More than a third of millennial and Gen Z workers are planning to quit their jobs this year. Here’s what’s driving them out the door.
By Susan Ladika, Financial Times
More than one-third of young employees may already be eyeing the exits, making it imperative for insurers to figure out how to keep them from heading for the door.
"The name of the game is about attracting and retaining younger employees," said Monica Martin, senior director and global total rewards leader at WTW.
In a recent Resume Builder survey, 37% of 18-to-24-year-olds said they are highly or somewhat likely to quit their jobs this year, while 35% of 25-to-34-year-olds said they planned to leave in 2024.
In many cases, these young employees are "trying to figure out what their careers should be," said Stacie Haller, Resume Builder's chief career adviser. "They're not weighed down by kids or mortgage.
At the same time," the stigma of changing jobs often has waned over the past few years," Haller said, and employees "have more choices because of remote work."
For many companies, "the employer-employee bond is broken," said Jeff Hyman, chief executive officer at Recruit Rockstars.
The Covid-19 pandemic "really accelerated many of the changes I think were already happening," Hyman added.
Rather than sticking with a company for 20 years, as their parents or grandparents might have done, the average member of Gen Z lasts just 27 months at a job, a study by CareerBuilder.com found. Millennials don't stay much longer, with an average tenure of33 months.
That can be a particularly important issue in the insurance industry, where the unemployment rate was just 1.9% in July, according to the U.S. Bureau of Labor Statistics, compared with an overall rate of 4.3%. And the industry is also grappling with an aging workforce. The median age of insurance industry employees is 44, according to the BLS, and more than 700,000 employees are age 55 or older.
Reasons for leaving
In many cases, the top reason employees give for leaving a company is better pay.
"Pay has always been the No. 1 driver," Martin said. But now "pay is more important than ever before," due to inflation and economic uncertainty, and yet those same pressures can also make it challenging for carriers to increase salaries as a retention tool. "Employers don't have money falling from the sky," she said.
A WTW survey found that employees who are motivated by higher pay would want to earn 10% more before considering switching jobs.
In many cases, the quickest way for a young employee to get a "meaningful" raise and title is to switch jobs, especially as the number of mid-level managers in many companies has been reduced, creating fewer opportunities for promotions. Hyman said.
But constant job hopping can come back to harm employees, he said.
"As a recruiter I can't evaluate their experience or track record," Hyman said. "They haven't stuck around anywhere long enough to make an impact."
That means companies might not want to take a risk in hiring them. "You're kind of radioactive," Hyman said.
On the other hand, job hopping "might not be as much of a concern if the various positions have prepared the candidate for the new role," Michelle Reisdorf, district president at Robert Half, said in an email.
How to keep younger workers
In addition to better pay, another key reason cited for looking for a new position is learning and development opportunities, said Maria Amato, senior client partner at Korn Ferry. On the other hand, three-quarters of 25-to-34-year-olds also said they would stay in a job they didn't like if it offered strong opportunities for learning and development, she said.
The Catch-22, however, is that because many younger workers don't stick around for very long, companies often invest less in their career development, Hyman said.
If employees only stay for two years, organizations "can only afford to invest so much," and that decision may push employees to look for work elsewhere, he said.
By providing opportunities for internal career growth, "employees tend to feel more genuinely supported and often find more value in their workplace," Reisdorf said.
She also recommended managers maintain open lines of communication and hold regular check-ins with employees to address any workplace issues that arise.
Often younger employees are "looking for places where they can grow their career," Martin said. And they want in-office work experiences "to be positive, fun and engaging."
Having workplace flexibility also is crucial, Reisdorf said. "This doesn't necessarily meanadhering strictly to only remote or only in-office policies, but instead offering flexibility that enhances work-life integration while still meeting business needs."
A company's culture is also a consideration, Amato said. "Culture is not a reason for people to join a company, but it is a reason they leave."
One of my clients, the CEO of a SaaS company, raised $15 million in venture capital in 2019. He came to me because he was missing his sales forecasts, as a result of his products being consistently late. He blamed the market, his competition, even his customers—everything but himself. After assessing his situation, I knew that I needed to get him to look in the mirror and admit he had a problem. The problem was people-related: vacancies, retention, and culture. For every issue that he could identify, I could tie it back to people.
