Business
Labour force
The workplace is in the throes of rapid change. Employees are quitting in droves and, among those who stay, expectations are shifting and demands are increasing. For many firms, this is a source of consternation, but the new trends can prove beneficial for company output, productivity and morale.
Here, The Point explores the changing world of work from the perspective of both employee and employer.
First, in What workers want, we assess the incentives most likely to attract, retain and motivate staff.
Second, in Fresh perspectives, we consider why so many workers are leaving their roles and how companies can use the Great Resignation to their advantage.
What workers
want
Companies once thought they were treating staff well by offering them an extra day off at Christmas. Then free drinks, wellness rooms and time-out space became de rigueur in certain sectors. Today, employee benefits have entered a new phase.
C utting-edge companies have frequently managed to grab the headlines by offering cool or quirky incentives to employees – from table tennis, pool tables and beer kegs to perks of a more personal nature. Some years ago, Apple, Facebook and Google added egg-freezing to their corporate benefits as part of an effort to attract and retain high-flying female staff. The tech giants, which have traditionally suffered from a dearth of senior women, may have meant well, but the benefits still attracted accusations of cynicism and even sexism.
Today, as the workplace faces pressure from multiple sources, companies of every hue are being forced to think more deeply about how best to attract talent. “In this environment, businesses need to consider what employees really want, rather than what just sounds cool,” says Zofia Bajorek, senior research fellow at the Institute for Employment Studies.
“You can offer as much free fruit, yoga and Indian head massages as you like. If you then throw people back into the lion’s den – with a bullying manager, no autonomy and an excessive workload – don’t be surprised if these initiatives fail to improve employee wellbeing and staff decide to leave.”
Some firms are actively helping staff to set up ergonomic home offices – providing free or subsidised office furniture
Eager for autonomy
The focus on wellbeing has become more acute since the pandemic began, but change was in the air even before then. Younger workers in particular were looking for a more flexible approach to working – including the potential to work from home or even from abroad, on occasion. “A generation of digital natives was already eager for more autonomy regarding where and when they did their work,” says Renée de Boo, partner for people and change at accountancy giant KPMG in the Netherlands. “But while the technology was already there to permit this, a lot of companies were worried that giving this kind of freedom would lower productivity. The pandemic has proved that this is not the case.”
The pandemic also appears to have made many workers less prepared to tolerate unsatisfying or restrictive jobs. “A bit of distance from the office has given many people a new perspective. The most talented employees are demanding more from their employer across a range of dimensions and beyond pay – whether in terms of working environment or flexibility,” says Ashley Whipman, director at interim executive firm Oakwood Resources.
A place for collaboration
This can start, he says, with a rebellion against “the battery-farm approach to offices, in which as many cubicles as possible are crammed into the smallest amount of space”.
A beautiful office, by contrast, can help both to attract and retain workers, argues Catherine van der Heide, a principal at architecture and design firm Hassell. “If the workplace isn’t somewhere you have to be, it must be somewhere you want to be,” she says. “But a beautiful office won’t succeed on its own.”
The office can also act as an embodiment of a company’s values – such as openness, sustainability or a commitment to employee health. One of Hassell’s recent clients, a health insurer, aimed to create a workplace that would enable workers to leave healthier than when they arrive.
“The office was hardwired for health,” says van der Heide. “In addition to a wide variety of work settings, outdoor sports courts and edible gardens, a ramp from the building’s main entrance spirals upwards from street level, giving employees easy access to bike storage on their way in. This makes both a symbolic and practical commitment to encouraging employee health and wellbeing,” she says.
Consultation is key to find out what is important to people. This gives companies a clear and evolving idea of what really matters to their staff
Office designs can include a range of costlier options too, such as gyms, swimming pools, wellness suites and free day care for children. However, research suggests that these might not always represent an efficient use of resources. In 2020, Hassell surveyed 2,300 workers around the world, asking them to pick the five amenities that they would value most from a long list of features, ranging from dog day care to more green space. “One of the most striking features of the results was that a lot of the high-end, nice-to-have amenities were the least popular,” says van der Heide. Many of the pricier perks – even conveniences such as a personal concierge and on-site childcare – tended to rank poorly.
“The two most wanted perks were free lunch and a shorter commute,” she says. “Right behind them were a host of practical considerations, with people selecting options such as more space to focus, more space to collaborate, and better meeting facilities.”
