Finance

How the Great Resignation Will Affect Business in 2022

Headlines in the United States have highlighted the “Great Resignation” for much of 2021. The very sound of this name gives employers stress. And many employees themselves don’t know what to make of it. Just because something has the word “great” in doesn’t mean it’s actually a good thing (i.e. The Great Depression, The Great War, and The Great Hong Kong Typhoon of 1937).

The significance of these trends and the worthiness of the title “great” are explained by Greg Rosalsky:

Goodbye. Farewell. Adios. Sayonara. Workers have been giving their bosses an earful of such words as of late. Last week, the U.S. Bureau of Labor Statistics announced that 4.3 million Americans, or 2.9% of the entire workforce, quit their jobs in August. That was a record-breaking month, piggybacking on previous record months. “The Great Resignation” is real, and it can be seen across virtually all industries.

While much of the focus has remained on the United States labor market, the “Great Resignation” is gaining traction in Australia, England, and other nations around the globe. It’s clear that this isn’t a local aberration. And it seems to be carrying momentum into early 2022.

What Is the Great Resignation?

There’s nothing unusual about above-average numbers of people moving on from their current jobs. The ebb and flow of the job market ensure these patterns play out over and over again throughout the decades.

But this is different.

The current average annual turnover rate in the United States is 57%, with 70% of the job departures voluntary. It’s simply not sustainable for small businesses with limited recruiting and training resources to deal with that much turnover. And the financial impacts are felt across the spectrum, leading to a combined loss of $600 billion a year.

When it comes to the tenure of the employees leaving, there’s bad news at both ends of the spectrum. Many businesses are seeing their experienced employees exit, taking established knowledge and tactics elsewhere. New employees are also heading for the door. A staggering 33% of new hires are departing in the first 90 days.

The Great Resignation is impacting nearly every industry, but some feel the sting more than others. The following are among the hardest hit:

  • Technology
  • Healthcare
  • Hotels
  • Construction
  • Restaurants and bars
  • Retail
  • Arts and entertainment

Widespread and deep in impact, the Great Resignation is shaping economies and personal fortunes around the world.

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What Is Causing the Great Resignation?

While the overall statistics of the Great Resignation leave little room for debate, there are plenty of differing opinions when it comes to the causes. Some experts point to government programs that have delivered extra benefits and incentives to workers. Others claim that workers are quitting because they don’t want to return to their offices as businesses transition into post-COVID work arrangements. And, finally, many people see the trend stemming from efforts to get either promotions or more money elsewhere.

These factors certainly play roles to varying degrees. But when you’re talking about a trend playing out tens of millions of times each month around the world, there is usually an underlying force.

Rosalsky offers this theory:

In a new working paper, the UC Berkeley economist Ulrike Malmendier suggests there’s something existential behind the Great Resignation: The pandemic and the rise of remote work have changed the way we view our lives and the world. The idea that our experiences shape our choices is hardly radical. And Malmendier isn’t alone among scholars in suggesting that soul-searching during the pandemic helps explain the surge in quitting. Texas A&M psychologist Anthony Klotz, who predicted and coined the term the “Great Resignation” back in May, credits “pandemic epiphanies” with motivating many workers to depart their jobs for greener pastures. But “experience effects,” as Malmendier calls them, remain remarkably under-investigated in economics, which tends to be more focused on the cold, material incentives that influence our behavior.

Perhaps the idea of pandemic epiphanies rings true for you. There’s no doubt that the disruptions brought on by COVID-19 have led all of us to reevaluate our personal and professional lives. What matters most to us and what can be left behind? What is bringing us satisfaction and what needs to be changed? Where do we want to be next year?

Finding the answers to these questions can be tricky to nail down amidst the volatility of a post-COVID world while taking action can be significantly easier. As humans, we’re grasping for control of our lives that seem to be mired in chaos.

Thus, home buying has exploded in many parts of the world. The process of selling or purchasing a property would be considered laborious in most contexts, but when contrasted with the extreme intensity of the pandemic, it actually becomes an escape for millions of people.

Quitting your job falls into this same camp. It’s an assertive move, regardless of whether you have a better job waiting for you or not.

Who Is Doing the Resigning?

The Great Resignation has attracted quite a throng, meaning everyone from hourly-wage teenagers to senior executives have left their jobs in recent months. But if you look closer at the global data, one group, in particular, is quitting more than all others.