It took some doing, but over the course of six months, we changed nearly everything about the way he ran the “people part” of his business. The playbook you’re holding served as our guide. We determined what he needed his company’s DNA to be built around, which meant removing mis-hires and low performers, reassigning people to the right roles, and establishing a leadership cadence. Most importantly, he committed to never settling for a B-Player again.
In less than two years, he is finally on a rapid path to profitability, and his Board couldn’t be happier with his performance, particularly with regard to the quality of his new hires. His revenues are tripling year over year and it was only possible because he made building a Rockstar team his first priority. The key to turning around his business was to turn around how he hired.
Misconceptions About Rockstars
I’ve used this term quite a bit now without providing a definition. Hiring managers use their own definitions, but they’re often soft and squishy—how many times have you heard “I really like him” or “She’s a keeper”? Let’s be specific. In my world, Rockstars are those in the top 5 percent of performers at the compensation level that we can afford, across two dimensions: competencies and DNA. You’ll hear them referred to as A-Players, difference makers, gamechangers, or top performers. But there’s so much fuzziness in all these labels that I need to be precise in what we’re trying to identify. After all, if our ultimate goal is to remove subjectivity from recruiting, how can we even begin when we can’t agree on what we’re seeking?
For some, there is a negative connotation of the term, similar to “diva” or “prima donna,” but that’s not what I mean by Rockstar. We’re only concerned with its positive connotations. Rockstar is shorthand for the best talent you can get your hands on to ensure that your company thrives.
Somehow, a myth was born years ago that only certain key seats need to be filled by Rockstars and that the supporting cast should or can be B-Players, or that there’s a bell curve model that makes for an ideal harmony. I want to dispel that dangerous notion. Think about a football team that invests a king’s ransom in a franchise quarterback, then strings together a rag-tag offensive line as an afterthought. What good is it to have a Pro Bowl quarterback if you’re not willing to keep him upright? He’s not going to do much good on the disabled list.
Let’s put a Rockstar in every seat.
As I write this, elite pro basketball players garner record-breaking salaries to play alongside other superstars. NBA teams have realized that winning championships requires acquiring top-notch talent in every position. Consider that Michael Jordan won a number of scoring titles but didn’t win a single championship until the Bulls assembled star role players around him:
Dennis Rodman, Steve Kerr, Scottie Pippen, Bill Cartwright, Horace Grant, Toni Kukoc, and B.J. Armstrong, among others who excelled at their individual roles. (I’m a Chicagoan…can you tell?)
For another thing, as the adage goes, it only takes one bad apple to spoil the bunch. A culture is an atmosphere created by the collective DNA of the individuals. Therefore, everyone in it is contributing to that culture—or detracts from it.
Then, there’s the reality that Rockstars want to work with other Rockstars. You create synergies by assembling Rockstars. If you can’t attract them at every position, maybe your company’s mission isn’t very compelling. Or maybe it’s the leadership you’re providing…or failing to provide.
The Truth about Rockstars
If the role is important enough to exist, it’s important enough to have a Rockstar fill it. Yes, Rockstars will cost 20 percent more but can be two to three to ten times more effective than an average performer. Because of that effectiveness, you won’t need to hire as many. I have a saying when it comes to Rockstars: “Recruit five, get the results of ten, and pay them like eight.” Considered this way, they’re actually a great value and simply the best investment you can make for your business.
I implore you to commit to never knowingly hiring a non-Rockstar again. When you hire Rockstars, the rest of your work largely takes care of itself.
That said, be careful, because a Rockstar at one company isn’t necessarily one at another.
Rockstars are Rockstars because they are a fit in terms of both competencies and DNA characteristics. You can’t simply make a play for a competitor’s top sales rep and think she’s going to produce equally well in your company. That’s lazy recruiting.
