Leadership and The Great Resignation

In May 2021, Anthony Klotz, Associate Professor of the Mays Business School at Texas A&M coined the phrase “The Great Resignation”, speaking of the unprecedented number of resignations due to the impact of COVID-19. An article published by Harvard Business Review cited that approximately 4 million Americans -- primarily mid-career employees -- quit their jobs in July of 2021. The highest departures were in the technology and health care fields. Since that time, departures continue across many industries, but primarily in white-collar jobs that have perhaps felt the greatest impact of the pandemic.

On the morning of January 20, 2022, the NACD Texas TriCities Chapter held a virtual program to discuss this topic, and the role that leaders in organizations play at a time when the war for talent reaches a crescendo. A panel of experts was moderated by David Bixby, Partner at Meridian Compensation Partners. Panelists included Dave Pruner of Heidrick & Struggles, and Directors Carol Hess (Wi2Wi) and Bill Easter  (Delta Airlines, Emerson Electric, Groupo AeroMexico, Memorial Hermann Health System). The panelist dialogue, followed by small breakout conversations, yielded insight into what executives and directors can do to understand the causes and monitor/measure to forfend unwanted departures.

Why is this happening?

The Great Resignation is caused by several factors which have culminated in the past two years.

A virtual workplace

The COVID-19 pandemic forced companies to quickly shift into a virtual environment. Almost overnight people stopped business travel and worked from home utilizing technology to meet with colleagues/clients and sell to customers. Much of this has proven to be effective and has provided a degree of flexibility that has perhaps been needed far before the onset of the pandemic. For many employees who live in large metro areas, the end of the daily commute resulted in less expense and stress (and more time for productivity). Many relocated from crowded urban areas to quieter suburban or outstate locations or moved into second residences.

Families at home

With children also schooling from home, family routines and dynamics changed. Parents became more hands-on working with younger kids, and families interacted and shared more meals together. Restaurants were closed, so people cooked more meals. DIY projects skyrocketed as people made use of their time and home to embark on improvements. The initial hardship of sorting out homework, Zoom calls, and chores were resolved, and resulted in newfound family connections that perhaps young families never before experienced.

On the other side of the same coin, the stress of having families at home is significant. A recent McKinsey report reveals that the pandemic’s impact on women has been disproportional and nets off substantial progress made in recent years. Women who often carry the larger share of household/childcare/eldercare duties are experiencing burnout at a much higher rate than men, driving perhaps decisions for them as well as their spouses in a need for occupational change.

Personal health and safety

As people contemplated the personal risk of contracting COVID-19 in their daily jobs, positions in healthcare, hospitality, and travel became far less attractive than other industries. As these industries either shut down (hospitality and travel) or ramped up (healthcare), employees more carefully examined their options, actions of their employers, and made decisions about personal priorities.

Millennial and Gen Z priorities

As people began realizing the workplace could and would likely continue to be different, decisions were made. We have known for years that for millennials and Gen Z employees, the definition of “great place to work” challenges traditional paradigms. According to a Deloitte survey on these their priorities, these two groups have strong opinions about topics of work/life balance, flexibility, climate change, and organizational purpose. The topic of shareholders vs stakeholders is not up for debate, and young employees expect their employers to have a productive and positive relationship with the wider community.

What can be done?

As a result of these factors, the implications of Great Resignation need to be considered in boardrooms around the nation. As the success of organizations lie in their ability to compete for the best talent to attract and retain, it is essential that leaders consider what can be done to minimize the wave of departures impacting so many companies. The program’s panel and subsequent breakout conversations yielded some productive ideas of what directors need to consider.

Be clear on strategic priorities

Examine the priorities that have been driving the business today. 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, and their purpose understood. People are less likely to leave if they feel their interests and those of the enterprise are shared and aligned.

Innovation in compensation and benefits

Although the importance of a competitive C&B package does not diminish, companies are innovating around the benefits topic given recent changes in healthcare policy and to address the changing desires of a new employees. The emergence of benefits such as unlimited vacation, sabbaticals, mental health days are seen as ways to create more flexibility and demonstrate an understanding of the need to create down-time in a 24/7 connected world. Educational benefits are also on the increase as topics such as foreign language lessons are included in some employee development benefits.

Examine the sacred cows

In every long-standing organization, there are policies and practices that are hardwired into the enterprise. Some of these can be found in HR practices, others in the operations themselves. These can manifest in leadership who are never questioned and behaviors that are overlooked. Particularly in companies that have experienced past success, it is important to visit this topic and see if the “non-negotiables” are causing people to question whether the organization is right for them.

Focus on ESG

A deliberate effort to align ESG interests to business strategy is important to most of today’s workforce. The purpose of a business can no longer be solely aligned to short-term shareholder interests. In today’s environment it is essential for organizations to commit to environmental, social, and governance standards held by the wider society. Employees today not only want their leaders to 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. A historical level of attrition should be compared against actual numbers, and a demographic breakdown of those leaving should be closely examined. Attention should be focused on particular demographic segments if they appear to be departing at a higher rate. This could be the result of specific operational, policy, or cultural issues that need attention.

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, which describes 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 not likely be how future generations of workers see as a sensible and effective culture. Technology, increased flexibility, and less importance placed on facetime will bring about different ways to collaborate, challenge, and build camaraderie between co-workers. Boards need to be aware of and support how culture is transforming in an organization.

The COVID-19 pandemic and associated incidents that took place between 2020-2022 accelerated change that was already taking place in the business world. Directors serving on boards should be careful to dismiss this as “something that will pass” with a belief that the world will soon return to a more recognizable model. Increasing vacancies in commercial real estate, sustained remote work, and the continued usage of videoconferencing are indications that this is not a passing phase, but that the business office of the future looks significantly different than that of the past.

As employees carefully examine options, driven by a different set of values, there will be great companies who 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 the 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.