What is ‘The Great Resignation’? An expert explains

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Abhinav Chugh, Acting Content and Partnerships Lead, World Economic Forum

• The Great Resignation is a phenomenon that describes record numbers of people leaving their jobs after the COVID-19 pandemic ends.
• Companies now have to navigate the ripple effects of the pandemic and re-evaluate how to retain talent.
• Dr. Isabell Welpe explains what we can learn from this recent trend in the workforce.

The Great Resignation is an idea proposed by Professor Anthony Klotz of Texas A&M University that predicts a large number of people leaving their jobs after the COVID pandemic ends and life returns to “normal.” Managers are now navigating the ripple effects from the pandemic, as employees re-evaluate their careers and leave their jobs in record numbers. Companies have a record number of open positions in the US, and to explore what has been driving this recent shift, a recent in depth analysis by Ian Cook and his team of more than 9 million employee records at 4,000 global companies revealed two trends:

• Resignation rates are highest among mid-career employees
• Resignation rates are highest in the technology and healthcare industries

At the onset of the pandemic, the job market was full of uncertainty and mass layoffs: millions of people lost their jobs, and those lucky enough to remain employed remained put in their roles for survival. However, as we now turn towards recovery, workers in privileged positions who don’t live paycheck to paycheck are now finally moving on. Most in non-developed economies with the absence of social security and unemployment benefits cannot afford this luxury but may still be undergoing duress and pent-up frustration from the disruption caused by the pandemic.

These trends highlight the importance to understanding why people are leaving and what can be done to prevent The Great Resignation. It also calls for a data-driven approach to determine not just how many people are quitting, but who exactly has the highest turnover risk.

Given the buzz generated around the term “The Great Resignation”, we turned to Professor Dr. Isabell Welpe at the Technical University of Munich. Dr. Welpe conducts research in the area of leadership, innovation, and organization from a behavioural science perspective, with a focus on the selection of managers, managing teams, the role of emotions within managing processes as well as incentive systems and performance measurement. Dr. Welpe also curated the Forum’s Strategic Intelligence briefings on “Workforce and Employment” and “Education, Skills, and Learning” which highlight the key trends and emerging issues relating to the future of work, education, upskilling, and innovation in these fields.

Behind the buzzword ‘The Great Resignation’

Your research gravitates around strategic leadership, work motivation, and the future orientation of organizations. What drew you to develop your expertise in this domain?

The study of organizations is fascinating because many things we hold dear are the result and product of organizations and the leadership therein. When things don’t work out, when services fail, or products lack a certain quality – it is all the result of organizational failure. What I find fascinating is that the role and shape of organizations is constantly shifting, often in response to technological developments. I expect organizations to become more marketized in the future with younger generations not holding 6 jobs in their lifetime anymore but 6 jobs at the same time, as workers offer their skills to different companies in different projects.

Technology development usually moves in waves and we will soon witness the dawn of the decentralised economy that enables a blockchain based way of makers and creators directly interacting with customers and users without the need to go through platform companies and intermediating firms. DAOs (Decentralized autonomous organizations) will be the next stage for organizations in this decentralised economy.

As the global workforce prepares to enter the post pandemic reality, what would you consider the most pressing challenge that organizations must address to sustain work motivation?

We have yet to see what a post pandemic world and workplace will look like. What we can already see is that how we organize work and work together will not return to the way it was before the pandemic. Many companies have announced that their employees never have to return to the office fulltime. I would expect to see a post pandemic work organization as one that moves away from a one-size-fits-all approach towards one that allows individual and asynchronous organization of work and work settings. For example, I expect that companies will allow a part of their workforce to work fully remote most of the time and allow another part of their workforce to come to the office only on 1-2 days a week.

