The Great Resignation Explained — How it Impacts Small Businesses
The Great Resignation presents a dramatic shift in the relationship between employees and their employers. Over 47.8 million workers in the US quit their jobs in 2021. There’s no sign of this employee exodus slowing down—with the Bureau of Labor Statistics a record-high 4.53 million people quitting their jobs in March 2022.
Even if you weren’t one of them, you likely know someone who has. Increasingly, employees are seeking higher pay, greater benefits, and more freedom.
This article will look at what the Great Resignation is, its causes, and how it impacts small businesses. We’ll also walk through 9 ways your small business can attract and retain employees during these volatile economic times.
What is the Great Resignation?
The Great Resignation, also known as the Great Reshuffle, is the ongoing economic trend where employees voluntarily exit from their jobs at an elevated rate. The term was coined by organizational psychologist and professor of management at Mays Business School at Texas A&M University, Anthony Klotz. In May 2021, Klotz predicted that the COVID-19 pandemic would cause pent-up resignations.
Since the media first latched on to the term, millions of Americans have walked away from their jobs.
Key Great Resignation statistics
In March, Pew Research published an article detailing statistics on what’s driving the Great Resignation and some of the potential effects. Pew’s research ranked reasons for leaving a job based on it being a “major reason” or a “minor reason.”
Low pay, lack of opportunities to advance, and feeling disrespected were the most cited reasons for Americans quitting. 63% of those surveyed said low pay and no opportunities to advance were reasons they quit.
Education also seemed to be a key factor. Those without a four-year college degree were more likely to quit than those with at least a bachelor’s degree. Finally, younger adults and workers with lower incomes were more likely to quit a job in 2021.
According to Microsoft’s 2021 Work Trend Index, over 40% of the global workforce considered leaving their job in 2021. Comparably, in a survey conducted by PricewaterhouseCoopers in August 2021, 65% of US employees said they were looking for a new job, and 88% of executives said their company was experiencing a higher turnover than normal.
Why is the Great Resignation happening?
With nearly half of the world’s workforce considering quitting their jobs, you might wonder, why is this all happening? Klotz predicted that the Covid-19 pandemic would lead to a prolonged mass exodus of workers. However, multiple factors are embedded within the pandemic and other issues that contributed to the Great Resignation and its persistence.
Klotz theorized that the initial surge of workers quitting was caused by the backlog of workers who weren’t quitting during the height of the pandemic. At the time, many people were burned out, unhappy, and reevaluating their lives.
“The pandemic brought the future of work into the present of work,” said Klotz, regarding how the pandemic brought changes to work that were waiting for a trigger. Remote work, which has been available for years and used by many tech-savvy companies, was thrust into the mainstream. The Gig Economy of the 2000s became extremely attractive to workers who found themselves locked into regimented jobs. In the end, technology and social demands enabled people to insist on more from their work.
Besides a change to more autonomy, flexibility, and control over individual lives, workers also want more pay and better benefits. Today, many employees are faced with overcoming inflation by searching for higher-paying jobs.
In the end, the Great Resignation is about the culmination of several complex factors all coming together to give U.S. workers the compulsion to say, “I quit.”
How is the Great Resignation impacting small businesses?
As you might imagine, the Great Resignation hasn’t just impacted large multinational corporations but also small businesses.
Today, there are 31.7 million small businesses in America, and many of them have fewer than 100 employees. Small businesses employ at least 61.2 million people in the U.S. (For reference, the U.S. has a total population of 334 million, which means that small businesses employ around 18% of the total population!)
In addition, many legal changes have occurred during the Great Resignation leading to sweeping regulatory changes that also affected small businesses.
In the end, the Great Resignation has had a huge impact on small businesses, from higher turnover to acquiring new talent. Many small businesses have had to adapt how they do business too. Some companies have gone from working in person to offering hybrid work or even full-time remote work. In any case, the biggest impact has been employees quitting to search for another job.
9 ways to attract and retain employees during the hiring crisis
If you’re a small business owner (or even a large business owner) facing employee turnover, you may be wondering how to attract and retain employees during this hiring crisis. Employees, after all, are the lifeblood of a company, and without retaining talent, you run the risk of losing control of your business.
Let’s look at ways that you can attract and hire more employees despite the competitive job market where workers seem to have all the power.
1. Revisit your cash flow and forecasts
A great place to start during any crisis is to reanalyze your cash flows and forecasts. Checking your cash flows can help you decide whether or not you can even take on a new employee. For many, cash flow shifted to zero during the pandemic, and to keep the lights on, many employers turned to Cares Act funding.
Now, many businesses are finding that even with restrictions being lifted, they are still having trouble with cash flow. Financial forecasting when combating uncertainty is key to bringing normalcy back to your daily operations.
