Written by Heather L. Cole, September 23rd 2021
For many organizations, it’s budget season. That time of year when companies complete budget templates either in Excel or in a planning tool like IBM Planning Analytics, TM1. Departments are requesting funds for projects and operations for the next year. But this is not a normal year! If you are using the same budget templates as last year, and the same logic or assumptions you may be missing a big point! Today I will share what you must consider in your budgets with the great resignation.
The Great Resignation –
The Great Resignation is a quitting trend like we have not seen in the last twenty years. According to Business Insider, “In July, 3.98 million workers quit their jobs, an increase from 3.87 million in June. That came in slightly below April's record-breaking 3.99 million quits, the highest level since the bureau began tracking the data in 2000.”
Business Insider blog, Another 4 million workers quit for the 4th month in a row, and it shows how Americans are rethinking work in a way they haven't in decades.
Why Are Employees Resigning?
During the Pandemic employees were given the opportunity to spend more time at home. They grew accustomed to spending more time with family and less time sitting on trains or highways commuting. The pandemic also gave many employees pause to reconsider their jobs whether they felt fulfilled and what really mattered in life. Many talented team members decided it’s time to look for new opportunities that will allow them to live where they want, provide an opportunity to expand their skills, make a bigger impact and more money.
According to the Forbes article, The Great Resignation’ Is Not New, But Your Response To It Must Be, the most common theme for employees resignation was that employees felt unfulfilled, and unaccomplished. They want to tackle challenges.
How the Great Resignation Impacts your Budgets & Strategic Planning!
Now that we know that the Great Resignation is real! Let’s chat about what you need to consider while you are creating your Budgets.
Many Expense Lines on Your Budget Must Increase!
The ripple effect of the Great Resignation will appear in many lined items in your budget. If you just take last year’s actuals, without significantly increasing them, you will fall short! Here are just a few areas of your budget that the Great Resignation will impact:
Employee Costs – Labor is costing more! I was chatting with a financial professional that was about to make a switch to a new company, and he said the new company offered a sign on bonus and a 30% uplift in base salary. To retain employees and hire new ones, organizations are going to have to take a closer look at what they are currently paying. I appreciate this may cause conflict with HR policies and uplift limits. But companies must be prepared to respond to the market demands.
At Lodestar Solutions, we have a number of clients with open positions to fill. When they ask us to review their job listing, it’s not uncommon for us to inform them they are below market value for the talent they seek.
The good news is that if you are a high performer, maybe it’s a good time to ask for a raise. But, one thing is certain, if you are looking to hire or retain talent, if will most likely cost you more. We recommend you adjust your budgets to reflect the impact of the Great Resignation.
Consulting Costs – Labor costs are not just raising for organizations looking to hire talent, but consulting firms are having the same challenge. The cost for consulting firms to retain and hire talent will most likely be passed on to you the customer. For an accurate estimate, reach out to the firms you anticipate working with in 2022, and ask them to estimate your new rates. Don’t be surprised when they are quite a bit higher than 2021.
If you are a Lodestar Solutions client and would like to better understand potential consulting costs for your 2022 project, please contact Services@lodestarsolutions.com.
Training Costs - We mentioned that employees are leaving because they are not seeing the opportunity for growth that they desire within their current companies. Employees want challenges and learning experiences.
According to Art Markman in a recent HBR webinar The Great Resignation, he notes there’s a trend in companies cutting back in training, especially in blue collar jobs. But he mentioned, one way to help retain employees during the Great Resignation is to invest in advancing their skills. Over the years we have seen training budgets slashed. But now it’s time to increase them and invest in both your future employees, and current ones. So, don’t forget to increase your training budgets to help retain employees.
For a deeper dive into The Great Resignation, Harvard Business Review has some great blogs:
- Your Star Employee Just Quit. Will Others Follow? By Art Markman
- Who Is Driving the Great Resignation? By Ian Cook
Recruiting Costs – This expense is somewhat self-evident. The Great Resignation is causing people to leave. Unfortunately, this can leave the people that stay overburdened with increased workloads. Burnout is another known reason for people to leave, so don’t wait too long to find a resource to help with the workload. Rapidly hiring replacements when an employee leaves should be a top priority. Therefore, it is logical that your budget for recruiting cost should be examined and most likely increased.
Benefit Costs - Many companies are getting creative on how to retain talent. In addition to increased salaries, we have heard of free lunching, home office credits, more paid time off and the addition of other benefits. If this is an approach you plan to have, don’t forget to adjust the benefit cost assumptions in your budget to reflect the changes.
Summary: The Great Resignation & Your Budgets
Lodestar Solutions hopes that this exploration into the Great Resignation era and what you must consider in your 2022 budgets has made you think. We don’t think the mass exodus of people from organizations will change any time soon. Over the next few weeks, we will share additional blogs on how to get people more engaged and fulfilled at work. Almost every organization needs to look at their strategic plan, and performance measure as it relates to their staff a little closer. Here’s a link to our most recent blog, Finance Must lead Business Transformation Before Someone Else Does.
So, check out future Lodestar Solutions’ blogs at https://www.lodestarsolutions.com/blog/, on the role of planning in the era of the Great Resignation.