How workforce rebalancing is building pressure in the talent pipeline

13 minute read 18 Apr 2022
Authors
Liz Fealy

EY Global People Advisory Services Deputy Leader and Workforce Advisory Leader

Passionate about solving clients’ organization and people issues through innovative Future of Work Solutions and leveraging EY’s proprietary digital accelerators. Employment and labor attorney.

Roselyn Feinsod

Principal, People Advisory Services, Ernst & Young LLP

Passionate about building a better working world with art and science. Mother to four, grandmother to seven. Avid traveler, hiker and runner.

13 minute read 18 Apr 2022

The EY 2022 Work Reimagined Survey reveals employee and employer insights amid a “Great Resignation.” Some employees feel empowered; gaps remain. 

Questions to ask

  • What are employees looking for in an employer, and what do employers think workers need to thrive?
  • What role do demographics play in employee attitudes toward wellbeing at work?

Dramatic changes in the ways we work and think about work have caused a tidal shift in how we view our priorities and prospects in daily life. The COVID-19 pandemic accelerated a work realignment already in progress, and transformed our understanding of success, purpose and value. Rising inflation, The Great Resignation, and calls for commitment and action on environmental, social and governance (ESG) issues, are further reshaping a workforce terrain that we’re all trying to navigate with new eyes. As the initial waves of health-driven change roll into new ones, the workforce is resettling into pools based on how we work, what we value and who we are.

It’s a new moment with new opportunities and a need for greater context for the how, what and why of work.

The EY 2022 Work Reimagined Survey reveals insights from more than 17,000 employees and 1,575 employers across 22 countries and 26 industries. The findings explore chief motivators of workforce turnover or retention and highlight areas of focus for leaders looking to lean in to the opportunities of the moment.

The survey shows:

  • Both employers and employees recognize that making provisions for hybrid and flexible work is a necessity, but not all employers have created and communicated a formal and clear policy and guidelines.
  • Employees feel empowered, yet nearly half (43%) of respondents say they’re likely to leave their employer in the next year. Total pay is their chief concern amid tighter labor markets and new opportunities.
  • The groups most expecting to leave their jobs identified as being Gen Z or millennials in the United States (53%) and working in the technology/hardware sector (60%).
  • Employers who have shown a proactive approach to the changing world of work feel more optimistic about what’s happening now and next in terms of changes to productivity and culture.
  • Both Total Rewards and Diversity, Equity and Inclusion (DE&I) are seen by employers and employees as areas demanding greater attention and action. 

We find ourselves poised to fully reimagine a more sustainable and human-centered workforce strategy. By responding decisively to the moment and recognizing the necessity for sustainable transformation of business, employers can redefine a new way of working that preserves the talent pipeline and future value.

How we’re working in a changed world

As much as the world would like to move beyond the COVID-19 pandemic and its effects, we find ourselves still rocked by a world in flux, including in the ways we’re working. Both employers and employees at first — necessarily — focused on short-term decisions to forge through one of the biggest health challenges in a generation. But now attitudes and strategies toward work are being molded by other macrotrends. Analysis from The World Bank shows expectation for slowing economic growth and persistently high inflation in coming years, and a need for coordinated action to address the severe costs of weather and climate disasters.

This backdrop colors the landscape for business investment and employee sentiment at a time when The Great Resignation appears to still be in full swing in some parts of the world. 

In the last year, 68% of employer respondents say employee turnover has increased in the past 12 months, with 43% of employees saying they are likely to leave their current employer in the next year. That’s a significant rise from last year, when only 7% of employees said they’d be unlikely to stay. The groups most expecting to leave their jobs identified as being Gen Z or millennials in the United States (53%) and working in the technology/hardware sector (60%).

Flexibility in work has been championed by employees and embraced by some employers over the last two years and has now become an expectation rather than a nice-to-have for most workers. Of those surveyed, 80% of employees want to work at least two days remotely per week. Just 20% of employees voiced reluctance toward fully remote working, compared to 34% last year, showing broader acceptance of working from anywhere. 

Despite this signal from employees, nearly a quarter (22%) of surveyed employers say all employees are expected to return to the office five days a week.

The diverging perspectives between employers and employees on hybrid/flexible work is only one example of what could be seen as a rebalancing of leverage in favor of workers. Perceptions of workforce culture, productivity, advancement potential and mobility show significant differences between employers and employees, and could further fuel an already hot race for talent.

