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Great Attrition has turned into the Great Renegotiation

Great Attrition has turned into the Great Renegotiation

The Great Attrition: How the Talent Shortage is Making Hiring Harder

The Great Attrition is making hiring harder than ever before and maybe even our ability to let go of people who aren’t aligned to the culture or poor performers? People are also quitting their jobs at record levels. Unfortunately, this has led to a talent shortage. As a result, businesses are struggling to find talented workers to fill open positions. 

While on the other hand, organisations that have been successful in hiring are now doing so by often reaching into new talent pools.

According to recent research by McKinsey, there are five types of workers that employers should target to find the best candidates.

Let’s identify these groups and see why they might be a good fit for your business while also taking a closer look at the causes of The Great Attrition.

How Is The Great Attrition Affecting Businesses?

The Great Attrition has turned into the Great Renegotiation. 

It seems like everyone is quitting these days.

Employees are switching jobs or changing industries. They’re retiring early. They’re leaving traditional roles to take on non-traditional employment, such as being self-employed, freelancing, or joining the gig economy. People are also quitting to start their own businesses, while some are taking time out from the workforce to reassess their lives and what is most important to them.

We’re in a buyer’s market, where employees can pick and choose their jobs, and competition amongst companies is at an all-time high to recruit the best talent.

According to the Australian Bureau of Statistics (ABS), as of August 2022, there were 470,900 job vacancies in Australia, an increase from 334,300 a year earlier in August 2021. Compare that to pre-pandemic numbers in August 2019, when there were 224,400 job listings, and the vacancies have more than doubled.

As employers fill vacancies, it still isn’t fixing the problem, as, during the year ending February 2022, 1.3 million people, or 9.5% of all employed people in Australia, changed jobs.

With the constant merry-go-round of advertising, hiring, and quitting, it seems a long time until things will return to ‘normal.’ If it does at all.

We’ve now entered the phase where employers continue to shout that people are ‘lazy’ and unwilling to apply for advertised positions. But in reality, that isn’t the case at all.

There is a massive mismatch between what companies currently offer and what workers are looking for.

Employers are still trying to do things ‘the old way‘ and use traditional means to attract talent and retain existing employees. Things such as titles, compensation, and opportunities for career advancement.

While all these things are still crucial for ‘traditional workers,’ after COVID-19, more people have begun reevaluating their career needs and what they want from life. As a result, it has caused many people who previously worked a traditional career to turn their backs on this arrangement.

This has led to a significant shortage in the labour supply pool because there are no longer enough employees with a traditional mindset available to fill all the openings.

One strategy employers continue to use is to poach workers from rival companies with a wage increase. But, they are just reshuffling workers from company to company without solving the underlying problem. Instead, they are making it worse by contributing to a wage escalation.

So what is the solution, then?

Organisations should try and find a way to once again recruit non-traditional workers.

But how exactly can they do that? Let’s find out.

McKinsey undertook extensive research after analysing workers in six different countries. They then created five essential employee personas that employers should target while recruiting and retaining talent for the long term. 

We’ll take a look at these personas shortly.

Many changes have been happening in the economy since the Great Attrition began. But, the number of employees who plan to quit their jobs is still at the same level as a year ago.

In Australia, that number is 41% of all employees. However, only 17% said they will almost certainlyvery likely, or likely leave their job, with 24% only somewhat likely to in the following 3 to 6 months. 

There are now trends starting to emerge regarding employees who have already quit their jobs, such as:

●     Reshuffling Workers – 48% of employees who left their job in the research sample quit and found new jobs in a different industry.

●     Reinventing Workers- Employees also leave traditional employment in favour of non-traditional jobs, such as freelance, gig economy, temporary, or part-time positions. They’re also starting their own businesses.

●     Reassessing Workers – People are also quitting their jobs because of life events rather than to find another job. Such as caring for children and seniors or prioritising their own physical and mental health.

Of employees who quit their job without a new one to move to, only 47% decided to return to the workforce, with only 29% choosing to return to traditional full-time employment.

These factors are contributing to people who have removed themselves from the workforce, leading to a significant shrinking of the talent pool available to employers.

Globally, there is a consistent desire for work that is more meaningful, higher paying, or a combination of both.

Employees now strongly realise that they can easily find better jobs, even if they leave the workforce for an extended time. Nearly 75% of respondents in the survey believe they could easily find a job that pays as much or more with the same or better benefits.

“The greatest discovery of all time is that a person can change his future by merely changing his attitude” – Oprah Winfrey

The Great Shuffle Between Industries

When employers now lose employees, there is no guarantee that they can hire workers with similar skill sets to the ones who quit. In fact, only 35% of people who left their job in the past 2 years globally moved to a new position within the same industry.

While 48% moved to a different industry, 17% did not return to the workforce. This means retaining high-performing existing employees is even more vital than ever.

Many industries have been hit hard. For example, in the Finance and Insurance industry, 65% of people who quit did not return to the same industry. For Travel, it is 55%, while Healthcare and Pharmaceuticals, and Education are 54%.

