One out of five people in the United States works in the retail and hospitality sector, and at least half of frontline retail workers are thinking about quitting. As people across the country reevaluate what they want and need from their jobs, retailers will continue to bear the brunt of the Great Attrition. What can they do to turn this turbulent period into the Great Attraction?
In this episode of the McKinsey on Consumer and Retail podcast, three McKinsey retail experts share insights from their latest research on the US frontline retail workforce. An edited transcript of their conversation with host Monica Toriello follows. Subscribe to the podcast.
Monica Toriello: If over the past two years or so, you have not thought about getting a new job or reevaluated the role that work plays in your life, it’s probably safe to say that you’re in the minority. A record number of employees have quit their jobs since the beginning of the COVID-19 pandemic, and many are thinking about doing so over the next few months—a phenomenon that has been given lots of names, including the Great Attrition, the Great Resignation, and the Great Renegotiation. Regardless of what you choose to call it, the fact is that if companies make a concerted effort to better understand why employees are quitting and take meaningful action to retain them, those companies can flip the script, and the Great Attrition can become, for them, the Great Attraction.
In September 2021, McKinsey conducted its first Great Attrition Survey. Recently, that research has been updated with a deeper dive into certain areas. Today, we’ll talk specifically about the part of the US economy that’s been most affected by the Great Attrition: frontline retail. To share with us their insights from this latest research are three McKinsey retail leaders.
Bryan Logan is a partner based in McKinsey’s Chicago office. He helps lead McKinsey’s work in retail organizations and advises companies on a variety of topics related to people and organizations, as well as marketing and sales. David Fuller is an associate partner also based in Chicago and also a leader in McKinsey’s work on retail organizations, advising companies on a range of topics, including operating model, talent strategy, and organizational structure. Aneliya (Annie) Valkova is an associate partner and a leader in retail operations. She advises companies on things such as customer and employee experience, frontline capability building and change management, and workload simplification. Annie is also based in Chicago. Thanks to all three of you for your time today.
The value at stake
Before we dig into your research, give us a sense of the scale of the problem. Retail CEOs are dealing with enormous challenges: inflation, supply chain disruptions, and so on. Where should attrition be on the CEO agenda, and why?
Bryan Logan: Monica, we’ve cut this problem so many different ways. It’s remarkable—any way you look at it, the magnitude of it is just overwhelming. First, just look at the employee base. One out of every five workers in the United States is employed by the retail and hospitality sector. That’s more than 30 million workers. So this isn’t just a retail, restaurants, and hospitality problem; it’s also an American problem.
If we look at these workers’ likelihood to leave this particular sector, their “quit rate,” as the government data call it, is almost two times as high as the national average in other sectors. This is a group that’s massive and is leaving their jobs much more often than employees in any other sector. They also report an almost 30 percent higher likelihood to leave their jobs than we’ve seen in other sectors. This certainly has massive implications for the overall US economy. From talking to leaders in retail, restaurants, and hospitality, we also know that there’s a linkage to bottom-line performance and to the customer experience. Any way you look at it, it’s a pretty massive problem.
David Fuller: There’s a lot of value at stake as well. As Bryan said, we’ve cut the data a million ways. Let’s just take one example. If you look at restaurants, the companies that are handling this well have created such a wide moat from the rest of their peers that they’re well placed to win the Great Attraction. Their employees report 15 to 30 percent higher job satisfaction and are twice as motivated in their day-to-day jobs.
Most importantly, this translates into outcomes: retailers with lower frontline turnover have higher comparative-store sales by three percentage points. So this should be at the top of the priority list not only because of the competition for talent and the fact that employees are looking for new jobs, but also because it actually translates into business results.
Flexibility for frontline employees
Monica Toriello: What are the highlights from the research? What was surprising to you, and which of the findings are most consequential for retailers?
David Fuller: In our survey of over 1,000 frontline retail employees in the United States across all retail sectors and formats—including grocery, big-box retailers, restaurants, and apparel stores—a few things stood out. First, we looked at why people might choose to leave their frontline retail jobs. The number-one driver of attrition was flexibility, and we should come back to that one because it’s interesting for a number of reasons. The next two are career development and health and well-being. There’s one conspicuous absence in the top three, which is compensation—it actually comes in fourth. Rounding out the top five is meaningful work.
One interesting thing is that the notion of compensation and minimum wage really grabs attention in the headlines. It definitely is important, but it’s not the most important. A myopic focus on pay is going leave you out in the cold during this Great Attrition or Great Attraction.
Employees in frontline retail are looking for a broader range of things. Two reasons this is notable. First, when you compare retail to other industries, flexibility jumps out as unique. Retail is the only industry in which flexibility ranks as the number-one driver of why you might leave your job. This is counterintuitive, given that in a frontline retail job, you have to be in the store helping customers. Second, in most other industries, there are one or two drivers that really pop. The list for frontline retail is a lot longer; the top five that we laid out are all really important. In fact, in frontline retail, the top seven or eight drivers are all critical elements.
Retail is the only industry in which flexibility ranks as the number-one driver of why you might leave your job.