With a workforce feeling more empowered and the labor market appearing increasingly liquid, many employers show declining levels of confidence in how their organizations are developing their cultures. Only 57% of employers say they agree that their culture has improved since the start of the pandemic, compared to 72% last year. For employees, 61% say they agree company culture has improved since the beginning of the pandemic, up from 48% in 2021.

Despite employers demonstrating agility through the pandemic itself, the exodus of employees accelerated. The details of employer sentiment can vary widely. The data reveals three distinct segments of employers based on their perception of business productivity and organizational culture:

Optimists (32%)

Employers who have been proactive in their approach to flexible work, real estate and technology  are more likely to agree they’ve seen positive outcomes. The optimists indicate they feel they have more agency in the present uncertainty. By giving clarity to their workforce and leaning into the change, these businesses invested in a strategic direction and can see the benefits. By taking a consistent, strategic and cross-functional approach to the current climate, these optimists are more likely to believe they’re steering their own course.

Pessimists (11%)

A smaller set of employers feels disempowered by the moment. Their perception of outcomes related to culture and productivity are drastically lower than optimists, and indicate less investment in clear actions toward improving technology, onsite amenities and further flexibility for the workforce. By not being proactive, these employers seem to have remained in a wait-and-see posture while the labor market and overall economic situation has shifted again. These employers have not positioned themselves to attract new talent as their veterans may continue to leave, further deteriorating confidence in their competitiveness.

Massive middle (57%)

A majority of employers remains somewhere in between the highs and lows without a distinct perspective on productivity and culture outcomes. This shows that employers and employees alike are undecided about what the future holds and there’s an opportunity for the employer to build a leading strategy and win the race for talent.

The vast majority of employees and employers seem to agree that the old status quo of the working world is gone. Most respondents agree that hybrid and flexible working conditions are here to stay, and employees are still prepared to switch jobs if they don’t find what they want. It’s then imperative that employers understand what the workforce most values.

What we’re valuing from pay to purpose

The depth of our collective reassessment of work can be seen in what we say we value. Inflationary pressures, the broader acceptance of remote work and lower barriers for finding new jobs have all contributed to employees (79%) putting a premium on total pay and other tangible benefits. Employers (83%) agree that the pandemic has accelerated a need for extensive changes to a rewards policy encompassing compensation, wellbeing, flexible benefits, time off and more.

Rewards include multiple categories of incentives and a detailed look at the priorities of employers and employees actually reveals a noticeable misalignment between the two. Employees are much more likely to place more weight on compensation and career advancement, followed by work flexibility factors.

Pay also factored into how employees perceived DE&I, 20% of whom said that addressing pay equity is the single most important action a company should take to improve DE&I. Employers agree that more must be done to improve DE&I, but the largest number of employers (17%) cited reviewing hiring criteria as the most important action to take.

Some employees may feel empowered by work flexibility, seeing more opportunity for advancement with virtual assignments and a broader mix of employment opportunities. But there is also some acknowledgement that further acceptance of hybrid/flexible working conditions may risk slower career advancement. There’s a noticeable perception gap between employers and employees with 72% of employers believing new ways of working will cause some segments of the workforce to lose competitive advantage, compared to just 56% of employees.

For employers, pay represents a fixed cost during a time of growing inflation. Only 18% of employers believe pay increases/reviews are needed to address employee turnover, showing a clear disconnect to what employees say they want in a new role, and what employers are expecting to most deliver to help employees thrive. Employers put emphasis on learning and skills, flexibility and employee psychological/mental wellbeing and safety.

The focus on learning and skills by employers could be a reaction to The Great Resignation. If turnover is high and employers show less confidence in productivity gains made through the pandemic, then an employer may be more likely to invest in upskilling the remaining workforce. This positioning from employers may also align with the needs and expectations of a subset of employees more likely to be company-committed. These individuals are more likely to be concerned about the risks of burnout and their mental wellbeing, more likely to work full-time in an office and have a more favorable view of work-life balance. The strategies and priorities of most employers therefore appear to be in line with this segment of employees showing more loyalty to their present employer.

The distinctions between groups which could be characterized as “job jumpers” and the “company committed” may be influenced by their professional sector, but also by generation. This highlights the importance of knowing the composition of the workforce to be able to respond to it appropriately.

