Talent in a changing market: What now?

| Podcast

In this episode of McKinsey Talks Talent, talent experts Bonnie Dowling, Bryan Hancock, and Bill Schaninger talk with McKinsey Global Publishing’s Lucia Rahilly about the latest research on the Great Attrition and Great Attraction—and specifically, what leaders should be doing now to gain traction in a volatile talent landscape.

McKinsey Talks Talent is hosted by Lucia Rahilly.

This transcript has been edited for clarity and length.

Higher quit rates, smaller pipelines

Lucia Rahilly: Are people still quitting? Or will there be a stabilization in the churn we’ve seen over the past couple of years?

Bonnie Dowling: What we’re seeing is we still haven’t dropped below four million people quitting their jobs per month in the US alone. That’s a lot. I would say the relationship between employees and employers has fundamentally shifted.

Bryan Hancock: It has become a lot easier to shift jobs postpandemic. Prepandemic, there weren’t all that many job openings that didn’t require you to move to the location. Now a lot of openings allow you to leave your current job in New York and pick up a job somewhere else without moving. At one point during the pandemic, four out of every five people who took a new job in a different city were not required to move.

On the flip side, social capital is lower than it’s been in a while. The ties that bind at work don’t bind as tightly if you’ve only met your coworkers remotely. That lessening of the ties makes it easier for people to move. We’re seeing that in the data.

Bill Schaninger: The first time we ran the study, workers in the healthcare and education sectors were on the lower end of likeliness to leave, whereas those in leisure, hospitality, and a few others were higher. Now education and healthcare are experiencing shortages. Some of this probably is pandemic hangover. They’re short in a way that supply is unlikely to fill.

Bonnie Dowling: For some of those sectors, it’s not just that people are leaving; there’s not the pipeline to bring people in either. The nursing pipeline has shrunk. Fewer people are going to nursing school now than previously. There’s been a shortage of nurses for as long as I can remember, and I say that as a nurse. It was a job that people used to be excited about. My mother is a nurse. My sister became a nurse. But now fewer people are joining the profession. That’s also true for teaching.

From my perspective, there’s been a shift with this new generation and what people want to do and the jobs that they’re excited about. The number-one job that high school graduates want right now is to be an influencer. As employers and leaders, we have to start thinking about how we’re going to build pipelines into these more traditional jobs, how we’re going to attract people into the industries that maybe don’t seem as exciting as influencing.

Revamping hard-to-fill roles

Bill Schaninger: Bonnie, I’m curious. We’re basically lapsing into the world of role design, right?

Bonnie Dowling: That’s right; we have to change our value propositions and how we think about the workforce to start attracting talent back into the workforce. You’ve got to make industries and roles attractive from the beginning. Think about roles that we’ve thought couldn’t provide any kind of flexibility, like nursing and manufacturing. We have to get more creative.

We have to change our value propositions and how we think about the workforce to start attracting talent back into the workforce.

Bonnie Dowling

For example, I was speaking with the CEO of a manufacturing company that had 12 well-paid, full-time positions on the books for four months. They had gotten zero applications. They had some of their most tenured employees say to them, “This isn’t working. We’re going to quit because we’re tired of working 50 hours a week. It’s just too much. You have to figure this out.”

The company created a new role: 12 hours anytime. You worked any 12 hours over the course of the week, at a minimum. If you wanted to work two hours a day for six days a week, you could do that. If you wanted to work one 12-hour shift, you could do that. Ultimate flexibility.

They put those roles up, and within three days, they had 170 applications. They’ve also had success converting some of those individuals into full-time employees. They turned the equation upside down. They said, “We’ve always thought we had to manage manufacturing, frontline operational positions in either 12-hour shifts to cover a 24-hour period, or three eight-hour shifts over a 24-hour period.” People were either working 36 hours or 40 hours, five days a week or three days. It’s a similar story in nursing and in so many professions that have shift work. The need and desire for flexibility is as great as it’s ever been.

Leaders have to think about what flexibility really looks like and how they can get creative. Forty-one percent of people said they quit their jobs because they didn’t have professional development and career advancement opportunities. If you want to draw people back in and make your industry sound exciting, that might be a place to start.

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Making flexibility your friend

Lucia Rahilly: The pandemic seems to have illuminated the value of flexibility, particularly for parents and caretakers. But we still see some companies, not necessarily in the healthcare field, reeling back on flexibility.

Bill Schaninger: Some companies quite famously made a pronouncement that by a certain day, everyone had to be back, and then only 40 percent showed up. They had to walk that one back. There is some power in numbers.

You’re taking a risk if you put a line in the sand. When we had our colleague Phil Kirschner on, he was saying that prepandemic, the occupancy data on offices was abysmally low anyway. It wasn’t as low as now, but it was never 100 percent; there was always a portion of employees who weren’t in. So why make it this ballyhoo that everyone has to be in?

Bryan Hancock: We found in our most recent research that there are many workers who are still traditional workers. They’re still motivated by compensation and progressing in the company.

