Great Resignation o Great Migration?

Understanding the change to take action
 

31 May 2022 8 min.

What is it: numbers around the world

Originally invented by Anthony Klotz in May 2021, the Great Resignation describes a record wave of people leaving their jobs during the Covid-19 pandemic. In particular, Klotz predicted an increase in the number of resigning employees at the end of the pandemic. The phenomenon is very real: in the US, more than 3.4% of workers leave their jobs each month. In 2021, we have already seen several record waves. The United States, in particular, recorded an impressive number of resignations in April 2021, only to break that record again in July and again in August [1]. But, looking at the employment data, this does not mean that people are leaving their jobs and joining the inactive group.

For this reason, we think it is more accurate to call it the Great Migration, as several authors have already started to define the phenomenon [2], or The Great Talent Migration, as defined by Benjamin Laker [3]. Workers who decide to leave their jobs do not do so in order to temporarily or permanently withdraw from the labor market: some look for a job that better reflects their needs, others decide to become self-employed. Again, the numbers are especially evident in the United States: 10 million Americans say they are considering a career as a freelancer as an option to work as flexibly as possible; these 10 million people represent a potential increase in self-employed workers of 17% compared to 2019 – quite a significant increase.

The pandemic is only one of the causes: workers, who have become accustomed to greater flexibility and autonomy in their working conditions, are abandoning jobs in companies that have not fully adapted to their new needs, for others that allow them to better balance work and private life, or to become self-employed. According to research by Upwork [4], of all the professions that used to work entirely remotely during the most critical phases of the pandemic, 25% have returned to office work and another 38% will return to the office in the medium term. Professionals are not happy: 34% of workers who had become accustomed to remote working say they are unhappy with a return to the office, 24% would even be willing to accept a pay cut to return to working from home, and another 35% might consider it.

The pandemic has also contributed to a structural change in the taxonomy of job offers, making the macro-category of “remote jobs”, i.e. jobs for which physical presence in a given geographical location is not required, widely popular; this, in particular for so-called knowledge workers, has led to an increase in the number of job opportunities to choose from, being able to assess the offer most in line with one’s expectations without considering the constraints related to the economic and personal costs of moving one’s life to another city or country.

What about Italy?

This phenomenon is not only limited to the United States. Although the numbers are not as clear-cut, also in Europe the phenomenon is becoming widely common and recognized. The European Commission has stated that the European definition of an SME should consider the self-employed as a category of its own right [5], legitimizing the smallest of businesses in the definition, since they represent the segment of the European labor market with the highest growth rate, with an increase of 45% since 2000. The reasons mentioned for quitting one’s job and becoming self-employed are similar to those already stated for US workers: 46.8% want to have flexible working hours, 37.4% want to be able to choose their own projects to work on, 36.9% want to be able to work from anywhere.

In Italy, too, the first early signs of this trend are starting to show, and here are some references for interpreting this phenomenon:

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according to Bank of Italy data, in the spring of 2021 the number of resignations was higher than in 2019 (the trend does not take into account the year 2020 and the first months of 2021 characterized by a natural more conservative attitude of workers towards their jobs due to the uncertainty generated by the outbreak of the pandemic). In the first ten months of 2021, 777,000 voluntary terminations of permanent employment relationships were recorded, 40,000 more than two years earlier. In the third quarter of 2021, resignations increased by 20% compared to the same period in 2019.

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according to the Ministry of Labor’s Mandatory Communications in the fourth quarter of 2021 the number of terminations of employment amounted to 3 million 497 thousand and involved 2 million 663 thousand workers (for at least one termination), with a trend increase of 14.4%. It is interesting to note that this increase was greater for young people in the 15-24 age bracket (+22.2%) and the 25-34 age bracket (+16.1%). A large proportion of terminations (559,901) were due to voluntary resignations by employees.

Given such significant numbers regarding resignations, there is a slight increase in job-to-job transitions [6] and an 18.2% increase in the number of VAT numbers opened during 2021 [7], with 549,500 new openings, of which 67.2% by individuals. These increases, however, are partially due to the recovery after 2020, in which drastic declines in almost all of the phenomena just described were observed, so it will be necessary to monitor the trends in the coming months to see confirmation of this trend [8].

