Great Resignation in 2024: Reasons & Strategies to Mitigate It
Historically high levels of turnover rates are challenging businesses. Both juniors and senior executives switch employers in an effort to better their well-being, putting firms in a tough position. According to Deloitte, more than 70% of CEOs cite the difficulty in hiring and retaining trained personnel as their top short-term concern.
CEOs must first understand why employees leave their positions in order to effectively combat the Great Resignation. Therefore, in this article, we present 4 data-driven, stylized facts regarding Great Resignation. In the end, we outline the five major topics that prompt workers to reassess their careers, along with our advice to CEOs on how to handle the Great Resignation.
What is Great Resignation?
According to the common economy theory, people tend to hold onto their occupations more during uncertain times (like pandemics or financial crisis (2008)) because they wish to preserve what they have. Therefore, it was expected to observe a decline in monthly employee resignation rates once the Covid 19 Pandemic began.
Although theory and reality were in agreement during the initial days of the pandemic, starting at the end of 2020, monthly resignations increased to historical heights (see Figure 1) and stayed there throughout 2021 and the first quarter of 2022. This peculiar condition is known as the Great Resignation, and according to a recent PwC survey, it is likely to persist over the coming year as almost 20% of workers plan to change jobs.
Figure 1: Monthly resignation rates in the US as a % of total employment
1. Great Resignation or Great Reshuffle
Nearly 50 million Americans left their jobs in 2021, but the majority of them continued to work and quickly found new positions. Because of this, some experts, including the CEO of LinkedIn Ryan Roslansky, claim that the Great Reshuffle is taking place rather than the Great Resignation, where individuals switch jobs in search of rewarding professions, rather than leaving the labor pool entirely. Forbes argues that one of the causes of this is the digital transformation, where talented people migrate from traditional occupations and titles to modern ones.
2. Did Great Resignation begin before the pandemic?
On the other hand, Harvard Business Review views the Great Resignation as a process that has been underway for more than ten years, ever since the ‘08 crisis, which has resulted in a global labor shortage crisis. The difference is, the current epidemic, according to HBR, has speeded up the rate of quitting jobs. That claim is supported by the continuing decline in the labor force participation rate. For instance, about ten years ago, the labor force participation rate in the US was around 65%. These days, it is barely over 60% (See Figure 2). So even though some people switch between jobs, some permanently quit the labor force.
It is worth mentioning that the fall of labor participation rate is associated with the fact that baby boomers have reached the age of retirement. As the name refers in many countries this generation constitutes a relatively greater portion of the society.
Figure 2: US labor force participation rate
3. Enhanced bargaining power of workers
Governments’ interventions to reduce adverse economic impact of pandemic encouraged employees to get retired or search for new jobs due to following reasons:
- Fiscal policies: Throughout the globe, governments during the pandemic have increased their spendings to support their societies. Even in the country like US which is associated with a being a one of the most market economies, following welfare measures have been observed:
- Government transfers of 1400$ to eligible citizens.
- Extension of unemployment benefit payments to 1200$ per month.
- Student loan payment deferrals.
- Monetary policies: Initially during the pandemic, central banks around the globe reduced interest rates to inject cheap credit into the market. For instance, the Fed reduced its interest rate to 0-0.25 bp in March 2020. Cheaper credits encourage workers in two ways:
- It provides an opportunity for employees to resign their jobs to search for a better one since the borrowing costs, during their job hunts, were almost 0.
- Globally low interest rates caused money flow from bank deposits and government bonds to relatively riskier assets like stocks and cryptocurrencies (See Figure 3) which increased many people’s savings in terms of dollars and gave them the confidence to retire or change occupations.
- However, it is important to mention that central banks including the FED have started to hike interest rates. Thus, this positive impact that encouraged Great Resignation between 2020-2022 period might get reversed nowadays.
Figure 3: The cart of Nasdaq
4. Pandemic made people reconsider their career choices
After the epidemic started, according to a Hays’ poll, nearly three quarters of workers said they had second thoughts about their jobs and careers (See Figure 4). HBR developed this idea further and suggested that individuals examine their lifestyles in a more philosophical manner, determining whether or not their “standard lifestyle” is fulfilling.
Figure 4: Percentage of employees who reconsider their careers after pandemic
5 Tactics to combat Great Resignation
After reconsiderations, the following 5 major factors led people to change or leave their jobs:
1. Unfavorable corporate culture
According to MIT, exclusive, abusive and disrespectful behaviors against employees or a group of employees is the single greatest reason why people resign (See Figure 5). MIT defines a “toxic” work culture as one in which discrimination and exploitation make employees unhappy.
