The great resignation is having the same crippling effect on New Zealand businesses that it is having on businesses around the world. The US Department of Labor Statistics has reported that in 2021 nearly 70 million people left their jobs. 4.3 million left in December, 2021. In March 2022 the number of job openings (10.9 million) exceeded the number of new hires (6.3 million). In New Zealand we are getting daily reports of acute shortages of skilled staff across most industries.
The cost of replacing these people varies from 50% to 150% of their salary and up to 400% for senior or specially qualified people. If we say an average is 100% of wage or salary cost and your average salary is $50,000. For a 200 person company with an annual turnover of 20% the cost is $2 million!
However, it is worse than that: the issue is you can’t find suitable replacement people. Recruiters are routinely contacting people who are not currently looking to try and attract them into new jobs. As people resign and their roles cannot be filled, additional workload is placed on current staff who then start thinking about whether it is time for them to make a change. They know it is a buyers’ market and they are in demand. Finding an attractive job is relatively easy. And so, the cycle accelerates.
Why are people leaving?
Recent research from McKinsey in the chart below shows there are many reasons:
The great resignation has created an environment where people feel there is little risk in changing jobs so they are critically examining what they like and dislike about the job they are currently in. Whilst this produces many different reasons for leaving, the reasons have different underlying causes. Sorting the reasons for leaving into groups by looking at the underlying cause of each one helps us understand what is needed to address the issues:
The cause of the top four reasons for people leaving in the chart above are the person’s immediate manager.
The reasons below these are the result of senior manager decisions, policies, or accepted processes and practices in the business, with two notable exceptions:
‘Unreliable and unsupportive people at work’ and ‘a non-inclusive unwelcoming and disconnected community’ are the result of people feeling they do not belong or fit in with their team or the organisation.
Different factors drive satisfaction and dissatisfaction
In the 1950’s and 60’s Frederick Herzberg found that some job characteristics consistently drive job satisfaction and a different set of factors drive job dissatisfaction. The two are independent of each other, not opposites:
The opposite of satisfaction is not dissatisfaction – it is no Satisfaction.
The opposite of Dissatisfaction is not satisfaction – it is no Dissatisfaction
Remedying the causes of dissatisfaction will not create satisfaction but it will remove the dissatisfaction which is making people leave.
The dissatisfaction factors
Herzberg called these the hygiene factors. They are the basic elements that people expect to be provided as part of their job. They do not create satisfaction in themselves but they cause dissatisfaction if they are absent or not adequate in the mind of the employee. They include things like a fair total compensation package, a safe working environment and workplace flexibility.
The satisfaction factors are the drivers of engagement as defined by Gallup’s Q12
The Gallup research conducted over the last 25 years has taken this concept beyond satisfaction and defined the factors that drive engagement – the level of commitment that people have to the organisation. Most importantly, they have also measured the effect on business performance of changing it the effect on business performance of changing it. They found that the 12 factors of engagement are grouped into four stages and to improve engagement it is important that the stages are addressed in the correct order.
So, which are more important?
The drivers of engagement are the things that cause people to commit and go the extra mile. The more engaged people are, as measured by the Q12 , the more committed they become and the greater the improvement in business performance. They determine the long term success of your business. Since 70% of engagement is a direct result of the employee’s immediate manager your key focus is to help each of them become as good a manager as they can possibly be.
On the other hand, the basic elements, or hygiene factors do not work this way. They are those elements that people expect to be a given part of their job. It’s not that pay, benefits, workplace safety and the structure of the organisation are unimportant. It’s just that they are equally important to all employees. They do not drive commitment. If they are satisfactory in the eyes of employees, their level of engagement does not increase – it just means they are not unhappy. But if these elements are not satisfactory it can cause them to become disengaged and eventually leave if they become too bad. These elements are like traffic lights – red or green . They can be likened to tickets to a sports fixture: they get you into the game but they can’t help you win it. They just need to be fixed. The Q12 items are the long term key.
What should you do first?
- Measure the problem. Determine what the causes are in your organisation. Use survey data, exit interviews and any other relevant data you can quickly gather to understand and measure the reasons people give for leaving. Measure how easy or difficult it is to recruit in the current environment and what effect this is having on your business. Measure, measure, measure.
- Prepare a plan which addresses the dissatisfaction factors first (stop the bleeding). It is difficult to credibly start work on the Q12 items if there are serious dissatisfaction elements at work. Prioritise the impact that each of the dissatisfaction factors are having and develop a practical plan of action to address these in order. Develop a communication plan to tell people the actions you are taking and why.
- Measure where you are on the Q Start with Stage 1 in detail and then work through the other stages. The first item of ensuring people know what is required of them at work requires a conversation based performance management tool and an understanding of the process of setting meaningful KPIs that people will connect with. Mariner7 can help with advice and experience on a project plan to put this in place.
- Develop a project plan to begin the engagement journey This roadmap will start the process.Mariner7 is happy to share our knowledge and experience of what works best. Contact us here Mariner 7
Herzberg found that these were not opposites.
In our earlier blog A road map for improving business performance and productivity we reported the Gallup research which found that 70% of an employee’s engagement is determined by their immediate manager.
This is the most important person in the organisation. Managers account for 70% of the variation in employee engagement and employee engagement employee engagement consistently affects key performance outcomes, regardless of the organisation's industry or company.