indulge in a little nap), or reduced hours.
Many are familiar with the concept of exit interviews, a process by which enlightened employers gather feedback and insights from people who just resigned, in a bid to understand what happened, trying to avoid losing other people for the same, hopefully preventable reasons, and globally just to get better at preventing unwanted departures. But what about conducting stay interviews? The idea here is to talk to employees about whether they’re considering leaving and ask them what the company could do to prevent that from happening. Although it can be difficult to have employees candidly talk about this process, it can certainly make them feel more understood and committed.
The pool of available workers won’t catch up any time soon to meet the needs of employers. With that in mind, we must find ways to increase the productivity of the people we’re able to attract and retain. Technology will, of course, play a big role in that, with artificial intelligence, robots and robotic process automation quickly becoming cheaper and more capable of handling routine as well as not so routine tasks. While technology can be a powerful tool, it will do no good without innovative thinking and novel ideas. What companies really need is to develop a true culture of innovation. This transformational shift requires humbler managers who know they won’t be able to come up with all the novel, original ideas their organization needs to compete and succeed. I’m referring here to a new breed of managers who welcome inputs from others, are intent on mobilizing employees and are ready to tap their collective wisdom. This will make things better for everyone while improving performance.
Speaking of the existing pool of available workers, there are ways of broadening it. This includes looking at people coming from other industries to, after proper training and adaptation, fill roles for which they wouldn’t typically be considered. Think of the countless restaurant employees who have embraced new careers, enjoying higher pay, improved conditions and better hours. This also includes people from marginalized and discriminated groups. And, last but not least, immigrants. Studies after studies show they’re crucially contributing to the economic growth and overall success of the communities who embrace them.
Whether they stay or leave, it’s no use blaming employees for an organization’s problems. We should stop seeing workers as assets that should be fixed or replaced when they “malfunction”. People are, well, people, so best make them partners and active participants in the betterment of their work environment. Holding them accountable, yes, but treating them like the adult, intelligent and skilled people that they are. This will go a long way in keeping them engaged, motivated, and committed.
A New Hope for the Future of Work
Going back to Dr. Klotz (the “inventor” of the Great Resignation), he said during a Washington Post interview that he saw “a lot of firms talking to their employees, having one-on-one conversations, asking what employees want going forward, and then thinking about their organizational culture and their organizational constraints”.
Changing culture is hard. It takes courage, but also time, humility, and dedication. Trust cannot be won overnight; it has to be earned and nurtured through words and deeds. Here are a few pointers on what can help you:
- Clearly communicate your values. Repeat them often.
- Ensure everyone is on board and understand what’s at stake. Perception gaps between managers and field workers is a sure way of preventing effective communications, and of derailing any attempt at making things better. How could a team come together on an issue when people don’t agree on what’s really going on?
- Build trust. One-on-ones are great, but what if people fear retaliation or a detrimental impact on their career/employment? Trust can be established by providing safe and confidential means of providing feedback, but also by making sure that real, effective action will follow. Few things spur disappointment faster than unmet expectations and unfulfilled promises.
- Give people real power to participate fully in enacting changes. Given the chance, they’ll surprise you (probably themselves too!), and the results will be clear for everyone to see.
- Recognize efforts and celebrate success at the individual, team, and collective levels.
During another interview, this one with Business Insider, Dr. Klotz also said that “one hopefully silver lining of this horrible pandemic would be if the world of work transitioned to a more healthy, sustainable place for employee wellbeing”.
This is more than wishful thinking. I strongly believe this is an inescapable imperative for modern corporations and society at large. A healthy, motivated, empowered and engaged workforce is key to furthering economic as well as social progress.
How about you? Have you felt or seen the effects of the Great Resignation yourself? How has that affected you, and how are you coping with it? Share your comments below and let’s keep the conversation going!
Further Readings and References Regarding the Great Resignation
I try to list most of the material I use for writing my articles. Feel free to reach out if you feel I missed, misrepresented, or misused content you own or are responsible for.
About Francis Dion
I am a growth-focused tech entrepreneur and alumnus of the MIT Entrepreneurship Development Program. I am also cofounder and VP of Plan Monark, a software-as-a-service platform that supports teams looking for solutions to their most critical issues.
My interests span technology, entrepreneurship, organizational performance, social responsibility, and human as well as artificial intelligence.
Follow me on LinkedIn. Reach out and lets get the conversation going!