There are several other segments of the workforce that are growing: for example, people anchoring on flexibility first, such as the ease of picking up a gig job. Caregivers, people who are retiring or near retirement age, all have different motivations. There are also the idealists who are hoping to change the world. If you look at all the folks in those segments, that’s a significant part of our workforce.

With this talent shortage, companies should be thinking about how they can customize propositions that meet the needs of their own workers. In 2016, 27 percent of American workers defined themselves as independent workers, anybody from an Uber driver to a lawyer hanging their own shingle. This year, it’s 36 percent.

With this talent shortage, companies should be thinking about how they can customize propositions that meet the needs of their own workers.

Bryan Hancock

In a traditional company, it’s hard to think about how you’re going to get all the talent you need if you’re not thinking about how to tap into those segments who would otherwise work for themselves.

Making sense of ‘quiet quitting’

Bill Schaninger: We’ve had two years when most companies were down staff. They didn’t ratchet down revenue expectations when they were down staff. They needed people to go above and beyond to over-deliver. The quiet-quitting phenomenon is people saying, “You’re going to force me into this transactional mode? You’re not getting a darn ounce more than the bare minimum.”

A good portion of our economy requires thinking, doing, and contributing outside the normative hours. The irony of insisting on people coming back at a specified time and asking them to be available outside hours, constantly giving tons of energy, is so mismatched to any kind of emotional exchange.

Bonnie Dowling: One of the reasons leaders want to bring people back to the office is that they think their employees can’t quiet quit if they can see them. Which is not true. You’d be amazed at how much online shopping I can do while sitting in a cubicle. I’m a professional.

I don’t know if quiet quitting is always bad. I think there’s a spectrum. Certainly, there are the quiet quitters who are doing absolutely nothing, and that’s bad. But there’s another group of people saying, “You hired me to do X job, but now you’re having me do X plus 150 percent or X plus Y job, and I’m not going to do that. I’m burned out. So I’m going to come in, and I’ll do the job that you hired me for and no more.”

We, as employers, need to figure out how we clearly define the job that we’re asking them to do and build that relationship and understanding so that it’s not a matter of quiet quitting, and instead it’s a matter of balance.

Bryan Hancock: It’s a two-way street. You’ve got quiet quitting, but you also have quiet firing, where employers have written somebody off but haven’t given them the feedback. Some employers have pushed their employees to the side. In both cases, you’re not having a real conversation between managers and employees about what’s going on.

If people just had those conversations, both the quiet-quitting and the quiet-firing phenomena start to decrease quite a bit.

Bonnie Dowling: Feels like you’re saying they need effective leadership.

Bill Schaninger: [Laughter] Welcome to the pod, Bonnie. We have a running clock on when I’m going to go on a rant about “Suck less as a boss.” I’m so happy to hear you say that.

Bonnie Dowling: We’ve got to start training our managers and leaders. We are in a different world. They need to lead differently. It’s not going to work to do the same thing that they did back in 2019. It’s not going to work from an operating-model perspective, given hybrid and virtual models. They’re going to have to learn how to check in with employees rather than just walk by cubicles. Managers are going to have to understand what it means to manage productivity. Butts in seats was never a great measure.

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Talking to your team

Lucia Rahilly: Bonnie, can you say more about that? Vis-à-vis retention, suppose you’ve successfully pulled from some of these various categories that Bryan described. How does that create a more complex challenge for managers? Is it harder to foster cohesion among teams that have such a variegated constellation of priorities?

Bonnie Dowling: It certainly could be. If your workforce is diverse, you have to think about how you’re creating an inclusive team environment.

For example, I was speaking with an IT director. She had about 300 people under her in her department, and she said, “We can offer flexibility, but everybody wants something different. I have people who want to work three 12-hour shifts. I have people who want to work five eight-hour shifts. I have people who want to work a little bit seven days a week. I don’t know how to give them the flexibility when we’re still a team in a department and we need to have time together.”

I said, “Why don’t you think about core collaboration hours? Do an analysis of your calendar and figure out what meetings your department owns. And see if you can start to establish a time frame and figure out when you expect people to be together and available and to schedule the meetings. But what you do outside that time, how you do the rest of your work, that’s up to you. You want to do it all in one go, then do it all in one go. You want to do it from 4:00 a.m. to 8:00 a.m. every day? Do it that way.

They ended up designating 9:00 a.m. until 2:00 p.m. Monday through Thursday for core collaboration. That gave them 20 hours a week of meeting time, and that’s plenty. The other 20 hours, you figure out how you want to do the rest of your work. There was massive engagement improvement. People were really excited. The IT director was able to accommodate and create a much more inclusive team environment for people from all different walks of life with all different working styles. The key was to talk to people, understand their definitions of flexibility, and do the work to figure out an inclusive model that could really work for everyone.

Bryan Hancock: As a manager, you should be having the conversations you should’ve been having anyway: What are the priorities? What are you working on? How are you spending your time? When do we need to be together? What do you need from me? How can I help accelerate things?

