After huge recent fluctuations in the labor market—record low unemployment before the pandemic, record job losses during, and record re-hiring in the aftermath—employers are facing more severe talent shortages than any time since we at RainmakerThinking began our workplace research in 1993.
While the particulars differ by geography, industry, skill specialization, and level, the evidence of talent shortages is widespread:
- Voluntary unplanned turnover (the “quit rate”) is increasing.
- Pent-up departure demand (the “want to quit rate”) also is increasing.
- Open-position and time-to-hire rates are increasing.
- Early voluntary departure of new hires (less than eighteen months) is increasing.
Why?
Many observers point to acute, post-pandemic, presumably short-term factors:
- Workforce burnout and depression
- Fear of infection—causing fear of returning to the workplace
- Extended unemployment and other benefits
- Increased family care needs
- Location disruption
- Specific industry changes (for example, health care, restaurant/hospitality, public safety)
- Hastened retirements or career pausing
- Postponed schooling/training/graduation leading to delayed workforce entry
While most of these acute factors above will ebb with time, there also will be lasting echoes, especially given the longer-term trends that have been steadily transforming the employer-employee relationship:
- Globalization and technology have reached a point where the world is so highly interconnected and rapidly changing that adaptability has replaced stability as the strategic imperative.
- Institutions must be flexible, above all else, so employers can no longer even pretend to offer job security to even the most loyal employees.
- Individuals must fend for themselves and their families, so employees must be prepared to sell their work to the highest bidder, in whatever currencies the individual may value (money, time, location, or otherwise).
- Employer-employee relationships become less and less long-term and hierarchical and more and more short-term and transactional, and new modes of work continue to emerge (first there was temping, part-timing, and consulting; and now the gig economy).
- Employers have learned from the pandemic that they must be even more lean, flexible, and adaptable (read, smaller real estate footprints and fewer permanent workers) going forward; and many employees, for their part, are recalibrating their career ambitions and plans, opting—at least for now—for more life in the balance with work.
Meanwhile, the supply-and-demand curve for employees promises to be unforgiving to employers for the foreseeable future:
- For jobs that require technical training and certification, whether, through a professional degree or apprenticeship to a skilled tradesperson, the pipeline is not keeping up with market needs.
- For those service jobs that do not require training and certification, there are shortages of candidates with the soft skills necessary for optimum performance.
- Organizations with significant “age bubbles” (those born before 1965) will begin to feel the steady effects as the oldest, most experienced employees retire. Those retirees take with them the skill, knowledge, wisdom, institutional memory, and relationships developed during their tenures.
- By 2022, individuals born in 1990 and later will comprise more than 33 percent of the North American workforce, with similar figures for Western Europe and Japan and even higher percentages in parts of South America, Africa, and Asia. Organizations with high percentages of young workers will face an increasingly transactional workforce, not hesitating to request greater flexibility in their working arrangements.
The Talent Wars Are Costly
When open-position and time-to-fill rates are high, your teams remain perpetually understaffed. There are five costs:
- Sales realization opportunities are lost and over-promised-purchasers are ultimately disappointed due to lack of capacity to fulfill the demand for the work necessary to deliver your services and products.
- Current staff members become overcommitted as they seek to fill in work in positions that remain unfilled; overcommitment syndrome leads to mistakes, delays, relationship friction, diminished morale, and burnout—ultimately leading to increased turnover.
- Overtime costs increase.
- Perpetual understaffing workarounds become entrenched bad habits, leading the team further and further away from best practices.
- New hires do not get enough attention in the onboarding and up-to-speed training process.
That’s why one of the worst things that can happen nowadays is when one of your valued employees decides to leave. So why do good people leave even unexpectedly when you wish they would stay?
Top 4 Causes of Early (Within 2 Years) Voluntary Departures
There is great consistency in data over more than two decades, including the last two years, in the top causes of early voluntary departures among newly hired employees:
- Buyer’s remorse or overselling the job: When the newly hired employee is very disappointed by the real conditions of the job as compared with representations or promises made during the hiring process.
- Inadequate onboarding and/or up-to-speed training process: When the first days and weeks of a new hire’s employment are not rigorously scheduled with interactions, experiences, and assignments designed to make a connection between the new hire and the organization—its mission, values, history, culture, people, and work—and transfer to the new-hire ownership of at least one concrete task, responsibility or project.
- Hand-off to a disengaged or unsupportive manager: When the manager does not provide clear expectations, regular feedback about performance, resource planning/troubleshooting/problem-solving, credit, or reward for performance.
- Limited flexibility when it comes to assignments, schedule, location/workspace, or other preferred work conditions.
While much hiring was postponed during the pandemic, where hiring was occurring, some of the underlying conditions contributing to these causes were exacerbated, leading to unnecessary hiring failures. At the same time, some new hires suffering these causes may have hesitated to leave their jobs during the pandemic, even if they had concluded that taking the job was a mistake.
When employees (new hires or longer-term) decide to quit—but not until “the time is right”—we call this “leaving in your head,” or “leaving without leaving.” This phenomenon is sometimes the explanation for diminished performance or bad attitude from a previously “good” employee.
Leaving without leaving is also a big component of pent-up departure demand.
Top 5 Causes of Current Pent-up Departure Demand/Mid-Stage Voluntary Departures
The top causes of current pent-up departure demand in today’s workforce also overlap with data over the last two decades regarding top causes of middle-stage (two to five years) voluntary departure:
- Overcommitment syndrome for an extended period with no end in sight: Siege mentality (incoming assignments, requests, opportunities feel like an assault); burnout.
- Disengaged or unsupportive manager: When the manager does not provide clear expectations, regular feedback about performance, resource planning/troubleshooting/problem solving, credit or reward for performance; or efforts to provide some flexibility when it comes to assignments, schedule, location/workspace, and other work conditions.
- Limited flexibility when it comes to assignments, schedule, location/workspace, or other preferred work conditions.
- Lack of career path: No clear steps toward role/position growth or advancement.
- Relationship conflict: Cliques, ringleaders, or other exclusionary social formations.
Again, the pandemic—with its attendant dangers, fears, lockdowns, supply chain disruption, market volatility, and other pressures—exacerbated many conditions underlying these causes. While many people did leave jobs (or the workforce altogether) during the pandemic, many others have stayed in place waiting for the right time to leave. As hiring soars to record highs in the post-pandemic era, quit rates also are soaring as pent-up departure demand is released.
What Can You Do?
Your #1 strategy for winning today’s talent wars is to retain the valued employees you already have by fighting these top causes of turnover. You’ll save yourself the costs of replacing that valued employee—the costs of recruiting, onboarding, and up-to-speed training for a replacement. You’ll keep earning a return on investment in the recruiting, onboarding, and up-to-speed training investment you have made in your existing employees. You’ll prevent disruption and increased work burdens that could affect the rest of your employees. You’ll prevent diminished morale and copycat departures. And the more you control turnover among good employees, the more robust your bench strength of home-grown talent who could be available for other positions throughout the organization. While you cannot control the large acute factors and the long-term macro factors driving the larger talent shortage, you CAN fight the causes of turnover in your own team/organization among your own talent. That is the first strategy.
