Challenges, Opportunities and Leadership Implications of the Great Resignation

In a new report, Russell Reynolds Associates says that availability of key talent and skills is a leading cause of concern among business leaders. And it’s the No. 1 issue they feel least ready to face. Forty percent of employees, in fact, say that they are “at least somewhat likely” to depart from their current job in the next three to six months. 

January 27, 2022 – The Great Resignation has become the moniker for two phenomena – increased numbers of employees quitting their jobs voluntarily (usually to take on another job elsewhere), and a sense of a looming wave of attrition driven by COVID-era induced burnout and disengagement within the workforce, according to a new report from Russell Reynolds Associates’ Thomas Handcock.

Leaders are concerned, according to the search firm’s latest research. The firm’s Global Leadership Monitor, which tracks top executive priorities, found that availability of key talent and skills was the second most important external factor (behind uncertain economic growth) that executives across the globe believe will impact their organization’s health over the next 12 to 18 months. Critically it was the top issue that they were least likely to feel prepared to face – close to half of leaders do not believe their leadership team is prepared to address the issue, well behind most other issues Russell Reynolds Associates tracked.

Evidence of the Great Resignation is robust. McKinsey’s analysis found that 40 percent of employees say that they are at least somewhat likely to leave their current job in the next three to six months. Furthermore, 53 percent of talent management professionals reported that they are experiencing greater voluntary turnover this year than prior years, and of those, 59 percent expected that the turnover rate would not change over the next six months, while five percent thought it would increase.

Analysis to date has almost exclusively focused on the workforce in general. Russell Reynolds Associates’ data shows organizations are also at risk of leadership talent attrition; this is particularly pronounced among next-generation leaders – those one or two levels down from the C-suite. Fully 73 percent of next-generation leaders say they are open to new opportunities. Talent mobility among these next-generation leaders was at an already high 65 percent before the pandemic, so this state of affairs is not a sea change. There are however two important factors to consider: First, rampant demand. As Anna Penfold, leader of Russell Reynolds’s global functions practice noted: “As we speak to candidates – whether they are actively looking or not – we consistently hear that they are being approached about many other roles, and they frequently have multiple offers on the table.” Second, fewer than four in 10 next-generation leaders have confidence in the C-level succession strategy at their organizations. “Chances are many of your next-gen leaders are open to new opportunities, don’t see a future within your organization, and are being actively courted by multiple other organizations,” the report said.

Challenges and Opportunities

According to the Russell Reynolds report, leaders should be concerned about heightened levels of attrition both in their employee base and in their leadership teams. “While it is right to connect these trends to the effects of the global pandemic, this is not simply a story of burnout, but also one of opportunity,” the study said. “There are a set of supply and demand-side dynamics that are conspiring to create a buoyant labor market – this creates opportunities for individuals to seek out new career opportunities, and for companies to tap into new talent.”

Many individuals, at all levels within organizations, have been, or are, re-evaluating their career and life goals and priorities, the Russell Reynolds report says. “Others have had a change in circumstance – perhaps they have moved to a new location, or they have had to deal with the challenges of ill-health, death, financial troubles and caring responsibilities,” said Russell Reynolds. “Furthermore, many employees are simply questioning their employer’s value proposition: Did my company show up for me and my colleagues when it mattered? Am I excited by the purpose of my organization? Do I feel valued?”

The search firm notes that these supply-side dynamics (what talent wants, feels and needs) are not new but they have been amplified by the psychological stress and dislocation of the pandemic. In turn, they are driving heightened levels of openness to new opportunities (and expectations of what those opportunities must deliver).

Related: How to Prepare Candidates for a Successful Resignation

“While those dynamics play out there are a set of demand-side dynamics that are driving growth in hiring and increased levels of convergent competition – more organizations competing for the same talent,” the Russell Reynolds report said. “In addition to voluntary turnover, two key forces create new hiring needs for organizations. Firstly, business transformation and investment. Forced digital acceleration, redesigning of supply chains, new products and market strategies and opportunities, all driven by the disruption of the pandemic have created new hiring needs. Secondly, organizations are also resetting leadership expectations. For some, this is a straightforward evaluation of how leaders performed in the crises and the conclusion that some did not pass muster.”

