Both names are a bit misleading. While a “resignation” or “reshuffle” sounds like an event, data points to a new normal where employees switch jobs more frequently. A job market report by Joblist published in January 2022 shows that 74% of full-time employees and 51% of part-time employees plan to quit their jobs in the next year.
About 80% of these employees (the great resigners?) believe they can make more money by switching jobs.
Structural changes in the cost of living and the nature of work point to a permanent change. We’ll explore this further below.
But first, here is the new status quo that you need to know:
With this information in mind, there are key adaptations you should make to ensure the longevity of your business. If you’re thinking about opening a business, the Great Resignation brings new attention to the necessity for systems and processes to rapidly hire, onboard, and retain employees. Master these systems, and you can give your business a competitive edge.
First, let’s look into one of the great questions of 2022.
In a poll of 764 HR professionals, 76% stated that they believe the Great Resignation has changed the labor market forever. Nothing dramatic.
Baby boomers are retiring. Some workers have left the job market over health concerns, disrespect, and overwork. Faced with extreme inflation and the ability to work from almost anywhere using digital tools, younger workers are demanding higher pay, better benefits, more comfortable working conditions, and greater flexibility.
According to Karin Kimbrough, Chief Economist at LinkedIn, one is six jobs are now remote. That’s a sea change from 2019, when a mere 4% of American workers telecommuted for half time or more and only in 67 American jobs offered full-time remote work.
Survey after survey shows that workers enjoy working remotely. In a 2019 Buffer survey, 99% of workers said they would like to work remotely at least some of the time for the rest of their career. For many, that reality has arrived. In a 2022 update to the survey, 97% of workers still say they’d like to work remotely at least some of the time.
Millions have switched to remote work to match an ideal lifestyle where life and work blend more seamlessly. But another factor stands out in the Great Resignation.
In a survey of 900 American workers, 67% of workers cited a “low salary” as a key issue determining whether they stay at a job.
Long-term trends have put upward pressure on wages. Younger employees are especially challenged by epic 20-50% annual housing inflation and 6-60% annual inflation for other goods. Even when an employer provides a 10-20% pay raise, it’s often insufficient to cover an employees’ cost-of-living increases.
People simply can’t afford to live on the same wages they earned a year or two ago. With pressure to maximize earnings for every hour spent working, workers are abandoning low-paying jobs for higher-paying opportunities.
Businesses that can’t offer remote work or pay higher wages have lost workers.
Replacing those workers in a competitive labor market has been difficult. Some businesses have remained understaffed. Some have gone remote. Some have cut services. Others have shut down entirely.
Many businesses adapted to the new trends. They cut costs and attracted new employees by going remote, hiring freelancers, and optimizing other parts of their businesses to increase profitability and wages.
Often, navigating the Great Resignation has involved adopting new technology and reassessing how a business can operate in a post-2020 world. Think about restaurants that added online ordering, set up QR code menus, shut down unprofitable indoor dining, offered delivery service, and added options to tip 18%-40% to their Square card readers. When was the last time you saw such a transformation of businesses in just one year?
Businesses that adapted were able to attract and retain workers by providing the increased flexibility and higher pay that today’s workers are after.
The history of economic cycles suggests that no trend will endure forever. However, there is no indication that the Great Resignation is a temporary phenomenon.
Ever since 2010, employees have quit their jobs more frequently. In 2010, about 1% of employees quit every month. Now, more than 3% quit every month.
A recession is the most likely event to interrupt this pattern. But as the brief 2020 recession showed, an interruption rarely reverses a long-term trend.
High quit rates are ultimately driven by enduring forces like demographic change, technological advancement, and cultural shifts. These forces have shaped today’s American economy, which is defined by rising inflation, opportunities for remote work, and high cultural interest in job mobility.
The bottom line is that higher quit rates are something you should plan for in your business.
Protect yourself accordingly.
Adapting the fundamentals of your business will be too industry-specific for us to cover productively. Suffice it to say, if you’re operating a business independently, you should be networking, reading, and observing what other businesses in your industry are doing. What’s working? What isn’t?
There are at least two functions that all businesses must work with, so let’s get started with those.