Ian Cook highlights this demographic trend in an article for the Harvard Business Review:

Employees between 30 and 45 years old have had the greatest increase in resignation rates, with an average increase of more than 20% between 2020 and 2021. While turnover is typically highest among younger employees, our study found that over the last year, resignations actually decreased for workers in the 20 to 25 age range (likely due to a combination of their greater financial uncertainty and reduced demand for entry-level workers). Interestingly, resignation rates also fell for those in the 60 to 70 age group, while employees in the 25 to 30 and 45+ age groups experienced slightly higher resignation rates than in 2020 (but not as significant an increase as that of the 30-45 group).

Why is this mid-career sector defining the Great Resignation? They often have the most career options, as they’ve built up enough experience to be in demand and also have enough years ahead of them that they’re attractive to other companies. So while the frustrations and disruptions of the pandemic have affected all levels, this group, in particular, is more able to step into new roles.

Evaluating the Role of Entrepreneurs

The term “resignation” is a bit of a misnomer when describing what is going on for the majority of those who have quit their jobs in the past year. The word often carries hints of finality, as though the individual will leave the workforce entirely after quitting their job.

But that’s not the case for the majority of workers around the world. Entrepreneurs in particular are reassessing and then reengaging. This phenomenon has led some observers to clarify the trend as the “Great Reshuffling” as opposed to the Great Resignation.

This flexibility of options has always been a prime advantage of entrepreneurship. When a work situation becomes unacceptable, a better option arises, or the pursuit of a new challenge beckons, you can make the move without feeling like you’re tethered by layers of corporate obligations.

Unsurprisingly, the level of entrepreneurship is rising around the globe. These unprecedented numbers represent current entrepreneurs who are moving on to better career options, former entrepreneurs leaving desk jobs to return to running their own business, and new entrepreneurs who have been converted by the promise of autonomy, flexibility, and purpose.

For example, let’s consider the example of companies requiring workers to return to their offices. This has been a growing trend in many industries that had formerly allowed employees to work remotely. Three different groups of people could take issue with this transition back to the office settings of old:

  1. Those who prefer the experience of working from home
  2. Those who must work from home to care for small children or homeschool older children
  3. Those who don’t feel comfortable with the health risks associated with the return to their office

Driven by legitimate concerns, a large portion of these 3 groups could decide to leave their current jobs in order to avoid the forced return to their office buildings. As they contemplated their next steps, they might consider taking a job with a company that allowed full-time remote work positions. This is more common these days, meaning there have never been more career options.

But the entrepreneurial route would appear extremely compelling in these situations, as it would allow them to take more command of their lives and present the flexibility to choose their work arrangements. Thus, many choose entrepreneurship in order to advocate for themselves in the face of mandates. You can’t have a say over every aspect of your life, but you can make career moves that restore a substantial level of control.

What’s in Store for 2022?

Most experts agree that these trends of workforce upheaval will continue well into 2022. That’s not to say that things will always be this way. The Great Reshuffling that’s currently underway is leading to increased stability in many sectors. People are figuring out their lives during the most discombobulating period of this generation. Each passing month will likely bring a bit more calm and clarity to the picture.

But what does it mean for the business world in the near-term?

First, the bad news. Employers are still going to face struggles when it comes to recruiting and retaining talent. In other words, the parcity of employees will require new approaches. Maybe you can create certain roles that are 100% remote, granting your company access to a whole world of potential candidates. Or you might use automation software to handle many daily tasks, freeing up your current employees to take on new responsibilities without the risk of overburdening them.

If you’re an employer hoping to thrive, you’ll need to think like an entrepreneur. How can you structure your open positions in a way that attracts this new breed of employee? What perks can you offer that will help your listing rise above the sea of competitors?

Now, the good news. These recent trends will bring more energy and efficiency to your business. Millions of unengaged employees stood up from their desks this past year and decided to leave their jobs. If they’re now more confident about what they need in order to find purpose in their work, then they will be valuable assets to the companies who land them in the Great Reshuffle.

Additionally, these trying times can be the necessity that serves as the mother of invention. Leverage the pressure to refine your processes, improve your company culture, and use software to lighten the load for employees.

By embracing an entrepreneurial mindset, you’ll exit the Great Reshuffle better than when you entered it. If you’re an employer, your business will be more aligned with what people are seeking for their careers. You’ll discover ways to promote autonomy and flexibility, while still achieving key business results.

If you’re a solo entrepreneur, the world is your oyster. There are more tools and resources than ever to help you monetize your skills and build a legacy you can be proud of.

We wish you the best of luck during this tumultuous and exciting time. And we’d like to offer you a wide range of resources to assist in your journey. Our collection of free business courses provides strategies and insights that will help you structure the career you’re seeking.

Need help with business negotiations? We’ve got that covered. Looking for strategies for building an ecommerce empire? You’ve come to the right place. Interested in advice for overcoming the obstacles in your path? Step right up!

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