An important trend, first and foremost for companies

It is essential to be aware of the phenomenon and to understand the extent to which increased internal turnover impacts the organization and/or directly exacerbates the company’s cost structure, going beyond the more immediate considerations of increased costs associated with iterating screening, recruiting, and onboarding processes to find, train and hire new employees to replace those who choose to leave.

An increase in departures may entail risks in terms of business continuity, primarily due to the need to redistribute responsibilities for ongoing activities and/or projects more or less quickly. In addition, those leaving the organization may take with them potentially key contacts, skills, and knowledge, which, if not properly managed through sound knowledge management practices, will absorb additional resources to be recreated.

Moreover, since job rotation is often accompanied by an increase in salary, the growth in turnover in a given professional sector could fuel an upward trend in the average cost of professionalism in the market of a given territory, which in the medium/long term would directly increase the budget dedicated to personnel costs.

Finally, the need to fill the positions that remain unfilled by those who change companies, in addition to (as already mentioned) committing HR structures to the iteration of screening, selection, and onboarding processes, also leads to a more frequent distraction of middle management from coordination, strategy, and business development activities due to the effort required to adequately follow the selection and training processes of new resources.

Understand, act

There are two possible ways of adapting to this new scenario: reducing attrition and aiming to increase retention, or fully adapting to the new working environment on the one hand by adjusting one’s personnel management methods to respond to a structurally higher turnover and on the other by becoming more flexible in the way skills are acquired on the market, by adopting flexible talent models [9], i.e. models involving the integration into business processes of the skills of resources from outside the company whose collaboration is not subject to a contract of employment (ranging from the outsourcing of micro-tasks to on-demand freelancers accessible via digital platforms to long-term collaborations with VAT-registered professionals).

To be able to act on retaining talents, it is essential to maintain a focus on employees’ needs and their degree of motivation for the work they do, in order to be ready to intervene before the person’s willingness to seek (and eventually accept) a new job offer. Today, more than ever before, understanding and monitoring information and metrics representing the needs of the workforce is one of the main tools with which HR and managers can improve corporate employer branding strategies (both for the internal population and for the market of possible candidates).  There is a wide range of qualitative and quantitative analyses on the subject, but the starting point is the ability to synthesize and schematize the typical complexity and variety of corporate populations.

Adapting to an increase in internal turnover means accepting a reduction in the average time employees stay with the company and acting accordingly to reduce the organizational “trauma” of departures. For example,  it may be useful to exploit available predictive people analytics to calculate the probability of exit of current employees; integrating this information into the input of workforce planning processes could, for instance, bring to light the need to anticipate screening activities on certain positions with a high probability of remaining unfilled. Constant and in-depth monitoring of staff competencies also makes it possible to quickly identify which organizational operations are most threatened by the professional decisions of individuals, allowing action to be taken in advance to capitalize on and depersonalize the most critical competencies through continuous and widespread training and the continuous monitoring and updating of corporate knowledge management methods and tools.

Flexible talent models, on the other hand, have many advantages: first of all, they allow for agile scaling, both positive and negative, by accommodating the variability of labor demand. Staffing on demand, in fact, is mentioned by the seminal Exponential Organization [10] in its model as one of the factors that characterize companies capable of navigating the future. Secondly, flexible talent management models allow for the outsourcing of single tasks, whereas hiring a full-time equivalent would not be justified against the direct and indirect costs incurred by a traditional working arrangement, and would also contribute to slowing down the project(s). Moreover, especially for highly qualified professionals, turning to external resources gives access to innovative skill sets that are always up-to-date with the latest market needs.

It is useful to stress, however, that the adoption of flexible talent models requires prior assessment.

The first one concerns the nature and characteristics of the activities to be managed. Possible aspects to be considered when assessing which activities to entrust to internal resources and which to external resources concern the gap of available competencies compared to those required by the specific task or project, the degree of customization/specificity of the task or project to be carried out and the consequent complexity in formalizing the requirements to be communicated, and more generally all the direct and indirect transaction costs associated with collaboration; indirect costs include, in particular, those related to the onboarding and management of external resources (directly proportional to the degree of knowledge and interaction with internal structures required by the activity) and the assessment of risks in terms of safety at work, GDPR and/or intellectual property (including the related bureaucratic and administrative management). Secondly, it is important to define the organization (roles, processes, and technologies) to be built and nurtured for the initiative to be successful.