Ways of working across demographics

It may seem self-evident, but it bears emphasizing that the workforce is not a monolith and perceptions of wellbeing, value and productivity can vary widely among workers based on demographics. The data shows wide gaps between self-perceived levels of wellbeing between geographic location, professional sector, gender and seniority.

One of the starker comparisons of the preferences and perceptions of work is shown through a generational lens.

Real estate and work realities

The EY 2022 Work Reimagined Survey provides greater detail to generational preferences, especially around physical and organizational design and how the workforce will interact with the office. Gen Z is much more likely to put higher weight on the ability to stay socially connected while working (29%) than do Baby Boomers (21%). Gen Z also puts higher value on flexibility and the ability to have a change of work scenery (22%), compared to just 14% for Baby Boomers. Gen Z is also more likely to consider the design of an office/workspace as a driver to be in the office (12%) compared to Baby Boomers (7%).

Broadly, the purpose of the physical office and how it influences the way work gets done depends on the demographic makeup of the workforce. Younger workers cite more informal social factors as potential drivers to being in the office, compared to a more utilitarian view from Gen X or Baby Boomers who are more likely to see the space as useful for collaboration. Parsing the details of an organization’s workforce provides an opportunity for a bespoke solution to harmonize the priorities of employers and employees.

Key focus areas to reimagine your workforce

The world of work remains in a state of transformation, spurred on by the challenges of recent years and expectations of those to come. The data shows that the optimistic employer group took a more proactive stance toward uncertainty. Leaders should consider finding cross-functional ways to respond to opportunities when they arise, for example:

  • Operationalize hybrid models

    Hybrid work is here to stay, so employers should build a structure with intent. Understand which roles are best suited to remote/hybrid work, and build the systems needed to create value while streamlining functions. This may include building an integrated mobility strategy to manage tax compliance for a geographically diverse workforce, along with structuring rewards and even real estate strategy to attract and retain the workforce you need.

  • Reinvent the workplace

    It’s not enough to repaint an office and expect workers to return to cubicles. Employers should consider a renewed integrated workplace plan that considered the physical space and amenities needed to empower productive workers. But it should also consider how the workforce engages in social networking and learning both in the physical office and in the digital realm.

  • Create the work-technology experience

    From grocery shopping to hailing a cab, we know the importance of a good user interface and design for business. A virtual workplace and employee experience platform should be on par with consumer technology providing a seamless technology experience across all work contexts. Done well, this can contribute to efforts identifying areas requiring culture change and moving the organization toward a more equitable reality.

  • Reshape and optimize programs and career frameworks

    The pandemic and so much more have redefined employee expectations and employers should update their rewards and career advancement models to respond to a still fluid labor market.

  • Define culture and organizational networks

    Before fully undertaking a large-scale transformation, employers should assess the fitness of their organizational culture. This includes understanding which key aspects of an organizational culture to preserve and how to engage key influencers to reduce friction toward the new physical and digital realities of work.  

These areas of focus may differ between organizations, but leaders should work to find the right constellation of solutions that address the specific makeup of their workforce, desired direction of their organization, and the continued assessment of transformation in progress.

Final thoughts

Work has been reimagined by employees and employers but their visions don’t always align. Both see flexibility and hybrid work as the new normal, though further details reveal divisions. Employees are still willing to leave their jobs to advance their career and pay potential. Global uncertainty connected to inflation and labor costs are fueling reluctance among employers who are not eager to reset pay and career opportunities. If companies don’t address pay equity between internal and external labor markets, then efforts toward improving culture, productivity and DE&I will be neutralized by turnover. By acting with intentionality, leaders can build trust and orient their organizations toward an optimistic future.

Summary

There are drastic differences in worker perceptions based on demographics including professional sector, country, age and gender. Finding common ground between employer and employee expectations requires a cross-functional strategy with attention to physical and digital spaces for work. 

About this article

Authors
Liz Fealy

EY Global People Advisory Services Deputy Leader and Workforce Advisory Leader

Passionate about solving clients’ organization and people issues through innovative Future of Work Solutions and leveraging EY’s proprietary digital accelerators. Employment and labor attorney.

Roselyn Feinsod

Principal, People Advisory Services, Ernst & Young LLP

Passionate about building a better working world with art and science. Mother to four, grandmother to seven. Avid traveler, hiker and runner.