The use of office buildings will change as they become cultural touchstones and meetings places for recruiting, meeting customers, and holding bootcamps to facilitate interpersonal exchange. This new way of organizing work requires a different leadership style and also demands new skills from workers. Self leadership will gradually replace leadership through leaders and control. Workers who are able, willing, and motivated to take on responsibility will thrive and enable greater agility in their organizations. Managing the transition to this new way of functioning organizations requires two measures: Selecting the right talents and socialising them in the right way.

What’s causing the Great Resignation?

There’s been a lot which has been discussed relating to healthcare worker exodus after facing the brunt of the pandemic. However, service industries such as retail, hospitality, food service, etc are continuing to see the highest number of workers quit in any sector. Why is the demand for these jobs and retention fading from the labour market?

Industries with low location and time independence were among the industries that suffered most during the COVID pandemic work crisis. These are business models that are characterized by close proximity of location and time, which implies that providers and receivers of a product or service are at the same place at the same time. These are businesses like dine in restaurants, ship cruises, sporting events, music concerts, passenger airlines, etc.

All these business models suffer severely from such a crisis due to the nature of their business model which has cascading effects on workers, their participation, motivation, and wellbeing. Services provided at a specific place, but where provider and receiver don’t need to be there at the same time have done slightly better. Typical examples are self service stations and independent nature tourism with providers like bergfex or komoot.

As these businesses can be done independent from in time service provision, they have a high survival probability. Businesses that are characterized by a high location independence of the service and a low independence of time, such as businesses that need provider and receiver to do business at the same time but not at the same location have a high survival probability, where you might see lower incidents of the ‘The Great Resignation’. These are business models like live streaming, delivery restaurants, online counseling, and tele medicine.

What we now see is that businesses that offer their products or services independent of time and location, like streaming services, online retailers, remote work service providers, and other multisided platforms are where talent is moving to given their potential and their successful emergence from the pandemic.

Overall, virtual and remote work is mostly here to stay. —Dr. Isabell Welpe, Technical University of Munich

For white-collar workers, the pandemic afforded many new perks such as the ability to work from home, greater flexibility, a more balanced work-life balance – which were unheard of pre pandemic. Would you foresee companies and organisations offering and expanding such perks being the most talent competitive in the future?

I think Stewart Butterfield, the CEO of Slack, has a point in asking: “If we say that everyone must return to the office, or we expect people to, and one of our competitors says you can work remotely, who wouldn’t take the second option there?” We already know from surveys before the pandemic started that an overwhelming majority of knowledge workers would like to work from home and would even be willing to quit a job to work remotely. This is one of the major reasons for The Great Resignation.

During the pandemic, some of the most popular employers have announced that their workers never have to come back into the office regularly again, so it certainly will become an issue of employer attractiveness. There are many benefits of remote working, as employers can save on real estate costs and tap into global talent flexibly. The degree of remote work will also depend upon how well firms manage the challenges that come with remote work: overcoming communication silos particularly between the weak ties between workers and across departments, as well as sharing non-codified information and knowledge. Overall, virtual and remote work is mostly here to stay.

How should organisations be reevaluating their future orientation given the new world of work? What factors should be considered so that our systems are geared towards ensuring decent and dignified work for all?

One of the most important points is establishing a culture of individualized working conditions. Organizations need to know the approximate 5 areas, abilities, behaviour and rules where they cannot and will not compromise – such as high self responsibility and conscientiousness or ability for self development but remain quite flexible at working times, working places and workplace setups. We know from previous research that a lot of work has actually never happened at work due to the M&Ms “the managers and the meetings” as Jason Fried said in his famous TED talk, which keep people at work away from work.

So, the new normal with more possibilities for asynchronous work should enable a win-win situation for workers and organizations alike. Research on the performance of virtual teams clearly shows that both virtual and non-virtual teams always perform better with more role clarity, task clarity, structure and handbook first policies but that all of these are of particular important for the functioning of virtual teams. The pandemic has also shown that companies that have focused on recruiting highly trustworthy, highly committed and performance-oriented individuals found the transition to more flexible and future oriented work much easier.