As Americans continue to take advantage of a tight labor market to search for better- paying jobs, retention has become a serious concern for all companies. With healthcare, financial services, transportation and warehousing leading the way, 3.5 million workers voluntarily left their jobs in April 2018, the highest quit rate since the dotcom boom peaked in 2000.
The reasons behind the trend appear obvious: Good talent is in high demand and people are confident they can find a better job elsewhere. While most quit their jobs for better pay and benefits, today’s environment also makes it easier for employees to act on their desire to escape a bad boss, uninspiring environment, or work in a hotter industry.
Most economists blame the high quit rates on low wages – an apparent historical hiccup since wages tend to rise when unemployment falls. The reasons behind the low wages have also left economists debating, offering scenarios such as declining unionization, increased outsourcing and the rising costs of benefits.
As the quit rate movement gained serious momentum in 2017, management became increasingly concerned. In recent months we seemed to have hit a threshold and companies are becoming more resourceful in fending off attrition. Not only are employers starting to raise wages, but are also becoming more flexible in benefits, work schedules, or offering the ability to work remotely for a portion of time or all of the time. Recruiters, too, are becoming more proactive as they search for replacement talent, turning to “headhunting” to lure passive talent.
High quit rates impact management, from front-line supervisors up to CEOs
While a high quit rate is often considered the sign of a healthy economy, it brings significant business consequences. Keeping critical jobs filled is an increased stressor on management or for anyone who is expected to grow their company, division, or segment. If you cannot keep your people, you cannot hit your budgeted revenue numbers. Plus, turnover is expensive, further reducing profits. Employers need to invest more resources to retain staff. With more people departing or just getting started and ramping up, it becomes difficult to keep projects on track and morale positive.
It takes work to keep your best employees around
The high cost of quit rates should compel HR and Talent Acquisition leaders to recommend new solutions to management, clearly explained in terms of P&L, rather than typical HR-speak. For example, is it possible to use new technology to replace labor? This would increase productivity of the existing workforce and pay could be increased accordingly. Should business units be realigned or re-organized to enable a better labor pool to draw from or to free up more revenue opportunities to increase pay? What are the benefits of moving to a more remote workplace? Should there be a more concerted effort to understand the behavior of management as a contributing factor to attrition?
Take into consideration the training and upskilling opportunities your company offers. According to a recent survey from McKinsey & Company, executives now see “investing in retraining and ‘upskilling’ existing workers as an urgent business priority that companies, not governments, must lead on.” On-the-job training and team development not only safeguard your ability to stay competitive as a business, it sends the message that you are dedicated to helping your employees achieve meaningful careers.
Do you have compelling and competitive long-term benefits? A recent Glassdoor survey says that “while perks, an easy commute and a high salary may be what gets employees in the door, they aren’t necessarily what keeps them around.” Employees also care about career growth within the company, long-term potential, and a commitment to matching 401ks. Pay attention to social media sites like Indeed, Glassdoor and Yelp to help keep a pulse on employee concerns that HR might not yet be aware of, and put a strategy in place to improve your employment brand.
Finally, let’s not underestimate the role that meaningful work plays in retention. We spend a lot of time at work, and most people need to understand how their work provides social or economic value. Just as an employee may quit to escape an uninspiring environment, managers who care about providing motivating jobs earn loyalty. Whether through cross-functional teamwork or an opportunity to participate in a company-sponsored volunteer project, meaningful work inspires and makes even mundane activities uplifting.
A precaution for job hoppers
While I predict high quit rates will stick around until jobs get filled or openings get reduced for other reasons, here’s one message HR and recruiters need to get across: Taking the higher paying job in a ‘greener pasture’ can have consequences. If a company hits a rough spot and considers a reduction in workforce, the first people identified for cuts are typically the most recently hired people and, in particular, those with the highest pay. So, be careful what you ask for, it can bite back if things go south.