If you’re looking to hire new employees, make sure you have the cash flow to keep up with wage demands. If you lack the cash flow, root out the source of the problem. Are you experiencing a dip in sales?
In some cases, businesses have had to close because of a lack of employees to work to generate cash flow. If this is your case, it may be time to start hiring sooner rather than later.
2. Rework your hiring process
Finding the right employees can mean rethinking your hiring process. Finding a good candidate is no longer about firm handshakes and a strong cover letter. Many companies are eschewing traditional hiring practices for digital alternatives, like LinkedIn. On the other hand, solid recommendations from people you trust will never totally disappear.
Your hiring process should be your personnel plan’s key component. If you’re having trouble finding the right candidates, evaluate your hiring process. You could be missing out on a whole world of candidates and just not reaching them.
3. Adjust employee benefits
One of the top reasons employees decided to quit their jobs and find another during the Great Resignation is a lack of benefits. Better benefits don’t just mean health insurance, dental, and vacation time. Employees are now looking for greater flexibility, reduced hours, and the ability to work when and where they want. Giving your employees more benefits, like those clearly in high demand today, will benefit you when you’re searching for talent to bring to your company.
4. Invest in professional development
Once you’ve acquired valuable personnel talent, it’s important to make sure they stay around. A great way to ensure your employees continue working for you is to offer professional development. In many industries, it’s not uncommon for professionals to be required to take additional courses to maintain their professional license. (Attorneys are one example.)
However, just because your employees aren’t required to maintain a professional license doesn’t mean you can’t offer professional development. Many companies have begun offering tuition reimbursement for pursuing additional education, such as an MBA or other business-related education. These reimbursements can be conditioned upon continued employment, which means you can guarantee they stay with you.
Remember, developing your employees means that they can give back even more to your business in the long run. Investing in employee professional development is not only an investment in them but also an investment in your company.
5. Focus on hybrid and remote work
The pandemic proved that many companies can function while operating in a remote or hybrid fashion. Employees benefited greatly from this setup because they had greater freedom and more downtime. For example, working remotely means no more time commuting.
If possible, convert positions to hybrid or remote positions. Another option is to allow employees to work from home early in the day or leave early and finish their days at home.
Today, work is all about experimentation. Many organizations are also attempting four-day workweeks. These progressive work schedules give employees more freedom and are attractive benefits to employees looking for work.
6. Review your culture and work-life balance
In recent years, companies have come under increased scrutiny for harboring toxic cultures at work. Shakeups occurred at Fox News as sexual misconduct allegations emerged. Video game giant, Activision Blizzard, has been the center of the debate about toxic work environments lately.
A toxic work environment and lack of work-life balance are especially alienating to employees. Eliminating a bad culture can be difficult since they are often embedded in the structure of a company; however, it’s important to curb one before it has a chance to take hold.
Work-life balance is another important aspect of your work culture. Today, most employees are looking for a job that gives them the freedom to make it to their daughter’s softball game and not be stuck working late at the office.
7. Increase transparency
Company transparency is another improvement your small business can make when it comes to changes to attract and retain employees. Often, employees feel like they are left out of decision-making and have very little say in how their employer conducts business.
Increasingly, more small businesses are treating employees as stakeholders in their business. Providing employees access to information is a simple and effective way to give them a greater incentive to be invested in their work.
8. Reconsider roles and responsibilities
Restructuring how your small business runs can seem intimidating, but reconsidering roles and responsibilities is another way to drive employee retention and hiring. Sometimes, employees are overburdened at work or don’t have enough to do. Revisit the roles at your small business and the responsibilities of those roles.
Today, with remote work becoming more popular, it’s possible that roles may need to evolve to adapt to the changes that have occurred in work environments.
9. Increase pay and incentives
Finally, if you’re still having trouble retaining people or finding the right ones, it may be time to evaluate your pay and incentives. For example, many employees are faced with repaying their student loans, so it’s no surprise they are often looking for the highest-paid job possible.
Increasing pay, benefits, and other incentives are sometimes the only way to attract employees. This is especially true today, with inflation approaching 9%. Remember, one of the top reasons employees switched jobs in 2021 was low pay.
Focus on employees to strengthen your business
The impact of the Great Resignation on small businesses is complicated. For some business owners, it’s an afterthought. While others, like food service establishments, are taking the brunt of it.
If you are struggling to retain your staff or can’t quite compete with the competitive labor markets, start by looking at your business plan. Reference this list as you do and hone in on areas that appear to need improvement.
Just keep in mind that not all of these methods will make sense for your business. Instead, focus on adjustments that will minimize your employee resignation rate and lead to long-term benefits in your hiring strategy.