Consultation is key
This goes to the heart of what many experts consider best practice when it comes to corporate perks of all kinds – companies need to talk to their employees about what they want. “Consultation is key to find out what is important to people,” says Bajorek. “This gives companies a clear and evolving idea of what really matters to their staff. Questions can include asking how often they would ideally like to come into the office. Are they comfortable with hot-desking? And would they use a corporate gym if it were offered?” Failure to consult, Bajorek argues, means that companies can waste money on pointless perks.
You can offer as much free fruit, yoga and Indian head massages as you like. If you then throw people back into the lion’s den – with a bullying manager, no autonomy and an excessive workload – don’t be surprised if these initiatives fail to improve employee wellbeing
Demand for flexibility
Employee surveys reveal time and again that workers increasingly aspire to a high degree of flexibility. Most want the opportunity to work from home if they choose to and a growing number are also calling for flexible hours and even four-day weeks. This shift in attitudes has a profound effect on how the workplace itself is viewed. In response, more progressive companies have gone beyond seeing the office as somewhere that employees conduct functional tasks, instead regarding it as a place for collaboration and creativity.
“The proportion of office space used for individual work used to be 60 per cent on average, with the remaining per cent dedicated to collaborative work,” says van der Heide. “We’ve now seen this flip entirely to the opposite proportions. We won’t come to the office just to collaborate, but the proportion has shifted.”
Virtual inspections
With choice at the forefront of employees’ minds, offices are increasingly likely to feature state-of-the-art audiovisual equipment, enabling seamless virtual collaboration with those working from home. “Particularly with travel becoming more challenging during the pandemic, we have seen more companies investing in virtual augmented reality or drones instead of sending executives to distant factories or other facilities,” says Gerard Osei-Bonsu, a managing partner and integrated mobility leader at professional services firm EY in Switzerland.
Royal Dutch Shell, for example, has generated online three-dimensional simulations of oil platforms, making it possible for engineers to inspect facilities from home. And David Prinselaar, the head of manufacturing at paint maker Akzo Nobel, has inspected more than 100 plants since the start of the pandemic by using high-definition augmented reality headgear.
“This kind of technology wouldn’t be considered a perk, per se, but it certainly helps with work-life balance for executives who are often jet-lagged. Plus, it cuts down on the cost of business travel and carbon emissions for the firm,” says Osei-Bonsu.
If the workplace isn’t somewhere you have to be, it must be somewhere you want to be
Change in culture
On a more basic level, companies have been reconceptualising the office, he says. Instead of being a space where workers were supervised while they conducted their tasks – much like a factory with staff clocking-in – the office is increasingly viewed as place to spark creativity. “More forward-looking firms have become more flexible about exactly where and when functional tasks are completed,” Osei-Bonsu adds.
The demand for such flexible working is forcing many companies to rethink their corporate culture, management and leadership, says de Boo. “Many old-school managers had a strong desire to see their staff present in the office and were sceptical that they would be productive unless they were carefully supervised. Now companies need a new variety of leader, more willing to trust and motivate teams that are not always in the office. This kind of change really has to come from the top of an organisation,” she says.
Some firms are making the commitment to hybrid working more concrete, says Maarten Slokker, senior manager in de Boo’s team. They are actively helping staff to set up ergonomic home offices – providing free or subsidised office furniture.
Unlimited holiday
Perhaps the final frontier of such experiments in flexibility is the unlimited holiday allowance. This concept was made famous in human resources circles by Netflix, which started the experiment long before the advent of Covid-19. Bynder, a Dutch cloud-based platform for digital marketing, adopted unlimited paid leave in 2016, with founder Chris Hall explaining that the perk reflected the firm’s commitment to “giving our people more freedom when it comes to a better work-life balance”. After the policy was introduced, the number of days of leave taken rose by 11 per cent – but productivity increased as well.
Now companies need a new variety of leader, more willing to trust and motivate teams that are not always in the office
Increased anxiety
Since the pandemic began, the radical notion of unlimited leave has become a more popular talking point in human resources circles. But, as utopian as unlimited holidays might sound, such concepts could test the limits of the new ethos of worker flexibility. UK-based human resources software firm Charlie HR also instituted this policy, but it ended up returning to a more traditional 25-day holiday allocation. The company’s human resources chief, Amy Cowpe, recounts that while the policy aimed to empower staff fully, it ended up heightening anxiety, with employees becoming unsure of what was acceptable. Some members of staff, typically the younger ones, took far less than their entitlement, and ended up compensating for those who were bolder in taking holiday time.
