Table of Contents
Table of Contents
What Is “The Great Resignation”?
“The Great Resignation” is a term used to describe the nearly 50 million US employees who resigned from their jobs beginning in early 2021. This trend lasted through 2022.
Now, in 2023, the numbers suggest that the Great Resignation may be coming to an end. However, this isn’t an excuse for employers to stop focusing on retaining employees through better DEIB, engagement programs, pay, and benefits. Instead, the Great Resignation should motivate organizations to do things in new (and better) ways so that history doesn’t repeat itself.
So let’s dive in to learn how the Great Resignation got started, why it matters, and how you can retain top players even in times of tumult and change.
Contributing Factors to the Great Resignation
The Great Resignation was partly a result of people demanding better working conditions after experiencing decades of inequality and injustice. Sprinkle in COVID-19, and many employees realized that life was too short to stay in unsatisfying jobs. They began leaving en masse to achieve better wages and working conditions.
Here’s a closer look at some of the factors that led to the Great Resignation.
In the past five years, there have been notable acts of inequality, discrimination, and violence. Widespread social unrest and distrust for employers and the government has been brewing.
In October 2017, the #MeToo movement broke the internet as employees vowed to no longer tolerate sexual harassment or sexual abuse, particularly in the workplace.
In May 2020, a Black man, George Floyd, Jr., was killed by a police officer during an arrest, spurring over 450 major protests and reinvigorating the Black Lives Matter movement demanding equality.
As these examples—and countless others—demonstrate, Americans of all genders, nationalities, ages, ethnicities, sexual orientations, and disabilities desire to be treated with dignity and respect while earning equal, livable wages.
Social movements demanding equitable treatment have bled into the workplace, giving employers the ultimatum to improve working conditions or lose their employees.
In late 2019 and early 2020, the world was struck by the COVID-19 pandemic. There was no precedent to use as a guide, and the fear of mortality became real for all ages.
Organizations faced many questions: Should we shut down operations or are we an essential business that can continue to work? Are “essential workers” incentivized for continuing operations during the pandemic or should they be considered lucky to have a job? Are we doing enough to protect our people? Do we need to do layoffs, furloughs, or pay cuts? How do we continue operations if we have to shut down a department due to quarantine? Can some positions that were historically office-only now work from home?
People Reevaluated Their Priorities
For employees, no measure that any employer took seemed to be enough. Employees began to question if going to work and potentially exposing themselves and their loved ones to COVID was worth the risk. Many employees quit because they didn’t think employers were doing enough or feared potential exposure. Employees wanted and needed more from their lives and employers.
According to the Society for Human Resource Management (SHRM), 68% of workers seeking new employment “decided to make a change during the COVID-19 pandemic and 64% said their expectations for what they want in a job have changed since the pandemic.” SHRM also states that 33% of people resigned due to a career change, which they referred to as “COVID clarity.”
“Some people became more aware of what they really want out of a job and in their lives as a result of the pandemic” and as such, chose to re-prioritize their lives.
While many employees were furloughed or laid off during COVID, others experienced “massive amounts of burnout and a lack of work-life balance.”
Merriam Webster’s definition of burnout is “exhaustion of physical or emotional strength or motivation usually as a result of prolonged stress or frustration,” and “to cause to fail, wear out, or become exhausted especially from overwork or overuse.”
As employees “actively [processed] the impact of COVID-19, whether it [was] the fear of the illness itself, or the impact of being socially isolated, the impact of loss of control over what’s happening in the world” drove people to unprecedented levels of burnout.
“Many essential frontline workers saw the same low wages as usual, but with longer hours, understaffing, negligible safety measures, and no paid sick leave,” yet employers and executives continued to exceed profits. Employees felt overworked, underpaid, and undervalued. In one survey, SHRM reported that 48% of American employees “felt mentally and physically exhausted at the end of the workday” and 41% felt burnt out.
Pay & Benefits
“At least 63% of Americans have left their jobs partially because the pay was too low” and 43% stated a lack of benefits was their reason. SHRM found that 58% of organizations began offering higher starting wages in 2021 as a way to attract candidates.
The MIT Sloan Management Review considered the turnover data of 600 companies from April to September 2021 and found the primary reason people quit their jobs was a desire to “escape a workplace culture perceived as toxic.” One researcher found 57% of people who left their employer felt disrespected at the workplace.
As an employee’s role elevates, it is common for companies to expect them to stay connected 24/7, even while on vacation or sick leave. This is unhealthy and can lead to burnout.
Why Should Companies Pay Attention to the Great Resignation?
Unless an organization is non-profit, money is a top driver and key performance indicator of an organization’s long-term success. The Great Resolution was a serious threat to the sustainability of an organization based on the cost of turnover, the inability to attract/retain employees to provide goods/services for sale, and potential rising costs from increased unionization efforts.
Cost of Turnover
You often hear people say the cost of turnover is extraordinary, but have you ever calculated the actual cost?
“The Work Institute estimates the cost of turnover is 33% of a worker’s annual salary, while others estimate the cost to be 1.5 times an employee’s salary.” As Jerry Maguire once said, “Show me the money.” How much is turnover really costing employers? We may not know for sure, but we can estimate!
The annual median wage in the US in 2021 was $45,760.
33% of 45,760 is $15,100.80.