Monica Toriello: Let’s talk about flexibility. As you said, David, the opportunities for building flexibility into a frontline retail job aren’t immediately obvious, given that frontline employees have to be physically in the store helping customers. What are some creative ways that retailers are offering flexibility?
Annie Valkova: For frontline retail, flexibility means predictable schedules, predictable hours, the ability to choose the days when they work and the time they start working, and independence and control over how to do the work. These might sound simple, but they have a big impact on frontline employees. Even before the pandemic, employees were looking to have more control over both when and how they do their job. We’re now seeing that employees have a higher willingness to speak up.
This isn’t to say that compensation, because it landed at number four, isn’t important; it’s more to say that compensation isn’t enough to keep frontline employees. They have more options. If compensation becomes table stakes, employees look for all these additional pieces—like well-being and flexibility—to stay at a job versus go look for a new one.
If compensation becomes table stakes, employees look for additional pieces—like well-being and flexibility—to stay at a job versus go look for a new one.
Bryan Logan: There’s one example that I think is remarkable on this flexibility front. We’ve heard a lot over the past few years about the rise of the gig economy and the flexibility that gig work provides for workers. As a result, workers have dropped out of the traditional workforce in high numbers to take on gig jobs and piece together a schedule that works for them. Well, there’s a large-format retailer that has essentially created a gig workforce within its own employee base.
What that looks like is a set of choices for every worker in stores: “What job do I want to do on this particular day? Would I like to work at the cash register and check customers out or work in the backroom or stock shelves? Would I like to consult and sell products to customers?” And by the way, their pay will change commensurate with the job that they select on that day and how many hours they work, so long as they’re trained for that particular capability. The retailer has seen a massive improvement in retention rate after rolling this out.
What matters most to which employee segments?
Monica Toriello: So the desire for more flexibility is the number-one reason that retail frontline workers go looking for a new job. But as you said, there are several other important reasons, and your research revealed that there are different motivators for different segments of the frontline retail workforce, right? Different aspects of the employee experience are more important to younger employees versus older employees, for example. Say more about those differences.
Annie Valkova: This is a massive workforce, and there are different pockets within it. What employees care about is different across retailers but also within each retailer. When we look at the research, we see some of these differences pop up.
For example, among age groups, we see that employees under 35 are less likely to quit than employees over 45 are. But for the younger employees, career development is one-and-a-half times more important than it is for employees over 45. How do you keep and cultivate pathways for employee career development so that younger, high-performing employees don’t leave? Employees over 45, on the other hand, are much more focused on being in a supportive environment at that point in their lives and careers. The challenge is creating a value proposition that meets the needs of both age groups and keeps both from switching employers.
We also examined what is driving men versus women to stay at or change their jobs. While flexibility remains the top reason why men leave their jobs, for women, things like supportive leaders and health and well-being are as important or even more important than flexibility.
This is where we start to get to the realities of the frontline retail population and what else has happened in their lives over the past two to three years: the lack of childcare, for one, and more recently, macro uncertainty. We know from McKinsey’s research on women in the workplace that burnout has escalated much more among women than among men. Flexibility still matters to women, but there are other things—such as well-being and supportive leadership—driving them to leave their jobs. That’s another dimension that retailers need to focus on.
Understanding and empowering managers
Monica Toriello: Another dimension that retailers need to think about is managers versus nonmanagers because there are differences there as well, right?
Annie Valkova: Managers are actually more likely to leave their frontline retail jobs, and they have more options. For them, flexibility is even more important than what we see on average, whereas nonmanagers are looking for career development and ranking compensation a little bit higher as a priority. For high-performing employees, retailers need to create career pathways in order to retain them. But then once they become managers, it becomes a different set of things that’s keeping employees from leaving. And so how do you, as an employer, balance the needs of those two cohorts?
David Fuller: I want to pause on this notion of manager versus nonmanager. The rates of managers who have self-identified that they’re planning to leave in the next three to six months is 63 percent. That’s an alarming number. Managers tend to be the center of gravity of stores—they drive the culture of their stores. Retailers have invested so much behind this cohort, and it’s a cohort that needs a lot of attention from many different angles.
Bryan Logan: We’ve got managers who are thinking about leaving at a rate of 63 percent, compared to nonmanagers at 36 percent. We have this massive divide between managers and nonmanagers. Managers seem less satisfied—they’re more likely to leave. And yet, if you look at what matters most to nonmanagers, they’re a lot of things that managers control. They’re things such as career development, inspiring leadership, and meaningful work. We have this interesting juxtaposition where the nonmanagers’ satisfaction is largely based on a group of people—the managers—who themselves aren’t very satisfied and are thinking about leaving.
It really gets to this point of understanding what matters to the manager. The role of the manager in the workplace—in particular, in frontline retail—cannot be overstated. Understanding what really matters to them will have cascading effects, not just in retaining them, but also in creating the right environment for the entire employee base.
The role of the manager in the workplace—in particular, in frontline retail—cannot be overstated. Understanding what really matters to them will have cascading effects.
David Fuller: This is an acute problem to work on right now. There’s no time to wait. The first step is typically to go listen to your managers. What do they want? That can take a lot of different forms. It could be a listening tour, a series of interviews, or a more structured, robust survey. But that is a population in critical need.