These days there is also less of a stigma between people who regularly change jobs or have more significant gaps in their resumes than ever before. One of the reasons contributing to this is that employment opportunities have now opened beyond just a geographical location. People can look for jobs anywhere in their state, country, or globally without physically relocating – thanks to the world embracing remote work during the pandemic. 

This has led to employers competing with companies in their industry, as has happened previously, and with other employers across multiple industries.

“Change is the law of life, and those who look only to the past and present are certain to miss the future” – John F. Kennedy

The 5 Personas And How To Target Employee Value Proposition Post-COVID

To overcome the current disparity between labour supply and demand, companies should start looking at different employee personas segments and finding how to engage them. 

First, it’s crucial to understand what people like and dislike about a job. What makes them stay, and what makes them leave. 

McKinsey found that the most important factors for employee retention are:

●     Workplace flexibility

●     Meaningfulness of work

●     Support for health and well-being

These are things that traditional employment didn’t place much emphasis on in the past. 

Have you seen our LeadershipHQ Verification Program?

Top Reasons Why Employees Quit Their Jobs During The Pandemic

While on the other hand, some of the top reasons that people quit jobs between April 2021 and April 2022 were:

●     Lack of career development (41%)

●     Inadequate total compensation (36%)

●     Uncaring and uninspiring leaders (34%)

●     Lack of meaningful work (31%)

●     Lack of workplace flexibility (26%)

Being a positive leader and inspiring your team is more important than ever. 

In the past, team members may have overlooked working for a bad boss if offered an attractive salary. However, after the pandemic, times have changed. Right now, employees demand excellent compensation and a great boss. Otherwise, they know they can find another job quickly and easily. 

Investing in leadership development programs can help take your leaders to the next level that aligns with your organisational goals. It can also help you train your future leaders and prevent staff from leaving when they feel there is no chance of future career development.

Now that we know what contributes to employee retention and attrition let’s look at the five different employee personas

“Times and conditions change so rapidly that we must keep our aim constantly focused on the future.” -Walt Disney

1.  The Traditionalists: The Old-School Workhorses

Traditionalists are a dying breed. They are the ones that are still employed full-time by large companies and haven’t quit during the Great Attrition. They value their job title, status at the company, and career advancement more than having a life outside of work. They are also motivated by a competitive compensation package and perks. But traditionalists are quickly becoming a thing of the past as more people realise there is more to life than work.

People are starting to value their time and relationships more than their careers. So, while traditionalists may not be extinct just yet, they are definitely on the decline.

Yet, organisations love traditionalist employees. They are career-minded and easy to find with common recruitment strategies. What these employees are after also aligns with what companies have previously offered to hire and retain talent.

The problem is that there are no longer enough traditionalist employees in the talent pool to fill all existing vacancies. Moreover, that number will only decrease as more people reach retirement age. 

When companies now recruit workers through traditional methods, rivals try to poach their existing employees with higher pay and incentives to attract the same talent in declining supply. This doesn’t solve the problem and contributes to wage inflation, with workers freely moving between companies and employers having to repeat the same process over and over.

What Are The Other Options?

Traditionalist employees like to play it safe and continue with the old-school working model. But, the rest of the workforce is much more varied – such as being self-employed, freelancing, or working in the gig economy. Then some workers are students after part-time hours, temp workers, and casual/on-call workers.

While these workers are most likely not what organisations were looking for a few years ago, they now make up the majority of the available potential talent pool. Consequently, employers should strongly consider the following employee personas when trying to fill vacancies.

“To accomplish meaningful results from facing fear, harness the resulting courage and plug it into a higher purpose to create motivation and impact for positive change, to drive continual development, and to drive sustainable and ongoing advancement and improvement.” – Sonia McDonald from First Comes Courage.

2. The DIYers: Freedom Seekers

The DIYers persona comprises the largest percentage of people. They strongly value workplace flexibility, meaningful work, and a competitive salary as motivation to potentially return to a traditional workplace job.

They are mostly between 25-45 years old, and their current work ranges from being self-employed to working in the gig or freelance economy full-time, or part-time employees.

The factor that is most important to this persona is flexibility. So many people wanted a fresh start during the pandemic and asked themselves, “is this as good as it gets?”

Stress relating to the workplace, dealing with toxic managers, not feeling appreciated, and having no flexibility with their job was the decisive driving factor to seeking something different for themselves. Whether that was starting their own business, part-time work, or joining the gig economy to become their own boss. They all had one thing in common: giving themselves the freedom to set their own hours.

It will most likely be challenging to attract this cohort of workers. Your organisation must show them that you can offer them something better than what they have built themselves. You can offer this group of workers what they want by providing freedom, flexible working hours, and purposeful work, combined with a higher salary.

3. Caregivers: At Home But Wanting To Work Again

Many in this group are parents or caregivers who left traditional employment to care for children, parents, or themselves. While they are motivated by compensation, they have other priorities for returning to the workforce, such as workplace flexibility, employee health and well-being support, and career development. They are primarily in the 18 to 44 age group, with the majority being women that are either parents or caregivers.

