Permanent Shift or Pendulum Swing?
The crises of the past two years have led to lasting changes in the role of companies in society, the rise of stakeholder capitalism, new demands on leadership, digital acceleration and how work gets done. But what about employee expectations and demands? Is the Great Resignation a temporary shift or more permanent? We asked two experts to share their insights.
Forever Changed: 3 Strategies for Moving Forward
The world of work has permanently changed—there is no going back to the “before times.” While it’s easy to blame the Great Resignation on the pandemic, the truth is that it only accelerated problems that had been brewing for decades. We now have an amazing opportunity to re-vision work. In order to do that effectively, leaders need to understand what’s at the core of this pivotal moment in history.
Grief Has Battered Our Mental Health
Grief expert David Kessler says, “We’re feeling a number of different griefs. We feel the world has changed, and it has: The loss of normalcy, the fear of economic toll, the loss of connection. This is hitting us and we’re grieving. Collectively. We are not used to this kind of collective grief in the air.”
It’s not just collective, it’s personal. The Pew Research Center found that 72% of Americans know someone who has died or been hospitalized by COVID-19; rates are even higher for Hispanic (78%) and Black (82%) respondents. Grief has touched every corner of the globe and its effects are felt in every organization.
Humans are not meant to withstand such long periods of stress and grief and it’s taken a toll on our mental health. Anxiety and depression have climbed and prescriptions for related medications have reached record levels. The U.S. Surgeon General recently issued a warning for teens and children. All of this has accelerated burnout in people of all ages.
People’s Values Have Changed
Nightly images of hospitals, body bags and funerals, have kept us in a constant state of worry for our safety. Any cancer survivor will tell you that when you face your mortality, it brings your values and priorities into sharp focus.
From 2020 to 2022, people became clear about what mattered and started making changes in their lives. This included relocating, ending or redefining relationships, and leaving traditional work altogether to pursue their dream of starting a business.
For employees, the pandemic has driven an increased hunger for purpose. To no surprise, many are looking to satisfy this drive by finding meaningful work. Jessica Stillman, a columnist for Inc., wrote, “The Great Resignation isn’t primarily about the logistics of work. It’s about its meaning.” It seems that Aaron Hurst’s prediction of the Purpose Economy has come to fruition.
Burnout Is Driving Massive Shifts
Burnout, a diagnosable state brought on by long-term stress, is the number one reason employees cite for leaving their current jobs. Drs. Emily and Amelia Nagoski identify three main components of burnout: emotional exhaustion, lack of accomplishment and depletion of empathy. No matter how hard people work, they just feel like they are spinning their wheels. As their negative feelings grow, some inevitably project them onto their job.
The only cure for burnout is rest, not starting another job. This is why hiring managers are seeing an increase in ghosting behavior, both by applicants and by 25% of new hires who fail to show up for their first day.
Burnout was a serious problem even before the pandemic, costing nearly $200 billion in health care costs in the U.S. alone. In 2019, the World Health Organization declared burnout an occupational disease—at that time, about 53% of the workforce was burned out; new studies show that it’s risen to 89%.
However, the lockdowns also contributed to burnout as people began overworking and under resting. A 2020 survey found that 70% of workers who transitioned to remote work because of the pandemic say they now work on the weekends, and 45% say they regularly work more hours than before. In just two years, the workday increased from 9 to 12 hours. Work has even crept into our sleep time. One of the symptoms of burnout is insomnia, and email providers see logon spikes from midnight to 3:00 a.m.
During the lockdowns, when people lost access to how they normally rest and recharge—going to dinner, traveling, getting pedicures, etc.—they often leaned into doing more work. Gone were the clear boundaries that commuting provided, and many found that working seemed to soothe the uncertainty and anxiety caused by the pandemic.
Burnout creeps up slowly, making us too tired to care or take positive action. Psychologist Christine Hohlbaum states, “Sadly, most people don’t even notice its gradual grip over their lives until it’s too late. By then, external intervention is necessary to move burnout patients toward positive change.” Burnout, for this reason, is also called “the erosion of the soul.”
The bottom line is that people are burned out, scared and trying to create a better life for themselves and their families. To misinterpret the Great Resignation as just a temporary fight about working from home misses the larger reality. People have hit a tipping point and they want a different future—they are willing to quit or strike to do so and the power has shifted to their hands.
Strategies for Moving Forward
Researchers in business, economics and psychology are all seeing the writing on the wall—this shift in work is here to stay. The organizations that are going to survive will be where leaders took quick and decisive action to create better workplaces.
Make addressing burnout your top priority. Teach people what it is and how to recognize the signs in themselves and others. Leaders need to have open conversations about it and the toll it’s taking. Most importantly, leaders need to encourage (even mandate?) their people to rest and recharge.
Create a caring and meaningful workplace. Lorna Borenstein, CEO of Grokker, states, “Many companies are already experiencing painful employee turnover and bracing for more, which has sent them urgently seeking solutions…it presents employers with an opportunity to transform their approach to caring for employees, become an employer of choice and safeguard their future.”
Your employees have likely already been telling you what they want and need. Listen. At a minimum, you need to offer a living wage, physically safe work environments and psychological safety in a workplace where people feel they are treated with fairness and respect.
Train your managers. Consider these findings:
- 84% of workers say poorly trained managers create a lot of unnecessary stress.
- 57% say they have quit a job because of a bad boss.
- 50% of employees feel their own performance would improve if their boss received the right kind of manager training.