Those are all things that every manager should spend a couple of days a week of their time doing. It was a good idea to spend that time with your individual team members before the pandemic. It’s critical and mandatory now.

Bonnie Dowling: I spoke at a conference of auto executives, and they had different polling questions throughout it. One question asked in the beginning was: How many of you drive an electric vehicle [EV]? Ninety-plus percent of those in the room raised their hands. Everybody’s driving an EV.

Then I started my talk. I asked how many of them have polled their employees on what they wanted when it came to return to offices and working models. About three people raised their hands. I said, “So more of you drive electric vehicles than actually talk to your employees?”

Lucia Rahilly: Part of this might not be ill-intentioned. I’m thinking about myself, for example. When you’re overburdened, in part because of the talent gap, you don’t always have time to have several conversations a week with every person on your broader team. So you need to have that kind of portfolio redesign at the top to get enough managers in. It’s a chicken-and-egg scenario.

Bonnie Dowling: Leaders have to be able to lead. You need the time to do it. If you’re asked to do a bunch of other things, you need to go through your role and figure out what actually matters. And your people matter.

Lucia Rahilly: What about performance management for those different segments? How transparent do you need to be about performance management and goal setting for someone who values flexibility versus a traditionalist who might value career advancement?

Bill Schaninger: This ties into purpose. People need to know how their work matters if they’re mandated to work away from home—seeing where they fit in, so they have real-world clarity.

People need to know how their work matters if they’re mandated to work away from home—seeing where they fit in, so they have real-world clarity.

Bill Schaninger

The participation and goal-setting question is an interesting one. A lot of people have been raised traditionalists. I would argue that people who’ve had a taste of independence want to know how their work will be judged to a greater extent than many leaders will have been comfortable with in the past.

Your job, as a boss, has changed. It is, “Be with the people who are taking our brand promise in their hands, who are taking risk in their hands every day.” If one thing has come of this, it’s that if we recognize the segments and they’re all demanding something resembling, “It has to work for me,” then the fulcrum becomes the boss. The boss cannot just try to use a “one size fits all” approach.

New talent market, new operating model

Lucia Rahilly: Can you give an example of a company that is changing its operations model to attract workers?

Bryan Hancock: There are manufacturing companies that have changed the shifts which people work to better attract the caregiver profile type, who have obligations in the earlier and later parts of the day. These companies have literally created shifts so that you can drop your kids off at school, do a modified shift, and then be back in time to pick your kids up from school. It’s not your typical eight-hour shift. They alter what the job is to be done across the shift.

One of the coolest things I’ve seen companies do is what a trucking company was doing. They had tons of people who were willing to sign up and become truck drivers. Then what they found was that the truck drivers were leaving.

A big part of why they were leaving was they were being asked to either pick up or make deliveries at very inconvenient hours, like the middle of the night. The organization at first said, “This is the demand we have from our customers. There’s not a lot we can do with it.” And then they really pushed on it, and so the organization took up the employee experience view and changed how they’d charge their customers. They said, “You want us to pick up or drop off at a time that all our drivers hate? You’re going to have to pay us a lot more to do that.”

And they saw a significant decrease in turnover. Customers begrudgingly would take it because they would rather have the delivery happen sometime than have missed shipments. It was an interesting and tangible example of listening to what employees really wanted, questioning how the operation worked, and then redesigning the operation to meet the employees’ needs.

Lucia Rahilly: If workers are feeling pain in their pocketbooks now, are we seeing in the research that the solution to retention may simply be to raise wages? Wages would seem to be more important now both because of churn and also because of inflation.

Bryan Hancock: Compensation has to be in the general range. If you’re going to pay me three times as much money to do something down the street, I’ll consider doing it down the street. But an extra 25 cents or dollar an hour—we’re not seeing that create loyalty or stickiness to bad jobs. Compensation is one of the top six factors. It’s not the top factor.

Bonnie Dowling: It’s also important to think about where employees are in the economic spectrum. Because 25 cents an hour or a dollar an hour may not matter to white-collar employees. It may not be as important of a differentiator. But I was working with an agricultural company that was paying their employees $10 an hour. They hadn’t made a single hire since October 2020. We raised the rates to $14 an hour, doable without losing money. They had 70 applicants within the next two weeks. It matters at certain socioeconomic levels. It really matters.

Lucia Rahilly: How out of whack is the demand for talent versus the supply right now?

Bonnie Dowling: It’s crazy. There are 5.7 million people looking for jobs right now. There are 10.7 million open jobs in the US alone. That’s a five-million-person gap. That’s more than the entire full-time employed population of the state of Oregon.

Bryan Hancock: There aren’t enough people leaving current jobs to fill all the jobs that are open. The demographics are working against us, because there are more old people than people graduating from high school. If you think about what’s happening across the United States, this is what happens when economies start to stagnate. You end up having more people who have retired than entering the workforce.

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