The last two years may be one of the most tumultuous times in the U.S. workforce due to the extraordinary influence the global coronavirus pandemic had on the workplace.
As workforce researchers, 2020 was a fascinating year. Factors such as the economy, job growth, and unemployment significantly impacted the workforce at large and how employees behave. Thankfully, a global pandemic is rare, but the opportunity to study human behavior in the workplace under unprecedented conditions was and continues to be a unique opportunity.
For most employers 2021 was more turbulent. In the wake of the pandemic employers experienced what became a common headline — The Great Resignation. Employers encountered the highest levels of voluntary employee turnover since the Bureau of Labor Statistics began tracking the quit rate in 2001.
During the initial stages of the pandemic, Work Institute found employees reacted to a rapidly changing environment and workplace by behaving in both predictable and unpredictable ways. Of note was the disruption to family dynamics such as child and elder care, health risk, education, and how workers adapted to these changing conditions. Unprecedented numbers of employees exited the workforce via retirement. Most employers stepped up to comply with safety protocols and went to great lengths to protect employees.
Even with uncertainty related to the resurgence in COVID19 cases, economic recovery in 2021 was brisk and employers faced significant challenges. Open jobs hit a record 11 million in July as reported by the BLS in their Job Openings and Labor Turnover Summary. Nearly 5.2 million U.S. workers quit their jobs (not seasonally adjusted) in August, the highest monthly number ever recorded. As unemployment trended down logic implied most of those employees quit their jobs to go to work somewhere else. This represented a 44% increase from June of 2020 and a 25% jump from January of 2021.
Work Institute publishes an annual Retention Report highlighting the trends and insights related to employee retention in the U.S. workforce. Clearly 2020 was a challenging year for U.S. workers and we saw trends reflective of those challenges in the 2021 Retention Report: The COVID Edition, which is reflective of 2020 retention data.
After the first six months of 2021 showed employees were still quitting their jobs at record levels, Work Institute investigated the reasons why employees quit their jobs to give employers insights into what they must do to effectively retain employees and reported those in the 2021 Mid-Year Retention Report.
The above chart represents the 11 Reasons for Leaving Categories that Work Institute has tracked for over 20 years. The job market narrative in the U.S. continues to center on pay issues in attracting employees either back into the workforce or to change jobs. Pay is an issue when attempting to convince a potential employee back into the workforce; however when it comes to employees quitting a job they already have, the data indicates a different narrative.
As published in each of the last five Retention Reports, pay is cited as the root cause for departure by fewer than one out of every 10 employees who quit their jobs. If employers intend to retain their current employees, they must reject the assumption that pay is the driver of dissatisfaction and focus on the real issues reported by employees as their Reason for Leaving.
After evaluating the first six months of 2021, Work Institute found a few emerging trends indicating employee behaviors impacted by the global pandemic began to change. The above chart is reflective of reasons for leaving for 2019, 2020 and the first six months of 2021.
Several observations were quickly apparent.
- Career issues continue to be the number one cause of employee quits as it has since the inception of this report in 2017. Of note is that Career issues decreased over 8% in 2020, but in the first six months of 2021 were up 17% over 2020 and 2.5% over 2019.
- Work-life balance stayed at 10% but if this remained for the last six months of 2021, it reflected a downward trend in Work-Life Balance departures. Early indications were that workers found value in more flexible work arrangements including being able to work from home or a hybrid approach that allows some to work from both home and/or workplace. Of course, this only impacts approximately 25% of the workforce as it applies only to those that have office-centric jobs.
- Departures related to management issues trended down nearly 34% in 2020 when compared to 2019. That downswing started to trend back upward in 2021 by about 14% and the concern is that managers remain ill-equipped to cope with the complex issues present in the workplace.
- Health & family reasons jumped 41% in 2020 due to hardships facing employees related to the pandemic. Although this reason declined in early 2021 it continues to remain at a level higher than 2019.
- Total rewards increased 30% over 2020 levels but only returned to the level seen in 2019. Again, less than 1 in 10 workers cite pay and/or benefits as the root cause of their departure.