A lot of it gets down to empowering managers. This might be a silly example, but one retailer had very restrictive policies about who could open and close the cash register at the beginning and end of the day. It had to be a full-time manager, and that was usually one or two people per location. So the manager had to be there before the doors opened and had to be there to lock the cash registers after the doors closed. If you think about that policy and the desire for flexibility, they’re irreconcilable.
This retailer had shift managers—people who were empowered to lead and were the most tenured persons in the store for hours or parts of the day—who weren’t allowed to just use the key sitting on their hip. Changing that policy is a simple intervention that makes a profound difference in the life of the manager. How can you find and eliminate those little pain points that are really grating in somebody’s day-to-day life?
Advice for CEOs and chief HR officers
Monica Toriello: That’s a great example of a specific, concrete intervention that seems so small but could really transform the employee experience. Now, I imagine that CEOs and chief HR officers [CHROs] across the country have already been thinking about some of the things we’ve been discussing. If you wanted them to take away one thing from listening to you all talk about this, what would that one thing be?
David Fuller: One of the interesting elements that we noticed—and one of the reasons we wanted to push on frontline retail—is that if you read the newspapers, there are all these articles about how the COVID-19 pandemic has changed the workplace. “What does flexibility mean? It means working only three days in the office.” Those articles are all focused on the corporate community, on who’s coming to corporate headquarters. But that’s not the question for the vast majority of workers in America. The percentage of people who could go fully remote during the pandemic at any time was in the teens.
So the biggest mistake that retailers make is having a narrow focus on the folks who probably sit around a CHRO’s office. Look more toward your front lines, look into the stores, and innovate there at a faster rate than you do in corporate headquarters. Because at the end of the day, the folks in your stores and on the front lines are the lifeblood of your organization. If they leave, and you just have a corporate staff left, you’re not going to sell much.
Annie Valkova: Understand what your frontline employees are looking for and how that differs, even within your population. What matters to some is not what matters to all of them. There is no average frontline retail employee, either across all of frontline retail or within each retailer. Understanding what drives different workers and being able to pick the interventions for each of your different subgroups, as well as communicate them in a coherent way, are what can make a difference here. What we sometimes see happen is a retailer introduces individual interventions but doesn’t quite connect the dots and build the story.
Bryan Logan: There’s another example that comes to mind. A retailer, one of the largest frontline employers, decided that it needed to understand what mattered most to its particular workforce. It found that its workforce was not heterogeneous, and the needs varied quite a bit by segment of the workforce. There was, for example, the high-school or college student who had entirely different needs from the person who was juggling a couple of jobs and raising a family.
As the retailer dug into this, it was able to create a tailored employee value proposition [EVP]—much like we talk about a customer value proposition—that appealed to these different groups. The EVP related back to the retailer’s labor strategy and talent strategy in terms of who to recruit and who would have the best chance of succeeding at this particular company, but it was grounded in research to understand the needs of the different segments of the workforce.
David Fuller: Bryan, I think that’s an important element of this story: understanding your population. What are the archetypes in your population, and how do you address those personas?
One more example that I think is worth sharing: another large frontline retail employer started building continuing education opportunities for its employees, which is fantastic. As it started to roll this out, it was pushing a lot of college credits. But over time, the retailer noticed the program wasn’t getting that much adoption and usage. It found that its workforce had been aging and a lot of them had college diplomas already.
Offering college degrees or credits to folks who already had college degrees wasn’t all that helpful, so the company reconstituted its program based on what its employees actually wanted, which wasn’t college credits. They wanted masters’ credits and to develop a fully different set of skills. Much of it comes down to knowing who your employees are and what they want.
Annie Valkova: Another thing that we think retailers can do right away is to look at the work that you are asking your frontline employees to do. Over the past two to three years, a lot of activities got added to frontline employees’ workloads—curbside delivery, buy online pick up in store, fulfilling online orders from the store—and it was different because there weren’t many customers in the stores. Now that customer traffic is back up, employees are still doing these additional activities. They’re getting burned out, and their satisfaction is going down.
It’s advisable to take a look at what you are asking them to do now. Ask yourself, “Which parts of that work can be simplified or removed quickly?” so that the satisfaction and the sustainability of the job can be improved.
Bryan Logan: Putting it all together, we saw four imperatives for retailers. First, understand your frontline labor pools and what matters most to them, and build an EVP that would resonate with the needs of those particular employees. The second is on this notion of flexibility. There’s no way around it: workplace flexibility is the most important factor in determining whether or not frontline retail employees will stay or go. The best retailers are innovating and investing in different flexible options for their employees. Third, the role of the manager cannot be overstated. You’ve got to invest to build strong managers and a development culture. Last, simplify frontline retail jobs and make them more engaging. Meaningful work is a top-five driver of choice for frontline retail employees, and that includes things like being aligned to the mission and purpose of the organization. Is the work stimulating, or is it boring?
In summary, understand your frontline labor pools and build a distinctive EVP that caters to them. Innovate to offer flexibility. Invest in strong managers and build a development culture. And finally, simplify frontline retail jobs and make them more engaging.