Yet, this is exactly what happens during free agency in professional football. A player has performed at a Rockstar level with the team that drafted him, and when his contract is up, he offers his services to the highest bidder on the market. Another team will invariably overpay to fill a position of need, trusting that they’re getting a proven commodity. High-priced free agents are anything but risk-free, however. Think about it: You’re playing in a new city, for a new coach, in a new system, with a new playbook, new teammates, higher expectations, and more scrutiny. In business, it’s the same thing: That other company is different from yours—different culture, different values, different brand, different sales process, different funding, different everything. Don’t presume that your competitor has made the same commitment to hiring Rockstars — they’ve got plenty of B-Players, and simply by “stealing” your competitor’s trophy people, you may be unpleasantly surprised.
There’s another problem in assuming Rockstar status translates from company to company: If the person you’re targeting truly is a Rockstar, why would their employer ever let them get away? Franchise quarterbacks don’t ever hit the free agent market, because the team offers them highly lucrative extensions at least a year before they finish playing out their current contract. You might well be poaching a B-Player from your competitor, doing them a favor while tarnishing your own culture, which does them yet another favor.
Perhaps you’re hiring a competitor’s sales rep. You might presume that you’re not simply getting that person, what you’re really getting is their stable of customers. The idea here is that those customers will be loyal to that salesperson and follow her from place to place. Unfortunately, the reality is those customers are loyal—to the company’s products and services—not to the salesperson. Think about the scene from Jerry Maguire in which Jerry’s been fired and is working the phones, scrambling desperately to take his clients with him. He ultimately keeps only one out of dozens, and it’s the most unmanageable, demanding, labor-intensive client in the bunch. In my experience, hiring for someone’s Rolodex is an awful idea.
Another assumption is that Rockstars can be developed. Sadly, C-Players never become B-Players, and B-Players rarely become A-Players. However, there are would-be Rockstars who are just in the wrong place. If you put them in the right spot, they’ll shine. That’s certainly true, but it’s a mistake to think that you can create Rockstars out of just anyone. That’s the rare exception.
It’s also important to realize that Rockstars sometimes lose their Rockstar status. Just as music Rockstars fade from the charts or lose their sound, business Rockstars can also diminish over time. So it’s important to review your talent on a regular basis.
It’s lazy to simply hand-off hiring to the HR department. Your HR leader should be a valued consigliere, but if you want to de-risk your hiring, you must make every manager—regardless of functional responsibility—own their hiring process and results.
Putting a Price Tag on Rockstars
Before recruiting, it’s vital to know up front precisely what you want and what are your non-negotiables. That is your bar, and you can’t settle for less. By the end of this book, I hope you hear my voice in your head—reminding you that every time you settle, you’re about to create a ton of extra work for yourself.
Bear in mind that there is no perfect candidate. You’re not even looking for the best candidate. Theoretically, you might filter out the best candidate during the recruiting process. You’re not seeking the perfect candidate; you’re looking for the safest candidate. The one who is most likely to succeed in the role you seek to fill. The goal is to remove as much risk as is feasible, and in doing so, give yourself the highest probability of landing a Rockstar.
Knowing what you want includes knowing what you want to pay. This seems obvious, but that doesn’t mean everyone adheres to it. If you don’t have a clear budget in place, you’re likely going to interview someone and fall in love, only to have your heart broken when you realize you can’t afford that person.
One strategy, and I use the term loosely, is to interview a lot of candidates and develop a sense of what the going rate ought to be. The problem is that you might be letting Rockstars slip away while you’re still calibrating the market. Interviewing a candidate that you don’t intend to hire is a huge waste of your time.
In determining your budget, bear in mind the cost of a mis-hire discussed earlier. A recent survey by CareerBuilder points out that two-thirds of companies report that a bad hire costs them at least $25,000. Why not just pay a Rockstar candidate that money in the first place and avoid many of the hassles? Start with the high end of your budgeted range, and recruit a Rockstar, instead of trying to be cheap by hoping to hit the low end of your range.
In determining a budget, a site like Salary.com may be helpful as a starting point, but it’s important to regularly benchmark compensation with other companies of similar size in the same city. I’ve found that compensation levels have become far more transparent because of the Internet and, thus, a lot more consistent. Three data points obtained from your local colleagues will usually suffice.
