For the first time, there are four generations in the workforce all working at the same time, and each group brings different behaviors, customs, and expectations with them. The newest wave of young professionals is known as Gen Z, and on the other end are the Baby Boomers, whose presence shrinks continuously as they retire.
Millennials currently make up 35% of the U.S. labor force and will be the dominant players by 2020. These younger workers are changing jobs more frequently—differentiating them from earlier generations that were more loyal to their employers—and propelling the workforce into a new era: the quitting economy. As digital natives, both Millennials and Gen Zs are playing by a new set of rules, creating a rotating workforce.
First-year turnover is at the highest point in the past 8 years with more than 40 million people quitting per year, which is equivalent to 2.6% of the workforce. This signifies a strong job market, as new workers can easily find another job if the present one doesn’t meet their expectations. Further proof is found in Deloitte’s 2018 Millennial Survey, which shows 43% of Millennials plan to quit their current job within 2 years and only 28% plan to stay for more than 5 years.
Attrition is expensive, costing U.S. businesses $1 trillion annually, and costs are predicted to increase 19% by 2020. Through the research we’ve conducted at Hibob, we’ve found that losing top talent is the single biggest concern keeping CEOs up at night.
New Employees with New Demands
The issue of the quitting economy was initially brought on by the surge of new Millennial employees who have different expectations and demands than previous generations. This trend can be found across all industries, but it specifically affects high-growth companies that tend to attract fast-developing individuals.
Today’s employees want to grow as individuals and thrive in teams as part of a larger nurturing culture. These workers have never known life without the Internet, and they are accustomed to constant communication and instant gratification. Because this generation has come of age in a recession, they are also more entrepreneurial, fiscally responsible, and skeptical.
Deloitte’s study shows Millennials’ loyalty to employers is deteriorating and their confidence in business is waning. There’s a surge in voluntary turnover across the board; one of every two employees is looking to quit, and one in every four employees will leave his or her job this year. Projections show this will increase to one in every three employees quitting next year, hitting record highs. With the average cost of losing an employee equalling 38% of their annual salary, employers must adapt to mitigate this cost and to retain their top talent.
Is the Quitting Economy Preventable?
The Work Institute’s 2018 Retention Report indicates that of those who quit, more than three in four employees (77%), could have been retained by employers. Seventy-five percent of the reasons for voluntary turnover are connected to things that managers have control over.
When Hibob surveyed thousands of businesses, we discovered the top reasons employees have given for leaving were a change in management, commute time, culture, meaning and purpose, and lastly, compensation.
When employers are faced with a crisis that is only expected to get worse, the two options are to sink or swim, adapt or perish. Either fight the wave of the future or simply accept it and prepare for it. It’s time to embrace the reality that the employee lifespan has drastically changed, and it is up to employers alone to adapt to the new generation of workers, gain awareness of today’s workforce trends, and implement strategies to prevent attrition.
Turnover is preventable. Company founders define 80% of the company culture, so leaders must address the four main reasons workers leave by enacting change in their company culture that meet Millennial and Gen Z priorities.
- Change in management. Employees who had more than four different managers had the highest turnover rates. Managers should receive significant training about the new generations of workers and employees should receive clear, transparent expectations from management.
- Commute time. This is easily solvable by offering flexible remote work policies.
- Culture. Company culture is more than just “quick fix” perks like ping pong tables and free snacks. It requires a deep look into company values and behaviors, and a strong execution of a well-thought-out plan that is communicated to the whole company.
- Meaning and purpose. These values are key to Millennial employees, even more so than compensation. Find ways to connect the everyday work to larger company goals and values.
This generation wants to do meaningful things, challenge authority and disrupt the norm. Winning strategies incorporate increased flexibility, clarity, fulfillment, and purpose in the path of career advancement to counteract the main risk factors. Efficient, intuitive office technology is a basic expectation for new employees, and therefore, it can enhance the consumer experience individuals have come to expect from every aspect of their lives.
The changes brought on by Millennials have transformed the workplace experience, as well as the HR professional role. HR is no longer about paperwork and administration; rather, HR serves as a strategic business partner to adjust to the new world of work.
The requirements from HR software have grown in parallel, evolving from a system of records to a system of relationships. Successful HR systems that reflect everyday consumer experiences will be easily adopted and perfectly suited to address the needs of the quitting economy as they allow for instant communication and gratification.
In this bright, shiny new world of work, a focus on organizational culture and a holistic approach to employee experience will benefit all generations of the workforce. Those companies aligned with Millennial and Gen Z’s preferences will be better positioned to attract and retain some of this up-and-coming talent. This is how companies can retain talent in the quitting economy.
|Ronni Zehavi is the cofounder and CEO of Hibob, a transformative HR platform launched in 2015 that helps high-growth companies to grow their employees and develop their culture. Under Ronni’s leadership, following the successful close of its Series A funding round in March 2019, the company has closed a total of $45 million in funding. This year Hibob also was named one of the top ten Israeli startups set to become a unicorn by Qumra Capital, as well as one of London’s five tech startups to watch in 2018 by RocketSpace, a global network of technology campuses working with innovative startups from around the world.
Ronni is dedicated to enhancing company culture for fast-growing businesses, and founded Hibob to provide high-growth SMBs across the globe with a solution for keeping up with the paradigm shift in the way people work, and improving the way they develop and maintain top talent through HR. With his 25 years of experience in the technology space including SaaS businesses, cybersecurity, and content delivery, Ronni created Hibob’s platform bob to give managers new and invaluable insights into their employees, while reducing the administrative burden of HR.
Hibob’s platform, bob, was built for everyone, but puts employee growth front and center. Our tools were created with the understanding of the new generation of employees and their need for transparency and digitization in retaining individuals in the new world of work.