The trend is well established but the latest US job statistics are still eye-catching: 4.4 million Americans (3% of the workforce) quit their jobs in September; 4.3 million quit the month before. The media describes this ongoing work exodus as, The Great Resignation. Whatever one calls it, employers should take notice. Managers who fail to prioritize employee retention, or who leave that task in the hands of Human Resources, may be placing their businesses at risk. At risk of being understaffed and unable to meet deadlines/shipments. Startups and small businesses are no exception.
I have two small business clients that are struggling with unexpected employee turnover. In their small slice of the Great Resignation, workers are leaving for many reasons. Some are taking less stressful jobs elsewhere; others are quitting to take “mental health breaks.” That classic job change motivator, more money, is still a factor . . . but less so than one might assume. Shorter commutes, remote work flexibility, disability insurance and other, less tangible lifestyle changes are more frequently mentioned during exit interviews.
The Great Resignation is an evolving, nationwide problem. Countless studies are underway; we will have to wait for definitive results. In the meantime, most experts recommend that businesses study:
Do not assume that “cost of living” wage increases in contracts are the answer. Firstly, the government’s inflation statistics have been suspect for decades. Among other shortcomings, Washington’s “basket of goods” fails to capture the true costs of healthcare, childcare, education, and housing. Secondly, a small percentage increase on an out-of-date base pay is not attractive. Understand market pay rates.
Exit interviews are fine but, by then, it’s too late. Moreover, departing employees may be unwilling to share their real reasons for leaving. Individuals may jump ship for more money or for more responsibility, but poor management may be the reason they began looking in the first place. Consider better management training/classwork. Also, hold “stay interviews.” Learn what is motivating employees to remain.
Long Term Incentives
Startups used to be able to justify short term employee sacrifices (below market salaries, Class C office space) by offering employees long term incentives like bonuses or stock options. In today’s Covid-impacted world long term incentives are still a good way to retain employees. Just don’t assume that workers will be willing to accept below market compensation for 3-5 years as part of the deal.
James Gorman of Morgan Stanley may be able to compel his workers to return to their offices and cubicles. Time will tell. Chances are that your workers are earning less than Mr Gorman’s and can more easily find jobs with comparable compensation elsewhere. Remote or hybrid work is here to stay. Reduced childcare options have made it unavoidable. Plan accordingly.
So, forget Supply Chain Disruptions for now. Another problem may be festering far closer at hand: The Great Resignation.
Peter has spent the past twenty-plus years as an acting/consulting CFO for a number of small businesses in a wide range of industries. Peter’s prior experience is that of a serial entrepreneur, managing various start-up and turnaround projects. He is a co-founder of Keurig.