Faculty Forum: Retaining Talent Amid The Great Resignation
March 21, 2022
The Box welcomes faculty-generated content to spotlight our university’s rich array of expertise. Part II of the inaugural contribution to the new “Faculty Forum” series of perspectives on trends and timely topics is from School of Management Associate Professor Radek Nowak, Ph.D.
In January 2022, The New York Times wrote that “the number of Americans quitting their jobs is the highest on record as workers take advantage of strong employer demand.” This newly emergent post-pandemic trend has been coined by the media as “The Great Resignation.”
The Great Resignation—a massive reshuffling ongoing in the U.S. labor market—has created a new and very competitive economic reality in which American employers struggle to fill a record number of open jobs. According to recent statistics published by the U.S. Labor Department, as many as 11 million open positions remained unfilled in February 2022. In such a challenging economic environment, to keep their business afloat, American companies have been forced to rethink their strategies that focus on attracting, recruiting, and retaining their human capital.
Although the negative impact of the Great Resignation has been recorded across different industries and, to some extent, impacting all employers, it should not affect all companies equally. While well-managed businesses may experience some negative consequences of the Great Resignation, “bad employers”—those characterized by poor management practices—likely will be most impacted.
While steps to attract and retain critical human capital should always be tailored to the specific business needs of each company, all managers across different sectors may want to consider leveraging the following solutions:
- Go back to the principles of good management: Research shows that employers who create a good work environment are more likely to retain their workers. Your company should create and communicate transparent processes for promotion, pay increase, and career advancement. You should use the performance management process to ensure that all employees understand their performance objectives and know how their individual and group efforts will support the firm’s success. Empower employees by providing them with all necessary resources. According to recent research published in Management Research Review (Nowak, 2021), these factors should increase a level of job satisfaction and organizational identification among your employees, in turn reducing their intention to quit.
- Invest in your managers: Edith Penrose, American professor at the London School of Economics, best known for her 1959 book The Theory of the Growth of the Firm, recognized that the success of any firm will depend on the firm’s managerial capacity. In other words, a firm cannot sustain its success without a high quality of managers, and this statement remains true more than 60 years later. Your employees interact with their managers daily and, in turn, create their perception of your company based on such daily interactions. And, yes, they also make a decision to quit based on such interactions. Provide your managers with all relevant professional training, ensure that they keep updating their managerial skills, and be very selective when hiring new managers. Ensure that your firm has the best managers your money can buy. Talking about money…
- Talk about money with your employees: Intrinsic motivators such as challenging tasks and interesting projects are critical as they can increase an employee’s job satisfaction. Nonetheless, in the current inflationary environment, your employees are most likely concerned about meeting their basic needs, such as paying for school or rent. A recent paper published by the Academy of Management Journal (“Motivation Purity Bias” by Derfler-Rozin and Pitesa) reveals that employers tend to discriminate against employees who show some interest in their pay and benefits. Such a strategy is always wrong, but it can become especially problematic in the current business environment. Reconsider making changes in your compensation system. Additional financial incentives will make your company more competitive and may also make your employees more dedicated.
- Finally, consider Employee Value Proposition (EVP): Past research describes EVP as unique arrangements of employment conditions (e.g., flexible work arrangements, flexible hours, Zoom, extra benefits, etc.) that a company can offer to employees in exchange for their skills, knowledge, and abilities. Good employers should therefore try to better understand the unique circumstances of each worker and create (tailor) such individualized employment conditions that will satisfy specific needs. According to past studies, EVP can be very effective as a mechanism to help retain critical talent. Using the EVP practices during the Great Resignation may become especially advantageous by attracting a high quality of talent, in turn helping your company fill critical job openings.
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