ORGANIZATIONAL CHALLENGES

Conquering the Great Resignation:

It starts and ends with your leaders

FEBRUARY 7, 2022 | BRENDA VAN CAMP

News about the great resignation has made headlines for more than a year. It started with the release of Microsoft’s research findings at the beginning of 2021 that stated 41% of workers were considering quitting their job. This resulted in organizations pre-emptively trying to retain employees by overhauling their employee benefits and perks. However, as the year unfolded, it became clear that the main reason people are quitting their jobs isn’t better pay, benefits or perks. Instead, they are predominantly quitting their jobs in search of better bosses.

One of the many effects of the pandemic is that it has changed people’s attitude about their work: They are much less willing to accept the daily inconveniences and unpleasantries that used to be “part of the price” of having a job. The power balance has shifted: Employees are no longer willing to put up with jerks at work – whether bosses or colleagues. They are no longer willing to sacrifice part of their happiness for work because life’s simply hard enough as it is.

In this week’s post, we unpack what this shift means for organizations going forward. The genie is out of the bottle: It’s time to stop hoping things will go back to “normal.” They won’t. The pandemic has fundamentally changed employees’ attitudes and expectations. Organizations need to adjust before losing even more of their best talent.

And the answers are not better benefits and perks. Instead, it is time to take a long hard look at the people who fundamentally “create” your workplace dynamics: leaders across all levels of your organization.

So let’s unpack this together.

“The power balance has shifted: Employees are no longer willing to put up with jerks at work - whether bosses or colleagues. They are no longer willing to sacrifice part of their happiness for work because life’s simply hard enough as it is."

The impact of the great resignation at the company level

Let’s start by briefly looking at how the great resignation is actually impacting individual companies:

According to the U.S. Bureau of Labor Statistics, 32.5% of Americans chose to walk away from their jobs voluntarily in 2021, compared to 27.9% in 2019, the year before the pandemic. That is a 16.5% increase in the rate of voluntary quits. Monthly that meant that 2.9% of non-farm workers voluntarily quit their jobs in December 2021, compared to 2.3% in December 2019.

This means that a company of 1,000 that in 2019 had an average turnover rate of 10% may now experience an average voluntary turnover of 11.7% (1.165 x 10% = 11.7%). So instead of having to fill 100 hires, they now have to fill 117 hires.

When competition for talent is especially heated, that is a lot of extra time, effort, and added costs. In addition, the average cost to replace a salaried employee is six to nine months of their salary. In other words, an employee who receives a salary of $60,000 annually would cost an estimated $30,000 to $45,000 to replace. This includes the cost of hiring, onboarding, lost productivity, and errors. So in the case of an additional 17 such employees, that is an additional cost of about $500k to $750k.

So yes, this increased attrition is a big deal for any company, so what can companies do?

“Compared to before the pandemic, there has been a a 16.5% increase in the rate of voluntary quits."

Employees are reconsidering what they are willing to put up with

Initially, there was much conjecture of what was behind this, but there is now sufficient research that all points in the same direction: A toxic culture is the most significant factor pushing employees out the door and resulting in the Great Resignation.

Research by Ronald Sull from the MIT Sloan School of Management, in collaboration with Ben Zweig from NYU’s Stern School of Business, and Charles Sull of CultureX, found that the impact of a toxic culture is ten times more important than compensation in predicting turnover.

What’s driving this? Well, the big work-from-home experiment has caused people to reconsider their basic assumptions about how much unpleasantness and indignities they should put up with at work. And people everywhere are concluding that they just are no longer willing to put up with jerks at work – whether it’s their boss or colleagues.

That’s certainly nothing new. For years, we’ve known that people don’t leave bad jobs; they leave bad bosses. But now, that is even more true and more widespread.

“A toxic culture is the most significant factor pushing employees out the door and resulting in the Great Resignation: Research found that the impact of a toxic culture is ten times more important than compensation in predicting turnover."

But we don’t suffer from that

The tricky part about all this is that most companies don’t think they have a toxic culture. Similarly, most leaders don’t think they are toxic leaders. They think of stories about companies like Enron or notorious leaders like Elon Musk and say, ”Well, we’re nothing like that.”