Figure 5: Effect of toxic culture on unhappiness among employees (Greatest the number greatest the impact).
Recommendations: To reduce negative impact of unfavorable corporate culture on employee turnover, CEOs must:
- Conduct surveys on employee satisfaction to pinpoint current issues.
- You may, for instance, ask your staff to rank the level of gender equality in your company on a scale from 1 to 10. To guarantee that the polls provide genuine information, you should keep their anonymity.
- Conduct polls to pinpoint “toxic” aspects of the work culture and prioritize addressing them accordingly. For instance, if your employees believe that there is a lack of gender equality in your firm, you can:
- Assess the metrics like gender diversity and gender pay ratio as KPIs to follow and monitor the progress. For instance, if males earn 1.5 more compared to females in your company, you can target to reduce it to 1 within 2 years and you can watch the progress quarterly.
- Organize training programs for your departmental heads and employees alike to diminish the negative impact of the “toxic” culture.
- Notice that what MIT calls toxic culture is the improvement areas of social and governance metrics of ESG reports. Thus, our Top 6 ESG Reporting Best Practices article might guide you to combat with great resignation.
2. Lack of opportunities for career development
According to the Pew Research Center, more than 60% of workers mention a lack of opportunities for career advancement as a reason for leaving their jobs. People are looking for training programs and possibilities for lateral mobility between departments to increase their knowledge and professional expertise.
- Organize training programs and allow your employees to attend courses/ certificate programs outside of the company. You can reserve capital for this purpose which in return can increase your workers productivity.
- Organize your corporate structure in a more multidisciplinary way which eases the lateral mobility between departments.
3. Working too Much
A Pew study found that nearly 40% of people leaving their jobs cite “working too much” as one of the reasons. Long working hours, the study argues, is associated with burnout and mental frustration.
In some circumstances, abuse is the cause of working excessive hours. On the other side, failure to adapt to automation techniques like RPA, AI, and digital workers may cause employees to put in excessive hours. For instance, according to Accenture, a typical insurance underwriter spends nearly half of his time on monotonous duties like data extraction and meeting scheduling. These are the tasks that can be automated with current technology. Although the rate of task automatability varies from industry to industry, businesses may now relieve their employees from boring repetitive tasks and shorten their working time thanks to digital transformation.
- By anonymous pools you can figure out the level of burnout of employees and react accordingly.
- Create a team that is responsible for taking strategic decisions regarding the digital transformation roadmap of your company. This team should decide which automation tool is aligned with your specific business goals, industry and existing IT infrastructure.
4. Insufficient compensations
According to PWC, a third of employees will be seeking a pay increase in 2022, and if their requests are not met, they are prepared to switch jobs.
Rich-poor disparity in income has been growing for decades. The growth in the CEO to Median Worker Income Ratio, which increased by roughly 15 times between 1965 and 2018, is one its indicators (See Figure 6).
According to Forbes, this long-lasting pattern has persisted in the age of pandemics, and it makes sense that workers are unhappy about the growing gap. For instance, it becomes nearly impossible to buy a house in the US due to growing housing costs and stagnating real income for average workers.
Figure 6: CEO to Median Worker Income Ratio (1965-2018)
- Reduce the CEO/worker compensation rate ratio to ensure a more equal work environment.
- To demonstrate that you care about your employees’ well-being, offer benefits like health insurance, a free membership to a fitness center, Sodexo, etc.
5. Greater demand for hybrid/remote working
A Harvard Business Review survey found that more than a third of workers will look for new employment opportunities if remote or hybrid working options are not offered. People consider hybrid/remote work options as an improvement in their work-life balance and being flexible regarding place to work increases employee retention. It is also a source of savings for the families who have babies in their homes.
- If you also have an office, let your staff members choose where to work, with respect to their personalities, lifestyles, living situations, familial arrangements, etc.
- Establish the network and security infrastructure required to support remote and hybrid work. In the business setting, where protected laptops and Wi-Fi connections were standard, traditional cybersecurity systems were created to safeguard servers and applications. To ensure cybersecurity, changing working practices necessitate new strategies and equipment. As a result, we advise:
To find out ways to combat with Great Resignation you can read our 3 Strategies to Combat the Great Resignation article.
To find more detailed information regarding Great Resignation and it means for your business you can reach us:
Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.
Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.
Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.
He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.
Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.
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