Bigger reforms
The pool and table tennis tables that became commonplace in the offices of tech innovators are now more difficult to find. But experiments such as unlimited time off suggest that companies are willing to contemplate far bigger workplace reforms.
“More extreme options such as unlimited holidays might go the way of the office pool table,” argues Whipman. “In most cases, such perks look a bit like gimmicks that may not really help get the best out of your talent. Instead, cutting-edge firms are looking for more balanced ways to create a workplace that attracts and retains top employees.” However, the flexibility to work from home, once a rare perk, looks likely to become mainstream in the post-pandemic world n
perspective
Fresh
Employees have been leaving their jobs at unprecedented rates in recent months. But, while mass departures may fill businesses with dismay, there are genuine advantages to be gained from staff churn – provided the process is managed effectively.
T he Great Resignation is viewed in some circles as a collective Damascene moment. After months of pandemic-induced soul-searching, the scales fell from workers’ eyes and they suddenly understood the most important things in life: their jobs and the daily commute not being among them. More mundane explanations include pent-up demand – 2020’s resignations simply happened in 2021 – and continued uncertainty pushing people out of sectors such as travel and hospitality.
Whatever the explanation, workers are walking. According to research by management consultancy McKinsey, 19 million US employees left their jobs between April and September last year, leading to widespread talent shortages.
The UK reported 1.2 million job vacancies last October, up from 400,000 before the pandemic, while in Germany, two-thirds of company decision makers say they are struggling to find skilled workers. Nor is there much indication that the trend is slowing down – McKinsey found that 40 per cent of employees in its global sample were at least somewhat likely to leave their jobs within the next six months.
Consultation is key to find out what is important to people. This gives companies a clear and evolving idea of what really matters to their staff
Productivity drain
Such antipathy can cause serious disruption for employers, particularly those who need to scale up operations quickly as the economy rebounds. The average cost of hiring and training someone new is $4,000, but it is harder to put a price on the productivity drain that often accompanies a settled employee leaving, or the impact of existing team members taking the slack while a position is unfilled. In some cases – for example, losing someone with vital specialist skills or customer relationships to a competitor – the challenge can threaten a company’s very viability.
With employee retention a pillar of most organisations’ talent strategies, it’s easy to see why the Great Resignation is making a lot of people nervous. But for businesses with a more considered approach, this mass exodus could present an opportunity.
Fruits of collaboration
After all, for most people who quit, replacements are eventually hired. They might be more motivated, skilled and creative, generating new ideas and perspectives that could revitalise an organisation where staff turnover has been low and complacency has set in.
Research shows numerous benefits of introducing fresh blood in different contexts. One study in the journal Science examined almost 20 million academic articles and two million patents, finding that teams with the most citations and patents were generally cross-functional and involved newcomers. Another paper, in the American Journal of Sociology, showed that leading theatrical writers and directors had their best results when they collaborated with new talent, rather than working with the same old team year after year.
The average cost of hiring and training someone new is $4,000, but it is harder to put a price on the productivity drain that often accompanies a settled employee leaving, or the impact of existing team members taking the slack while a position is unfilled
Knowledge lost
The optimum level of employee turnover can vary widely, too. Jeff Phipps, senior vice president at multinational software company ADP, aims for a churn rate of between eight and 12 per cent a year for knowledge workers. “Below that, you definitely lose the fresh perspectives, while above it you start to see engagement and client experience suffer as knowledge is lost.
And a greater burden is placed on longer-tenured staff while their new colleagues get up to speed.”
Important though the turnover rate is, retention is more than just a numbers game. Quitting can be good for the business, or it can be bad – it depends on who is leaving, why they are leaving and what happens next.
Lack of objectivity
It is tempting to see this primarily in terms of which employees quit – clearly, it is better to retain top performers. However, Phipps cautions against companies making performance management part of their retention strategy. “There’s this idea that you can build a clear view of who are your most talented people and who has a lesser impact, and that from there you can reward and promote the best and ‘manage out’ the poor performers,” he says.
“There are many problems with this approach. The measures lack objectivity, managers are not very good at rating and the focus tends to be on the individual, not the team”, Phipps says.
In other words, employees don’t exist in a vacuum. If they seem to be treading water, they may have been stifled by a dysfunctional line manager or culture.
It’s imperative to diagnose and fix those kinds of issues before assuming that an individual is automatically at fault.