And if you multiply 45,760 by 1.5, you get a whopping $68,640.
Multiply these costs by the 47.8 million employees who resigned in 2021, and US employers probably lost between $722 billion and $3.3 trillion in turnover cost alone that year.
Calculate your company’s estimated cost of turnover for bountiful justification to improve your total rewards package and catch the attention of your management team.
Current and future employees have higher expectations for employers and aren’t working just to have a job anymore. As turnover increases, employers struggle to backfill their openings, resulting in labor shortages that impact businesses and everyday lives.
During the height of the Great Resignation, retail, restaurants, and businesses closed because they could not hire help, and the lack of employees caused stress on their current employee base. Shelves at the grocery store were not being replenished because they couldn’t hire staff. Container ships were backlogged, and the world was experiencing unprecedented supply chain shortages.
While things have improved as we move out of the Great Resignation, hopefully the lesson won’t be forgotten so quickly. If businesses cannot sell their products, they cannot earn profits. If they don’t have employees, they cannot sell their products.
Increased Unionization Attempts
Harvard University labor economist Lawrence Katz, who coined the term “The Great Resignation,” commented on the recent jump in union organization attempts (and successes). He stated, “Using collective clout to improve pay and working conditions may be an increasingly important way for workers to make progress in the labor market.”
Collective bargaining may behoove many underpaid and under-appreciated employees; however, it may impact a business’s ability to continue operations. One example is Great Lakes Coffee Roasting in Detroit. Employees went on strike in 2022 demanding unionization, higher pay, and better working conditions The coffee shop wasn’t profitable, could not meet the employee demands, and ultimately had to permanently close the business. (Side note: it’s illegal to threaten to close down your business if employees discuss possible unionization or collective bargaining, but businesses can choose to discontinue operations altogether).
Tips to Actively Retain Employees
If the Great Resignation has taught us anything, it’s that employees have power—they choose where to work, and many can afford to be highly selective. Bad work environments, low pay, and rigid scheduling just don’t cut it anymore. To survive (and thrive), businesses must recognize the value their people bring and provide value in return. Below are 3 tips and tricks to prevent employees from leaving your company.
Improve Total Rewards
An organization’s total rewards package includes compensation,
health and well-being, retirement, recognition, paid leave, work-life balance, and more. Since the Great Resignation, there’s been an emphasis on re-evaluating compensation ranges, ensuring more competitive starting wages, and restructuring benefits package offerings to be more inclusive and all-encompassing.
Unsurprisingly, a survey completed by ADP in 2022 identified the most important characteristic of a position was the salary, showing the need for competitive and equitable wages. In a SHRM benefits survey, participants ranked these benefits as extremely or very important:
- Health care: 90%
- Flexible work: 83%
- Leave: 83%
- Family Friendly: 76%
- Wellness: 62%
- Retirement: 55%
What efforts were made during the Great Resignation by some of the top US employers to improve the total rewards programs?
Microsoft promised to “‘nearly double” its budget for employee salary increases and boost the amount of stock compensation it gives some workers by at least 25% in an effort to retain staff and help people cope with inflation.” Amazon announced it is “more than doubling its maximum base salary for corporate workers.”
KPMB began an automatic 401(k) match up to 8% and reduced healthcare premiums by 10% in 2022. They added 12 paid weeks of parental leave and 3 weeks of paid caregiver leave, and more. Mental health benefits are also at the top of the list of the improved addition to the total rewards package.
Offer Flexible Working Conditions
While “flexible working conditions” is technically part of a total rewards package, it is considered significant enough by employees to have its own section.
An ADP survey found that “at least half of workers indicated that they’d accept a pay cut in exchange for better work-life balance or more workplace flexibility.” Additionally, the survey discovered 71% of employees desired more flexible working conditions, and work hour flexibility is increasingly important.
Many employees realized how much they enjoyed working remotely during COVID. This has led to pushback as many organizations have begun requiring their staff to return to in-person work. ADP discovered that “64% of employees would consider looking for a new job if forced to return to the workplace full-time instead of being able to work remotely.”
Push DEIB & Positive Company Culture
Research shows that “Having a healthy culture is 10 times more important to employees than pay,” and a 2022 study revealed that “76% of employees would consider seeking new employment if they discovered an unfair gender pay gap or the lack of a diversity, equity, and inclusion (DE&I) policy within their company.” Companies that don’t seriously drive a pro-employee company culture are at a competitive disadvantage, particularly as unionization rises and employers struggle to fill open roles.
Employee engagement and communication are critical. One leader suggested that employees can help an organization move forward by having a team advisory board to bring “‘together diverse perspectives inside the company.” Consider setting up a board that can meet throughout the year to provide input on the company vision, policies, and procedures.
A few other ways to improve communication and engagement include conducting “stay interviews” (ask employees why they stay at the company) and pulse point surveys (Officevibe is a great tool for this). Create action plans based on the feedback, implement recommendations, and communicate the changes to the employees and leadership team.
Take care of your people and protect your business with Eddy
Questions You’ve Asked Us About The Great Resignation
Melinda is a senior-level people partner and business leader that is passionate about a positive employee experience, healthy company culture and driving DEI. Melinda serves as a positive change ambassador and the first thing you’ll notice about her is her true passion for HR. Helping people and improving workplaces are Melinda’s purposes in life, in addition to loving every dog possible!