Create the Scorecard
The Scorecard is the yardstick by which all candidates will be measured. Since we’re only interested in hiring Rockstars, this document reflects the gold standard. Let’s be clear, a Scorecard is not a job description—“must have ten years of managerial experience, bachelor’s degree from accredited college, knowledge of Excel, etc.”—and isn’t about a laundry list of requirements. On the contrary, the Scorecard is more of a standardized candidate grading system that identifies the tangible markers of success
Everyone in the recruiting process—including the CEO, the Board, the investors—must consider it a sacred text. It may take some time to get everyone’s input in quantifying the qualities you’re looking to hire. That’s fine; this process shouldn’t be rushed. I simply do not commence a search for candidates, let alone interview, until everyone who will provide input into the process has agreed on the Scorecard. Invariably, there are differences of opinion as to what is necessary for the role—and this crucial phase forces those to be ferreted out and reconciled.
Scoring is based on a 1–10 rating system, with 9 and 10 being Rockstar level. A score of 7 or 8 has Rockstar potential and deserves consideration. Any candidate with a score below 7 should be eliminated from the process. That person isn’t and most likely won’t become a Rockstar in the given role. While you can entertain 7s, you should be looking to hire 8s and above at every position measured across two dimensions: role fit and company fit. 10s are virtually impossible to find —the black swan—so I focus on 8s and 9s. Imagine the possibilities for your company if every employee met this standard.
Role fit is based on the candidate’s competencies for the job. Company fit is based on the degree to which their personal DNA matches the DNA of your company. I’ll get to this in the next chapter.
Step 1 in creating the Scorecard is to envision what success looks like. Looking back eighteen months post-hire, what would need to be accomplished in order for the hiring manager to determine that they would enthusiastically re-hire the person? Write down what the benchmarks of success are—launching five new products, closing $1.5 million of new business, putting the company in the black, turning around the division, etc. Be specific and quantify wherever possible.
Step 2 is to define the day-to-day accountabilities—typically five to seven. Determine what the individual would need to do in order to deliver the degree of success identified in Step 1. What will this person actually be doing every day? It sounds silly, but many executives oversimplify this step—they don’t connect the actual day-to-day tasks to the outcomes needed.
Step 3 is to define the competencies—think of these as characteristics—required to successfully execute those daily accountabilities. If one accountability, for instance, is to turn around an unprofitable product line, then the ability to ask insightful questions and prioritize problems to be solved might be an example of a necessary skill,as this person will need to uncover all the issues before crafting a solution. So, you might identify that competency as “intellectual curiosity.”
In creating the Scorecard, it’s vital to consider the specific point in the company’s lifecycle. The Scorecard for the third software engineer in a startup phase, for example, looks far different from the fiftieth software engineer in a maturity phase. A CFO during the growth phase is different from a CFO in a turnaround phase. You must be cognizant of every role at each stage: If you’re in the startup phase, you want someone in the seat who’s scrappy and innovative; if you’re in a maturity phase, they need to be driven by value improvement, and so on. Relatively few employees who got you here will be well equipped to get you there. This is one of your hardest tasks, to continually upgrade your employee base to meet the challenges of your next phase.
Finally, Step 4 is to determine the candidate’s DNA. Generally, the requisite DNA will not vary from position to position within your company, but it’s as important to assess as competencies during the hiring process.
So, What Is DNA?
Even more than competencies, DNA is the most predictive element of success. It doesn’t matter how competent a person is if their DNA doesn’t match your company’s ingrained DNA.
I’m not a believer in interviewing for “culture fit.” Heresy, I know. Over the course of 10,000 candidate interviews, I’ve concluded that seeking a culture fit is just too fuzzy. I have yet to find a reliable data-driven way to do so. Instead, I assess candidates in order to identify their personal DNA. By DNA, I’m referring to attributes that are hardwired at an early age and which rarely change over time, akin to genetic DNA. By the time we’re eight years old, we are largely the person that we’re going to be: detail-oriented, competitive, analytical, creative, etc. Those qualities will tell you much more about how a person will perform than last year’s sales figures. Obviously, determining someone’s DNA requires a great deal of digging, and that’s why a lot of companies don’t go through the effort. They might as well flip a coin.
Because I’ve seen my clients commit them over and over, I’d like to let you in on the most common offenses. No names mentioned.