When given the right training, managers not only improve, they can become the “secret sauce” that turns a good organization into a great one. A study by Gallup shows that good managers increase the productivity and engagement of their teams as well as attract new top performers.
Making it through the Great Resignation and turning it into the Great Rebuilding requires us to authentically explore how to make work more meaningful, connected and productive while supporting wellness and balance. The organizations that do so will attract great talent now and well into the future.
Organizational psychologist Anthony Klotz, who coined the term the Great Resignation, says this: “One hopefully silver lining of this horrible pandemic would be if the world of work transitioned to a more healthy, sustainable place for employee well-being.”
3 Indicators of a Permanent Shift in the Labor Market
Humans are creatures of habit. We spend many years learning and building these automatic ways of acting. Habits make us, and our companies, successful. The natural and unconscious way in which habits are built is not matched by the same capacity to change routines. Disruptive events lead to changes that make our old habits ineffective.
There can be no doubt that the labor market changes that have occurred during the pandemic are disruptive. The best way to determine whether the seismic shift is here to stay is to analyze three data sources.
At the heart of labor-market dynamics is supply and demand. When workers are abundant and jobs are few, then the market favors employers. This was the case after the recession in 2007-2008. The opposite is true currently, with few available workers and plentiful jobs.
At the heart of the reduction in people who are ready to work is a measure called the labor force participation rate, the proportion of people who are able to work, who want to work. According to the U.S. Bureau of Labor Statistics, this measure is currently 1.5 percentage points below its pre-pandemic levels, representing approximately 2 million fewer people who are available to work. This rate had been trending downward for 20 years prior to the pandemic. While some level of rebound is likely, there is no reason to expect the rate of labor participation to drastically increase. This means that the supply constraints that are being felt in the market will persist for some years to come.
The changes impacting the labor market are not only about supply and demand. They are associated with several major shifts in how, where and when work gets done. This means that not only is there a gap in the number of people and the amount of work, there also is a skills mismatch between the types of roles looking to be filled and the people looking for work. Evidence for this mismatch comes from the escalating pay increases for specific skills areas. An analysis of Visier’s own data set showed that people in finance with deep technical skills were seeing pay increases two times larger than their peers.
In addition, according to a McKinsey survey, business leaders expect that within five years 50% of revenue will come from businesses that do not yet exist. My field is people analytics, and it has been an emerging field for the last 15 to 20 years. It is now mainstream, with unprecedented levels of demand. The skill set required to set up and scale a successful function cannot be learned overnight.
There are too many such skills mismatches within specific industries to list, and the ways in which these mismatches could be resolved are equally varied. This gap between the demands for new capabilities and those that are prevalent in the workforce means that the time over which the labor market will reach a new equilibrium will be lengthened. This is due to the time it takes to train existing employees or to source specialists from other countries or wait for new employees with the relevant skills to graduate from their education programs.
The capability mismatch that we are seeing points towards an enduring shift in the labor market.
Different Work Modes
The other significant shift that has impacted the labor market, and which has accelerated during the pandemic, is the number of people who are choosing to access work in different ways. The most common example of this is gig work, where people find and deliver short-term contracts or even discrete pieces of work as they operate as a sole-proprietor business. The number of people who left full-time employment to start either their own business or to work in the gig economy is evidenced by the huge increase in new business registrations.
According to a report in the Federalist, the number of people participating in the gig economy grew by 34% above 2020 levels. It is not yet clear whether there will be a decline in this population as some choose to return to full-time employment. However, what is increasingly clear is that the people who may be able to fill your open position may not apply to a job posting but will be able to deliver great work on a gig basis. Many organizations have yet to develop the new habits that make accessing people and capabilities this way effective. It requires different sourcing and management approaches, and it increases the complexity of setting policy and conditions for the blend of people working within the organization. If you get the gig side wrong, it will hurt your business’s reputation, making it hard to access the best gig employees. Reward gig workers too highly and you incentivize your best people to trade permanent contracts for gigs, and they may then also be working for your competition.
In addition to the rise of gig work, there are many other changes, such as flexibility in location and hours that radically disrupt who can do what work and where. According to Emsi Burning Glass, the proportion of remote jobs increased dramatically in 2020, and up to 40% of jobs could be performed remotely. For many employers, this means the local labor pool, which used to have a limited choice about where to work, can now get hired by a much wider range of employers.
The combination of increasing gig work and increasing remote working opportunities changes the labor market in an enduring way, bringing in new levels of competition and tearing up common policies such as location-based pay ranges.
No Going Back
In each of the factors outlined above, the likelihood that the changes will unwind is very low, even as economic activity and people’s mobility opens back up.
In terms of supply, getting back to an abundance of people would require the reversal of the downward trend in labor participation or changes to immigration policy.
In terms of capability mismatches, this is likely to adjust as people orient their skills and education to new opportunities. At the same time, the rate at which new skills need to grow is accelerating, hence we are moving into a more dynamic labor market where the capacity to acquire and use new skills is even more important.
The changes related to where and how work is done are also likely to be enduring. Enough organizations have already re-oriented to this new reality and all signs are that employees will resist attempts to undo these changes.
All of this adds up to a very different looking labor market, requiring different processes for finding, engaging, developing and retaining people. What companies have experienced during the Great Resignation is not a blip—it is a marker that we have passed a tipping point in how people and companies engage to create value. Going forward, effective retention strategies will need to be “always on” as more people move jobs more quickly.