Some are actively seeking employment, while others are keeping an eye out for the right opportunity that would motivate them to reenter the workforce. However, they require a lot of flexibility and more support than was offered in their traditional workplace and leave their job to care for their parents, children, or themselves.

They are ready to offer their skills again and work with companies who can provide a flexible schedule to suit their needs. Otherwise, they would continue with caregiving instead of making sacrifices to return to an inflexible workplace.

Your company can recruit from this growing group of potential employees by providing part-time work arrangements, flexible hours, and benefits such as offering parental leave, flexibility around school holidays, and even on-site childcare.

4. Idealists: Students and Young Part-Time Workers

Workers in the idealist persona are often between the ages of 18 and 24, part of Generation Z. They comprise many part-time workers or students. This group has no mortgages, dependents, or other responsibilities that tie them down. Instead, they prioritise flexibility, work-life balance, career development opportunities, meaningful work and a supportive community. As a result, pay rates are a much lower priority.

Companies must provide flexibility while investing in their future and creating a positive organisational culture that includes inclusivity, equality, meaning, and purpose. Idealists also strongly value workplace diversity. By offering tuition subsidies along with flexible work schedules and development programs, you’ll be able to provide them with a culture they will love to be a part of.

5. Relaxers: It Is No Longer About A Career

People who fall under the ‘relaxers’ persona no longer prioritise work. Instead, they are a combination of people not actively seeking employment and others who would consider returning to traditional work, but only under their ideal circumstances.

People who retired during the pandemic earlier than planned have finished working in a traditional career and are most likely able to live comfortably without being motivated by money.

They may be bored at home and interested in returning to the traditional workplace – but only if it is to undertake meaningful work. This covers both early retirees and people who naturally retired but still have a lot to offer to the workforce – and they make up the largest cohort of people not currently in the workforce.

While many people retired early in the pandemic, they are slowly starting to return to work. Either by being enticed through increased wages or having felt the pinch of inflation as they see their savings shrink faster than anticipated.

Employers often don’t actively pursue hiring senior workers as much as other employees. But it may be worth reaching out to former employees who left on good terms and seeing if they are interested in returning to the workplace with more work-life balance.

Next Steps For Filling Vacancies

While employers should continue to recruit employees by traditional means, they should also widen their net and look at trying to hire from any of the personas above.

The world has changed since the pandemic. While there may seem to be a shortage of workers, they are out there. Only now, they are looking for something different than traditional pre-pandemic work arrangements.

Employers can take four different actions to succeed in long-term employee retention while minimising attrition. They are:

●     Improve traditional employee value proposition – focusing on title, career paths, compensation, having a great manager, and company benefits.

●     Offer flexible working conditions – including mental health benefits, positive company culture, career progression training and opportunities, remote work opportunities and a flexible schedule.

●     Broaden talent-sourcing – With a shortage of traditionalist workers, companies now need to look beyond traditional recruitment. Many non-traditionalist workers would consider returning to a traditional workplace if they received the right offer but are not actively looking.

●     Make Jobs Meaningful: Increasing belonging and a strong team and organisational culture make employees more loyal to a company. They’re also less likely to leave for another organisation for a higher payday.

Do you want to create an outstanding, courageous work culture that employees love?

At LeadershipHQ, we offer Cultural Development Programs that benefit your company while making economic sense. Our workshops are tailored to your unique needs to create and nurture the organisational culture you have always envisioned. Contact us today to find out more.

About LeadershipHQ

We are a leadership development and performance organisation. We encourage leaders to realise their full potential, discover their calling, and make a real difference in the world. With us, you’ll find a truly invested team that offers genuine care and support while telling it like it is. We are deeply committed to the success of our clients. You won’t have to deal with the egos of large consulting firms – your success and progression are everything to us. In our work, everyone feels safe and inspired. 

We do everything –

  • Cultural Development
  • Leadership Development
  • Executive Coaching
  • Online Leadership Solutions
  • Team Alignment and Building
  • Safety Leadership
  • 360 Degree Leadership Assessments
  • Project and Bid Team Development
  • Survey Design and Reporting

About the Author – Sonia McDonald

Sonia is founder of Leadership HQ and is also a renowned and award-winning author, having written several of her own books, Leadership Attitude, Just Rock It! and First Comes Courage as well as being a regular contributor in The Australian, HRD Magazine, Smart Healthy Women and Women’s Business Media. She was named as one of the Top 250 Influential Women in the world as well as Top 100 Australian Entrepreneurs by Richtopia.

Through her leadership advisory and coaching work at LeadershipHQ, and founding the Outstanding Leadership Awards, Sonia is internationally recognised as an expert in leadership and culture, organisational development, neuroscience, kindness, and courage. 

Sonia is also a full-time single parent and has a passion for women in business and teenage mental health. Sonia travels and speaks across Australia and Globe, and she is on a mission to building a world of great leaders and leadership.