Lack of Process
If you don’t have a standardized recruiting system in place, whether it’s mine or any other one, you might as well save yourself the time and draw a name out of a hat. If you aren’t consistent in the way you evaluate candidates—if you ask different questions in each interview, for example—how can you possibly expect to compare and contrast among candidates?
Unclear DNA
How can you hire people who share your company’s DNA if you don’t know what it is in the first place? At the risk of sounding alarmist, consider a hiring freeze until you resolve this issue. We’ll discuss DNA extensively in the next chapter.
“Post and Pray”
Job boards have never been ideal but are notoriously troublesome during periods of low unemployment because few candidates are actively looking. You’ll get hundreds of responses because it’s become so easy for applicants to simply click “Apply.” The next thing you know, your inbox is full. It’s a way to feel like you’re doing something, but it’s a lazy, inefficient strategy that relies on hope.
Rely on Factors Not Predictive of Success
Despite scientific evidence that these factors have little to no significant ability to predict success, countless hiring managers still use them to evaluate candidates:
Educational Background
Not the school you went to, the degree or postgraduate degree you received, or your GPA provide a measurable edge in predicting success. Despite that, some companies establish arbitrary requirements as barriers to entry. All this does is limit their pool of potential candidates. Furthermore, studies show that most candidates—particularly women—who lack an advertised requirement will not apply for the job. Remember that Steve Jobs, Mark Zuckerberg, Michael Dell, and Bill Gates hold no college degrees…except for the honorary degrees they picked up after creating world-changing companies.
Brainteasers
Why are manhole covers round? How many stoplights are in New York City? These types of questions, which were in fashion for a time, have proven to be largely useless in terms of predicting whether a candidate will perform well in a job. In its hiring, Google has even banned such questions after finding no correlation to the success of new hires.
Industry Experience
There’s a body of science that has overturned the commonly accepted folk wisdom that experience in an industry is predictive of success. It can be useful on the margin, of course, but I’ll choose a Rockstar from another industry over a B-Player with ten years at my competitor in a heartbeat. In all but the most arcane roles and industries (yours likely isn’t one of them), competencies are transferable.
Interview Skills
Some people may turn out to be terrible employees, but they shine in the interview. In fact, that is often the case—perhaps because the person has had to interview on a regular basis. The skills required to succeed in an interview are far different from those required for the job. Never forget that a great interview isn’t necessarily a great hire, and vice versa.
Gut Feelings
We’re all susceptible to our own biases, particularly affinity bias. No matter how much we talk about diversity, we tend to hire people similar to ourselves. Left to our own devices, we’re more likely to hire someone who attended our alma mater, looks like us, and speaks like us. Within the first seconds of meeting a person, we make assessments and judgments—what Malcolm Gladwell calls “thin-slicing.” Then, we spend the remainder of the interview confirming our biases. It’s an evolutionary strategy that, in this case, works against our best interests. Without a standardized way to measure candidates, you will “feel good about this guy.” If gut feelings were in any way accurate, I wouldn’t have written this book.
Skip Steps Altogether
It’s tempting to want to stop the recruiting process midway through because you think you’ve identified your Rockstar after a killer interview. “I’ve found our head of marketing,” you announce. Because Rockstars represent the top 5 percent, logically, you won’t be able to make that evaluation until you’ve seen a reasonable pool of applicants and until you’ve completed the all-important last stages of the process with your finalist. Every step of the process is crucial; there are no shortcuts. They’re additive to reducing your risk of a mis-hire, or inversely, to improving your current 50 percent hiring accuracy up to 90 percent.
Check References Too Late
This is a step that a lot of people put off—or worse, skip altogether—because it’s time-consuming and requires coordination with others. Reference checking can be a reliable predictor in distinguishing Rockstars from Rockstar look-alikes. But only if you ask the right questions of the right people. It provides a wealth of information that should be factored into every hiring decision and is anything but a formality. And yet, many employers check references after they’ve already made their decision. Why bother?
Throw New Hires into the Deep End
Some companies assume that Rockstars don’t need time to acclimate to their new surroundings, that they’ll just hit the ground running. Rockstars, particularly senior-level managers, need time to adjust to their new reality, just like everyone else.
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