The report also noted that for other organizations the “transformation of their businesses, and critically the expectations of their employees, mean they need to bring on leaders with new skill-sets and experiences as well as the capability to lead in a fast-changing world of work. Overlay these dynamics with a broad shift to hybrid working which means employers can cast the boundaries of location aside and tap into new talent pools, and you have a rich cocktail driving growth in hiring and talent competition.”

Fighting the Great Resignation with Cash 

As the Great Resignation has extended worldwide, compensation experts have reminded organizations that there are numerous ways to attract and retain employees besides paying them higher wages. But there’s overwhelming evidence that the go-to move for most companies continues to be paying more, according to the latest findings from Korn Ferry, which found a record a number of pay raises over the past quarter.

The supply/demand equation – part risk, part opportunity – is accentuated by two foundational trends. “Sustainability/ESG and diversity, equity and inclusion,” the Russell Reynolds report said. “Organizations were already under considerable pressure to make progress on both fronts before the pandemic hit. In order to make progress organizations need to evolve their talent management practices, especially as it relates to leadership talent and culture. New skills will be required to deliver upon sustainability goals, and progress on diversity at the top needs to accelerate. Leaders should be mindful not to underestimate the importance of these trends to attraction and retention – how an organization is engaging with them can make or break their employment value proposition in a competitive marketplace.”

Leadership and Talent Management Implications

Organizations are exposed to a substantial amount of talent risk today. “But that very same risk also presents an opportunity as talent becomes easier to dislodge from other organizations,” the report said. “In order to retain talent and have an opportunity to access new talent, leadership teams must consider two critical questions: how they as leaders, lead; and how they need to evolve their talent management strategy.”

Several key leadership attributes have been elevated in importance, and Russell Reynolds Associates believe they are here to stay:

  • Authentic and Empathetic: A heightened ability to sense context and deliver pitch-perfect communications with different audiences in different situations.
  • Purpose Driven: An ability to connect the organization to societal purpose and explain the “reason for being.”
  • Inclusive: Going beyond making employees feel heard and including them in building new ways forward.
  • Innovative and Adaptable: COVID is both accelerating change and (rightly) causing employees to question business and operating models. Leaders must demonstrate that they can evolve their businesses (and themselves) to earn and keep employees engaged.

Russell Reynolds asks do you display these attributes? How does your broader leadership team stack up?  The report says that there are several key actions every leader should be focused on taking today that will affect the experience and engagement of their teams:

Walk the (virtual) floorsConnect frequently with teams and individuals beyond set-piece townhalls. Focus on understanding how people’s experience of work has changed, and how work itself is changing

Role model – Walk the talk – if you are encouraging certain behaviors like work-life balance, increased collaboration – you need to role model those behaviors in what you do and how you work with others.

Collaborate down (not just across) – Work with team members deeper in the organization – this not only helps build their engagement and commitment but also throws up information and ideas that top leaders are often insulated from.

“The leadership team, directed by the head of talent management or the chief people officer, also needs to ensure that they put in place a set of immediate talent management actions, and engage deeply on a set of strategic talent management questions,” the Russell Reynolds report said. “Crucially, business leaders need to fully commit to the actions and discussions.”

Russell Reynolds offered these immediate talent management actions:

  • (Re)Evaluate your employment proposition and culture:Take a hard look at your EVP and distinguish between the brand proposition and the reality. What do you deliver on? What are you falling short on? What is fixable and what is not?
  • Implement actions plans for individuals and groups:Invest (and keep investing) in critical individuals and groups but avoid the compensation trap – more pay without a change in how work creates value for the employee is a short-term fix (and easy to compete with).

Russell Reynolds provided these strategic talent management questions:

  • (Re)Evaluate your talent needs:Have you evolved the understanding of what talent needs you have (and is leadership bought into that)? For many businesses, technical and leadership skill needs have evolved at a rapid pace due to the pandemic.
  • (Re)Evaluate your talent market: How do new ways of working change the talent pools you can tap into (e.g., by location)? Go on the offensive and build a pipeline in advance of need.
  • (Re)Evaluate your talent model:Are there opportunities to leverage different employment models in order to tap into scarce skills or retain critical talent, such as redesigning roles, more flexibility on location, using gig talent or building talent partnerships with organizations in your immediate ecosystem?

Related: Hiring Top Talent in Unprecedented Times

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media

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