- Retirements steadily declined headed into 2020 but jumped over 58% in 2020. Although they declined in 2021, there were still a healthy number of U.S. workers choosing to depart the workforce altogether.
If the trend of employee departures continued at the pace seen in early 2021, more than 42 million U.S. workers will have quit their jobs in 2021. This would be the most recorded employee departures in a year since the BLS began reporting the data in 2001.
Core Drivers of Retention
Knowing the REAL reasons employees quit is by far the most critical data in developing a sound employee retention strategy. However, there are also factors reflective of the workplace environment that are key drivers influencing employee departures.
The "core drivers" include employee perceptions of the organization, the people employees work with the most, the manager, and the job itself.
For the past three years, Work Institute has conducted extensive research on the four Core Drivers of Retention. In previous Retention Reports we published findings related to the predictive capabilities of the Core Drivers on Intent to Stay. Further research results now enable us to report the predictive value and assurances of the Core Drivers on specific categories of Reasons for Leaving.
Many organizations use exit study data to focus on the reason’s employees choose to exit their organization. Acting on those very reasons remains an urgent requirement, but it is also important to identify additional levers to create urgency for action and have an impact on reducing more preventable reasons for departure.
The first objective was to investigate if employee perceptions of the Core Drivers were impacted by the global pandemic and therefore different in 2020 than in previous years. Our hypothesis was that Ratings of Organization and Ratings of Manager would decline due to how organizations and managers responded to the pandemic. Surprisingly, the opposite was true. Ratings of Organization and Managers improved in 2020 compared to the previous two years.
Organizations and Managers were forced by the effects of the pandemic to allow remote working and to step up communication efforts. These factors were seen as by employees as positive and therefore improved ratings. It was also the case that due to the substantial number of employees who were working remotely, many managers became less a factor in employees’ day-to-day activities, leading to fewer negative perceptions.
Unfortunately, the improvement in perceptions of Organizations and Managers appears to be short lived. Early indicators from 2021 showed those perceptions trending downward.
The important takeaway is there were improvements in manager perceptions in 2020 that began to fade. Based on the predictive analysis, this could have a significant impact on reducing preventable Reasons for Leaving. Overall, Organization, Manager, and Job ratings all predicted more preventable Reasons for Leaving while Team ratings predicted less preventable Reasons for Leaving.
This research places a whole new value on the exit study methodology and the relationship between employee and manager. For years, the popular narrative has been employees do not leave companies but instead leave managers. Work Institute’s research confirms this to a degree but offers up an entirely new perspective on the role of the manager in an organization.
The Manager should be held accountable for their own behaviors and how they manage Team members. More critical however, is their responsibilities beyond just their immediate role. Duties must extend to additionally include stewarding employee perceptions of the organization. The Manager is the person most responsible for setting the tone for their organization’s climate, for mentoring employee’s careers, for adapting the job to fit team members, for finding new and creative ways to help employees improve their Work-Life Balance, and for regularly measuring, remediating, and developing the employee-employer relationship.
To create the conditions where productive employees stay with an employer, organizations must support their managers with measurement, remediation and development tools, and flexibility to meet employees where they are and create the conditions where employees want to stay.
What’s Next for Employers?
Now more than ever, employers must be diligent in listening and reacting to what employees say would improve the workplace and their intent to stay. The massive number of employees that quit their jobs in 2021 indicates that employers simply are not doing enough to create the conditions where employees will stay.
Lastly, new research proves how valuable the employee/manager relationship is to employee retention. It is time to reframe how we define the responsibility and influence managers have in the workplace. They not only manage the day-to-day activities of employees, but they also steward the company mission, vision, and values that employees want to align with and understand.
Managers hold the keys to help employees fulfill their occupational purpose by mentoring them in their career aspirations and help them develop both personally and professionally to achieve their individual goals.
Development of managers must be at the center of every employer’s strategy. Without highly effective managers, employers are not likely to achieve their objectives and are certainly going to bear the brunt of the high cost of turnover and employee disengagement.
To see the full 2021 Retention Report, visit www.workinstitute.com/retention-report.
