Lessons from the Great Resignation for small businesses

November 20, 2022 0 By Cypher9ja

Although the Great Resignation, where professionals left in droves to seek more flexible and fulfilling work opportunities, primarily affected big businesses, small businesses can learn some lessons from it.

“While big corporations do not fully appreciate the cost of replacing key staff, they often have some resources that can lessen the loss while they seek new staff. However, small businesses often do not have the same resources and are more affected by the loss of key personnel and therefore must be mindful of the trend of employees prioritising a wholesome work environment,” says René Richter, MD of RemChannel.

The Great Resignation refers to a US-led trend of workers quitting in large numbers amid the Covid-19 pandemic, opting instead for stimulus packages. However, it has sparked similar movements around the world, including South Africa, as workers seek more flexible working environments locally and overseas.

RemChannel’s recent biannual Salary and Wage Movements Survey conducted in September shows that the increasing costs of living, coupled with the inflexible working environments continue to push employees to seek greener pastures.

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Great Resignation a continuing trend

Richter points out that the Great Resignation trend is continuing in the professional services environment. In comparison to the March 2022 survey, the labour turnover, excluding temporary staff, has increased by 2.4 percentage points and by 2.8 percentage points since September 2020.

“The most concerning element is that the resignation rate is also increasing steadily. In comparison to the March 2022 publication, resignations increased by 2.1 percentage points to 38.5%, despite a depressed economic climate. Excluding academic staff of the participants in this survey, the sales and marketing turnover (28.8%) and human resources turnover (20.6%) are the highest among all the disciplines surveyed.”

The changing world of work increased the complexity of managing remuneration and in particular the employee value proposition (EVP). The power shift from the employer to the employee, in particular with professional staff, has become increasingly evident in the resignation statistics reported in this survey publication.”

The survey report notes that the loss of institutional knowledge at senior levels in the organisation which is a trend identified in April 2022 is of even greater concern. Statistics from the survey shows that 15.7% of top management and executives with experience of 15 years and more leave their companies.

Nobesuthu Ndlovu, managing director of Old Mutual SME, says the core skilled staff of small businesses are usually the backbone of the business and therefore the loss of their skills can have a severe impact.

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People who resign now often the backbone of a business

“These are the people who usually know the business inside-out and were pivotal to some of its successes, unlike large corporates that would have a whole finance, R&D and distribution department where the loss of one employee is felt but does not mean a breakdown in the chain of operations.”

She says the loss of core staff for small businesses also usually results in the business outsourcing the services that they require due to not having the HR capability that can search, recruit, onboard and train new staff. Large enterprises have a department, usually with a budget, specifically dedicated to this. Recruitment costs are also not usually factored into running costs for small businesses.

Ndlovu says that their Old Mutual SME customers have noted that they needed help with retaining their employees. “One of the reasons staff preferred large enterprises over small businesses, despite the flexibility and work-life balance that comes with a smaller concern, is their formal employee benefits, such as pension and retirement, medical aid and GAP cover.”

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Enticing core staff

This cost is not always feasible or viable for small businesses, but it is an important consideration to entice core staff. There are many ways for small businesses to compete, such as using the more flexible working environment that counters the larger salaries offered by corporates, a better company culture where employees’ opinions matter and providing opportunities for training and development. These considerations can go a long way in the current context of preventing the Great Resignation, Ndlovu says.

According to Richter it cost the large corporate participants in this survey an estimated R16.8-billion to replace employees each year and these costs were an even bigger burden on small businesses.

Should this not warrant measuring the costs of lost talent? “These funds could most certainly be used to review the employee value proposition and make changes to critical areas which would improve the retention of critical skills in the organisation.”

Richter says it is therefore crucial to evolve with agility to ensure future sustainability and create growth and employment opportunities in South Africa.