The adoption of external professionals entails significant changes to the selection processes, whose responsibilities may require dedicated roles and/or not exclusively linked to the HR perimeter (for example, the internal referents of the activity may have more autonomy in the procurement of the required skills through the allocation of dedicated budgets for the activity, thus reducing the time dedicated to the internal communication of the need). It is necessary to rethink the methods of onboarding and engagement through the standardization and digitalization of these processes to ensure their effectiveness in a very short time.

The working methods and technologies used may need to be updated/reviewed in order to adequately support the inclusion of outsiders’ activities in operational procedures (e.g. the adoption of effective tools for remote collaboration or agile procedures in project management).

Open points for the future

The Great Migration is certainly a real phenomenon that we are observing; it is still recent, especially in Italy, to be able to say with certainty that we are observing the beginning of a trend: we will have to monitor the numbers of the next quarters to verify it.

There is also a need to be cautious about claiming that this is a new phenomenon: a similar trend was observed in the aftermath of the 2008 recession [11], with a boom in new self-employed workers that peaked in 2014 (UK Parliament figures speak of 4.5 million new self-employed workers). If the Great Migration is indeed a repetition of a phenomenon already seen in the past, it would be necessary to investigate the points of similarity to see if and to what extent we can derive lessons from the past and apply them to the current situation.

Although increased volatility in employment can be considered a predictable phenomenon after periods of uncertainty, it should certainly be remembered that this trend could be fueled today by increasing global networking and the possibility, especially for knowledge workers, to access an ever-larger labor market where they can sell their skills to those offering the best working conditions (or more in line with their needs and expectations).

In any case, whatever the trend, the priority for organizations is to equip themselves with the tools to manage change quickly and with agility, starting with a managerial culture that separates the need to have the skills required to ensure business continuity from maintaining long-term working relationships with their people.

Sources

[1] Chris M. Walker, The Great Resignation And Freelancing (2022), Forbes –  https://www.forbes.com/sites/forbestechcouncil/2022/02/02/the-great-resignation-and-freelancing/?sh=319067cf3063

[2] Josh Bersin,  From The Great Resignation To The Great Migration (2021), Insights on Corporate Talent, Learning, and HR Technolog – https://joshbersin.com/2021/12/from-the-great-resignation-to-the-great-migration/

[3] Benjamin Laker, The Great Resignation And Great Talent Migration (2022), Forbes – https://www.forbes.com/sites/benjaminlaker/2022/01/26/the-great-resignation-and-great-talent-migration/?sh=304feb333fef

[4] Adam Ozimek, The Great Resignation: From Full-Time to Freelance (2021) – https://www.upwork.com/research/the-great-resignation

[5] Lindsay Liedke, 50+ Freelance Statistics For 2022: Stats, Facts & Trends (2022) –  https://startupbonsai.com/freelance-statistics/#2-european-%E2%80%93-freelance-statistics

[6] webinar “Is the Great Resignation Going Global?”, organizzato da OECD – OCDE, dati da Comunicazioni obbligatorie del Ministero del Lavoro

[7] MEF, Osservatorio sulle partite IVA – Sintesi dei dati delle aperture nell’anno 2021, MEF, Osservatorio sulle partite IVA – Sintesi dei dati delle aperture nell’anno 2020, MEF, Osservatorio sulle partite IVA – Sintesi dei dati delle aperture nell’anno 2019

[8] Comunicazioni obbligatorie Ministero del Lavoro (IV-trimestre-2021)

[9] Adam Ozimek e Christopher Stanton, Remote Work Has Opened the Door to a New Approach to Hiring (2022), Harvard Business Review – https://hbr.org/2022/03/remote-work-has-opened-the-door-to-a-new-approach-to-hiring?ab=hero-main-text

[10] Salim Ismail, Exponential Organizations, Marsilio, 2015

[11] UK Parliament, The self-employment boom: Key issues for the 2015 Parliament –  https://www.parliament.uk/business/publications/research/key-issues-parliament-2015/work/self-employment/

Debbie Cohen e Kate Roeske-Zummer, With So Many People Quitting, Don’t Overlook Those Who Stay (2021), Harvard Business Review – https://hbr.org/2021/10/with-so-many-people-quitting-dont-overlook-those-who-stay

Authors

Francesca Guzzetti, Giulio Ottaviano

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