This is the cost of the Great Resignation. Here’s what leaders can do

Workhuman’s research surveyed employees in the U.S., UK, Ireland, and Canada and found that nearly 40% are planning to look for a new job in the next 12 months. In December 2019 that number was 21%. Put simply, your potential cost of turnover doubled in the past 20 months. Actual quit rates are lower than 40% for many reasons. Nevertheless, the fact that so many more people are planning a job search this year should be chilling to any leader. 

Voluntary turnover has the potential to cost businesses billions, and that’s just the beginning of its effect. Visier research shows employees between 30 and 45—the core of most management teams—increased their resignation rate more than 20% this year. Resignations decreased slightly for 20–25-year-olds as well as 60–70-year-old employees. Visier suggests several reasons (including burnout and the effects of remote work) before recommending tailored retention programs. 

Your organization is in danger of being hollowed out. You have three options:

1. Hope this is temporary and do nothing
2. Get into a salary arms race to hold critical talent, which will crush your bottom line
3. Double down on building a culture that attracts and keeps the best people

RESIGNATION MATH

A bit of math shows that the third option is the best solution. The cost of replacing an employee can be anywhere from 50% to 200% of their salary. Using 100% as a benchmark, an organization with an average salary of $50,000 potentially faces that amount for employees who leave. Whether your turnover rate is 3% or 20%, that’s the kind of cost that can kill your bottom line. 

Retention is obviously the key to cutting that cost, and workforce data show that the best ways to increase retention have to do with company culture. Continuous feedback, employee recognition, celebrating individual and team accomplishments, and just building a more human workplace all have measurable bottom-line benefits because they all strengthen employees’ emotional ties to each other and the organization. 

Our research shows that a well-executed employee recognition program has the potential to cut turnover in half. So, for example, a 100-person company with a salary average of $50,000 and a turnover rate that goes from 10% to 5% would spend $50,000 on recognition and save $250,000 on turnover even though that initial $50,000 is already budgeted. In short, it’s not just how much people are paid; it’s how they are paid. Peer-to-peer recognition, spread throughout the year, builds engagement on the same salary budget as more traditional, top-down salary systems.

LET YOUR HUMAN SHOW

The Great Resignation illustrates the fact that people don’t make decisions based on strictly rational reasoning. We are emotional, community-oriented actors with needs that can never be fully quantified. We want to belong to a group. We want to feel appreciated. We want to show up as our genuine, complete, even messy selves and be recognized for who we are. All of these are possible in the organization I call the Human Workplace. 

Intentionality is the key to creating this culture. Work demands so much rational decision-making that leaders can miss the simple power of human connection. They need to pause and deliberately celebrate the connections and achievements that make up the irreplaceable networks of trust in a company. Show appreciation for employees’ contributions, the little considerations, as well as the big team wins. Tell stories about how their actions embody company values. For example, if you revere accountability, tell a story about someone who delivered on their commitments when pandemic disruptions made that especially difficult. Broadcast the story on your internal networks or all-hands meetings (I feature these stories in all my keynote speeches). 

Public appreciation of individuals and teams creates community. Put simply, it’s a message that “We’re all in this together,” which in today’s polarized environment might be one of the most counter-cultural messages you can give.  

Demonstrate personal empathy, the ability to understand and relate to what others feel. You can’t just say, “I feel your pain,” however. Empathy in an organization means taking action to alleviate pain. That might mean increasing flexibility (a big demand in Workhuman’s survey), offering remedies for stress (burnout’s a big factor in exits), and teaching employees to use empathy in their daily work, with customers and each other. if you want to go further, consider requiring all employees—no matter what level they may be—to learn and practice empathy skills. Make this part of your training programs, don’t leave it to good intentions.

Empathy also means talking about your own need for connection, trust, and belonging. Too many executives put on the armor of invincibility, which in a Human Workplace only creates emotional distance.

In July, Gallup found 48% of American workers are actively job searching or watching for opportunities, and SHRM’s latest data match Workhuman’s finding of nearly 40%. Two out of five of your workers might have their eye on the door, and your competition will spend money to lure them away.