Focus on reasons
A wiser approach may be to focus less on who leaves, and more on why they are leaving – and the flipside, why they stay. In a classic 1973 article in Harvard Business Review, authors Vincent Flowers and Charles Hughes zeroed in on the distinction between people who stay in organisations because they want to and those who stay because they feel they have to – because the company pension scheme is particularly generous, because they have children in local schools or even because they don’t believe they could get an equivalent job elsewhere.
“Many a company works for low turnover because it thinks a low rate implies that its employees are pleased with their jobs – and, a fortiori, productive. This is not necessarily true,” they wrote. To ensure that employees are staying for the right reasons, the study concluded, companies should strengthen “good” reasons to stay, such as job satisfaction, and reduce “bad” reasons, such as inertia.
For businesses with a more considered approach, this mass exodus could present an opportunity
Paying staff to leave
The paper may have been written nearly 50 years ago, but its findings hold good to this day. Take Amazon, which has been running a “pay to quit” scheme for more than a decade. Under the programme, employees are offered between $2,000 and $5,000 to leave – the only proviso being that they can never work for the company again. “We want people working at Amazon who want to be here. In the long term, staying somewhere you don’t want to be isn’t healthy for our employees or for the company,” the e-commerce giant explains.
There are less dramatic solutions, such as pitching pay levels at a rate that is good enough to attract talent but not so good that people join – and stay – for the wrong reasons.
Gaining new skills
Octopus Energy exemplifies the point. One of Europe’s leading unicorn companies, its valuation increased from $2 billion to $5 billion over 2021, while the headcount doubled to 2,000. Yet head of operations James Doyle says that competitors routinely pay 20 per cent more than Octopus does. He explains that the employer value proposition is based on knowing what people fundamentally look for in a job rather than just the amount they are paid. “We’re not the most competitive in pay, but there’s a lot of movement here. You never stay still with us. As long as you’re continuing to gain new skills and exposure to different parts of the business, there’s no cap on where you can go,” Doyle says.
One study in the journal Science examined 20 million academic articles and two million patents, finding that teams with the most citations and patents were generally cross-functional and involved newcomers. Another paper, in the American Journal of Sociology, showed that leading theatrical writers and directors had their best results when they collaborated with new talent, rather than working with the same old team year after year
Development opportunities
Octopus’s rapid growth puts the business in a privileged position, because it can provide more development opportunities, a priority for many employees. But that creates other issues. People regularly leave Doyle’s division for roles elsewhere in the company, a situation some managers might regard as infuriating.
Doyle prefers to view it differently. “There’s huge value in people moving around, so from a retention perspective it’s really important not to get in the way of that, but to get in front of it,” he says. As a firm, Octopus advocates promoting people before they feel ready and encouraging teams to work together to create company-wide development opportunities.
Sense of progress
This is clearly more difficult for businesses that aren’t growing terribly fast. One solution is to keep the structure fairly flat, so that people are able to work on projects that broaden their skills and experience without having to apply formally for a promotion. Another is to create levels within roles. US restaurant chain Waffle House, for example, has three degrees of grill cooks, from “grill operators” to “master grill operators” to “rock star grill operators”, giving people recognition and a sense of progress without them having to change jobs.
What else gives people a good reason to stay? The McKinsey survey is telling in this regard. The top three reasons for quitting were, first, not feeling valued by the business (cited by 54 per cent of respondents); second, not feeling valued by their manager (52 per cent); and third, not feeling a sense of belonging at work (51 per cent).
Many a company works for low turnover because it thinks a low rate implies that its employees are pleased with their jobs – and, a fortiori, productive. This is not necessarily true
Loss of purpose
As Phipps explains: “By building teams that leverage and value all participants, they find what they do rewarding, perform at their best for the long haul and are unlikely to leave.
People love to be part of a winning team that has a clear purpose. I believe the Great Resignation is about a loss of purpose and a failure of organisations to see that and respond to it.”
The pandemic has taken away the inertia that held so many employees in place, often for far too long. This may cause disruption, but for those businesses that value their people, give them opportunities and instil a sense of purpose and belonging, there will be huge opportunities, too.
Smart operators advocate that firms should stop seeing attraction and retention as separate or even antagonistic tasks. If employers concentrate on being attractive to proven talent and prospective fresh blood for the right reasons, rather than trying to hold them in or force them out, they can get the best of both worlds n