The Great Resignation: How Did We Get Here, and What Can Our Companies Do to Adjust?
Last May, Anthony Klotz, an associate professor at Texas A&M University, coined the phrase “The Great Resignation” to describe the unprecedented number of resignations occurring as a result of the impact of COVID-19.
It was apt: 4 million Americans—primarily mid-career employees—quit their jobs in July alone, with the greatest increases in departures recorded in tech and health care. Since then, departures have continued across all industries.
On Jan. 20, the NACD Texas TriCities Chapter held a virtual program to discuss this topic and the role that organizational leaders play at a time when the war for talent has peaked. David Bixby, a partner at Meridian Compensation Partners, moderated the panel of speakers, which included Dave Pruner, partner in charge of the Heidrick & Struggles Houston Office and directors Carol Hess (Wi2Wi) and Bill Easter (Delta Airlines, Emerson Electric Co., Grupo Aeroméxico, and Memorial Hermann Health System).
The panelist dialogue, followed by small breakout conversations, yielded insight into what executives and directors can do to understand, monitor, and fend off the causes behind unwanted departures. Here are some of the key takeaways.
Why is the Great Resignation happening?
The Great Resignation has been caused by several factors:
A virtual workplace. COVID-19 forced people to stop business travel and start working from home, using technology to meet with colleagues and clients and sell to customers. Much of this has proven effective and provided a degree of flexibility that was perhaps needed far before the onset of the pandemic. For many employees living in large metropolitan areas, the end of the daily commute resulted in fewer expenses, less stress, and greater productivity. Many relocated from crowded urban areas to quieter suburban or out-of-state locations or moved into second residences. As more companies are adding this flexibility on a permanent basis, people are reexamining their options and realizing that jobs that once were difficult to logistically accommodate due to required commuting are now within reach.
Families at home. With children also learning from home, family routines and dynamics changed. Parents became more hands-on, and newfound family connections. On the other side of the coin, however, the stress of having families at home has been significant. For example, a recent McKinsey & Co. report reveals that the pandemic’s impact on women has been disproportionate and offset substantial progress made in recent years. Women—who often carry the larger share of household, childcare, and eldercare duties—might be experiencing burnout at a much higher rate than men, perhaps driving their (and their spouses’) decisions for an occupational change.
Personal health and safety. As people contemplated the personal risk of contracting COVID-19 in their daily jobs, positions in health care, hospitality, and travel became far less attractive than those in other industries. As these industries either shut down (hospitality and travel) or ramped up (health care), employees more carefully examined their options and their employers’ actions, and they made decisions about personal priorities.
Millennial and Gen Z priorities. As employees began realizing the workplace could be—and would likely continue to be—different, they acted. We have known for years that for millennials and Generation Z employees, the definition of “a great place to work” challenges traditional paradigms and involves work-life balance, flexibility, action on climate change, and organizational purpose. The topic of shareholders versus stakeholders is not up for debate, and younger employees expect their employers to have a productive and positive relationship with the wider community.
How can organizations adjust?
Boardrooms nationwide must consider the implications of the Great Resignation. Organizations’ success lies in their ability to attract and retain the best talent, meaning leaders must consider what can be done to minimize the wave of departures impacting so many companies. The program’s panel and subsequent breakout conversations yielded productive insights on steps for directors to consider:
Be clear on strategic priorities. Examine the priorities that have been driving the business. Are they still relevant? Were they made priorities due to shareholder preference without consideration for stakeholders? Are there changes that need to be made to address a wider community of interest? Priorities should be clearly communicated with their purpose understood. People are less likely to leave if they feel their interests and those of the enterprise are shared or aligned.
Innovate on compensation and benefits. Although the importance of a competitive compensation and benefits package isn’t diminishing, companies are innovating around benefits given recent changes in health-care policy and to address employees’ changing desires. Unlimited vacation, sabbaticals, and mental health days are seen as ways to create more flexibility and demonstrate an understanding of the need to create downtime in a 24/7, connected world. Educational benefits are also increasing as topics such as foreign language lessons are included in some employee development benefits.
Examine entrenched practices. In every long-standing organization, there are policies and practices that are hardwired into the enterprise. Some of these are human resources practices, while others can be found in the operations themselves. These can manifest as leaders who are never questioned or behaviors that are overlooked. Particularly in companies that have experienced past success, it is important to examine if the “non-negotiables” are causing people to question whether the organization is right for them.
Focus on environmental, social, and governance (ESG) topics. A deliberate effort to align ESG with business strategy is important to most of today’s workforce. The purpose of a business can no longer be solely about short-term shareholder interests. In today’s environment it is essential for organizations to commit to ESG standards held by the wider society. Employees want their leaders to not only say the right things but also demonstrate through investment and action that the commitment is real. Compensation committees that align remuneration to ESG goals can further reinforce the priority.
Measure who and how many. As talent development is one of the primary responsibilities of compensation committees and full boards, it is imperative that directors understand the variables of the mass balance over time. Historical patterns of attrition (who and how many annually depart) should be compared against current numbers, and a demographic breakdown of those leaving should be closely examined. Attention should focus on whether or not particular demographic segments are departing at higher rates, which could indicate that specific operational, policy, or cultural issues need attention.
Remember that culture matters. Many are concerned that a hybrid work environment with employees who only gather in the office on occasion will struggle to build culture. Work culture (how it feels to work in an organization) is the glue that keeps people together, as it defines how things are done both formally and informally. It’s important for leaders today, many of whom are Baby Boomers or Gen Xers, to realize that how we define “healthy culture” will likely not be how future generations of workers see a sensible and effective culture. Technology, increased flexibility, and less emphasis on “face time” will bring about different ways to collaborate, challenge, and build camaraderie among coworkers. Boards need to be aware of and support how culture is transforming in their organizations.
COVID-19 has accelerated change that was already taking place in the business world. Directors serving on boards should be careful not to dismiss this as “something that will pass” under the belief that the world will soon return to a more recognizable model. Increasing vacancies in commercial real estate, sustained remote work, and the continued use of videoconferencing indicate that the office of the future will look significantly different than the office of the past.
As employees carefully examine options, driven by a different set of values, there will be great companies that find ways to retain a strong and productive employee base. Directors play a critical role in driving conversation in the boardroom to focus on creating an environment that garners loyalty and commitment. Strategic clarity, aligned values, and flexible work arrangements to provide balance are key to winning the war for talent.
Anna C. Catalano serves on the boards of Willis Towers Watson, Kraton Corp., HollyFrontier Corp., Frontdoor, Appvion, and the NACD Corporate Directors Institute. She is also president of the NACD Texas TriCities Chapter.