To be successful, businesses need to plan how to rapidly hire and onboard employees. Anything less, and a business will struggle to accommodate employee churn.
Think about it: If a business has 12 employees, someone is quitting every season. Every few months, the manager has to find and train a replacement.
Owning a business is supposed to be an opportunity for passive income. To many business owners, hiring and training someone every quarter just isn’t passive. This burden is even more substantial if a business has more than 12 employees.
As with anything in business, execution depends on systems that are carefully defined and consistently followed.
For hiring and onboarding, systems are essential for:
The Society for Human Resource Management (SHRM) has estimated the average cost of hiring and onboarding an employee is $4,129. And that was 5 years ago.
With this in mind, the best way to “hire and onboard” is to simply keep the employees you already have. That’s why thriving businesses tend to have solid systems to retain employees.
An employee retention system should include:
There are two ways to acquire business systems. You can develop systems independently, or you can buy the systems.
Both options are valid, so let’s take a closer look at each.
When creating business systems, you will:
The E-Myth Revisited outlines how to do all of this. The author, Michael E. Gerber, teaches business owners how to write standard operating procedures (SOPs) to simplify and automate their businesses.
Testing, defining, teaching and optimizing standard operating procedures takes most business owners years. A shortcut is to buy systems from a previous business owner or from a franchisor.
When you buy from a previous business owner, the business systems may or may not be written down. This can lead to significant challenges in maintaining a business once the original owner leaves. If you find yourself in this position, you can make the effort to document all of the SOPs during an ownership transition period.
When you buy from a franchisor, there’s a guarantee that the business SOPs will be written down in a clear and consistent way. In many cases, a franchisor will provide an operations manual. Manuals are often written years or even decades ago, and have been consistently updated each year to reflect the latest best practices. In fact, a key responsibility for a franchisor is to update the manual regularly to ensure the franchise’s systems are always simple, smooth, and seamless.
When you buy a set of good systems, you only have three steps that you need to follow.
The manager you hire will read the franchise’s systems and processes. They will teach these to your employees. Often a franchise will even train your entire staff including the manager. This gets your team functioning at a high level without causing you any stress.
When the franchisor updates a system, the franchise will update the manager you hire. Your business manager will then implement the changes following the franchise’s specific instructions.
If you’re looking to start a business, it’s useful to consider three factors:
On a risk-adjusted basis, a franchise business delivers higher returns with less maintenance work. The tradeoff is in a marginally higher upfront investment.
For many entrepreneurs, the decision of whether to develop new business systems or buy a franchise will depend on how you assess the risks of operating in today’s business environment.
For the most part, businesses thrive on stability. Volatility increases risk, and requires a business owner to spend more time actively managing change.
Undoubtedly, one of the biggest modern changes has been the changing relationship of employees to work. The effects of this disruption have cascaded across nearly every industry.
But even aside from the Great Resignation, other societal changes have created elevated risk levels for business owners: The pandemic shifted where people spend their time and money. Inflation reshaped what money people need to live. Social and environmental concerns are spurring new priorities for consumers and businesses. Technological advances continue to force businesses to find more efficient ways to serve their customers.
As you choose what business to operate, and how to set it up, consider the changes your business will face in the years ahead.
Use systems to create a sustainable advantage for your business. Keep them updated. In light of the Great Resignation, focus on systems for hiring, onboarding, and retaining employees. You will need these systems more than you probably have in the past.
Carefully assess how much time you plan to spend on your business. If you’re looking for a passive, stable income, you may not want to operate an independent business. Purchasing an established business with well-documented systems and processes can be a great way to limit risk. Purchasing a franchise that will support you with regularly updated systems and ongoing employee training may be the best way to deliver profitable income through a turbulent economy.
If you’re interested in exploring the world of franchising opportunities, you’re welcome to reach out. I’ve helped hundreds of entrepreneurs find the franchise that perfectly fits their goals and financial resources, and I would be delighted to help you next.
Many people are surprised to learn that my services are free for entrepreneurs. (Franchisors pay a small commission for my involvement in identifying exceptional candidates to lead new franchises.) To reach out, email me at email@example.com, give me a call at 801-874-3009, or schedule an appointment on my calendar below.