Many of these leaders overlook that research found that 1 in 4 leaders are seen as bad leaders. Not because they aren’t good at visioning or aren’t articulate, but because, amidst the pressures of everyday leadership, they at times misbehave in big and small ways that severely undermine the trust and respect of their people.

For example, we might snap at an employee, talk behind someone’s back, micromanage, roll our eyes during a meeting, obsess about and blame someone for an error, or become annoyed when someone counters our suggestion.

And the pandemic has unfortunately been a significant trigger of bad leadership behavior as many leaders struggled to adapt their style. For example, without all their people in the same office, many leaders complain that they feel severely limited in their ability to hold their people responsible for deadlines and results. As a result, to re-establish some sense of control, some leaders have put in place all manner of supervisory checks in hopes of “mitigating” the possibility of things going off-track. But keeping closer tabs on your people’s work or limiting their decision-making power generally backfires because it leads to employee resentment and disengagement.

And while we might rationalize those incidents or issues as momentary blips due to difficult circumstances such as the pandemic, they do not go unnoticed by those who work for us. They undermine their trust in and respect for us and their overall job satisfaction. And while your organizational culture may not be as toxic as Enron’s, or you may not be as abrasive as Elon Musk, more than ever, a toxic culture or leadership behavior is causing employees to quit. Ignore it at your peril.

“The pandemic has unfortunately been a significant trigger of bad leadership behavior as many leaders struggled to adapt their style.”

It all starts and ends with the effectiveness of your leaders

It is important to note that this is not “an HR challenge.” It is a leadership challenge. HR alone cannot solve this. Toxicity begins and ends with the behavior of your leaders across all levels of your organization. They set the example of acceptable behaviors – i.e., toxic leadership behavior leads to unhealthy employee behavior.

To address this, you need to fundamentally overhaul the effectiveness of your leaders across all levels of your organization. And that mandate has to come from the top, with HR in a supporting role, providing appropriately fine-tuned leadership development efforts and performance management that reinforce the right behaviors. You must also have a promotion and hiring strategy that prioritizes effective and emotionally aware leaders, over uncaring, transactional leaders.

Is it possible to develop leaders who know how to do the hard things that come with taking on leadership responsibilities while remaining a good human being?

It is, even though many leaders currently think they have to choose between being a good person or a tough, effective leader. Rasmus Hougaard, author of “Compassionate Leadership: How to Do Hard Things in a Human Way” and founder of the Potential project, captures this in his insightful matrix below.

During the pandemic, many leaders are either stuck in “caring avoidance” or are in “uncaring execution” because they are desperately hanging on to their old “control” ways of getting stuff done. They know no other way.

Instead, we need to develop leaders who know how to balance concern for their people with the need to move their organizations forward in an efficient, productive manner. We need leaders who can combine leadership competence with genuine caring. This requires leadership development efforts that focus on both the what and the how of leadership – i.e., a focus on helping leaders know what to do to achieve goals, such as setting direction, gaining alignment, making hard decisions, giving feedback, and holding people accountable, as well as how to do that effectively by developing a deep understanding of their people’s concerns and what motivates them. So this is not about leaders who just “lead from the heart” but rather about developing intentional leaders who don’t act reflexively, unthinkingly, or impulsively. Instead, they are deliberate in fulfilling their role as leaders in each moment.

Overall, this is about helping leaders develop the capabilities and mindset to effectively balance their leadership’s what and how.

"During the pandemic, many leaders are either stuck in “caring avoidance” or are in “uncaring execution” because they are desperately hanging on to their old “control” ways of getting stuff done. They know no other way."

In conclusion

There are no quick fixes to the great resignation. The pandemic has let the genie out of the bottle: Employees everywhere reconsider what they are willing to put up with from their boss(es) at work. No change in compensation will fix that. Instead, organizations need to double down on the development of their leaders across all levels of the organization – because, in the end, that is what it all comes down to: Employees want to work for better leaders – leaders who care about them and know how to lead effectively in a connected and human way.

"Organizations need to double down on the development of their leaders across all levels of the organization - because, in the end, that is what it all comes down to: Employees want to work for better leaders."

Conquering the Great Resignation:

It starts and ends with your leaders

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