Employee Loyalty and Employee Turnover in 2018

According to the Bureau of Labor Statistics, the unemployment rate in the U.S. is holding at 4.1%, the lowest it’s been since December 2000.[1] In fact, for the first time on record, there has been job growth for 86 consecutive months.  This is considered by most economists to be close to or at “full employment.”   The stock market has also been setting records seemingly every month.  Greg Ip, a writer for Dow Jones Newswires, reported last July on Fox Business that “the economic expansion is now entering its ninth year and in two years will be the longest on record.”[2] That is now a year and a half away and economic expansion continues.  By all accounts, this is the hottest economy the U.S. has had in a very long time.

Current tax reform is expected to further spur economic expansion and business growth. Companies are poised to take advantage of the myriad of tax benefits.  Many businesses are already making plans for capital improvements, equipment updates and new technology purchases.  Armed with updated systems, businesses are expected to expand their geographic reach and/or product lines. A surge in the creation of small businesses is also anticipated given the tax benefits for pass-through companies.  By all accounts, if there was ever a time to start or grow a business, it is now.  All of this business growth will likely spur increased hiring, which will likely push the unemployment rate even lower.  How will a heated labor market affect employee turnover given the U.S.’s current labor force?

Understanding Today’s Workforce

The U.S. labor market now consists of roughly 161 million workers (ages 16 and over) out of which 9.4 Million are Boomers, who are over 65 and poised to retire soon.[3] The rest of the workforce consists of just over 150 Million GenXers, Millennials and up-and-coming iGens, who are just about to enter the workforce.  How will a heated labor market affect employee turnover based on today’s labor force?  What kind of employee loyalty can companies expect in a tight labor market comprised primarily of Boomers, GenXers, Millennials and soon to come young iGens?

Here are some facts about the generations reported by the Pew Research Center based on U.S. Census Bureau data.[4]

Boomers, ages 53-70 today, are identified by the reproductive boom that followed World War II.  This was the largest generation until two years ago.  This generation peaked in size at 78.8 million in 1999.  Now, this generation is shrinking as the number of deaths among them exceeds the number of older immigrants arriving in the country.  There was an estimated 74.9 million Boomers in 2015 and that number will continue to decline.  By 2050, there is expected to be only 16 million Boomers left.

Generation Xers, ages 37-52 today, are caught between the two larger generations of Millennials and Boomers.  This generation is smaller because the generational span of Gen X (16 years) is shorter than the Millennials (17 years).  Also, GenXers were born during a period when Americans births averaged around 3.4 million per year, less than the 3.9 million annual birth rate when Millennials were born.  Nevertheless, GenXers are projected to surpass the Boomer generation in population by 2028 (as Boomers die) when there will be 64.6 million Gen Xers and 63.7 million Boomers.  The Gen X population is expected to peak this year at 65.8 million.

Millennials, ages 20-36 today, numbered 75.4 million two years ago, surpassing the 74.9 million Baby Boomers.  That makes Millennials the biggest generation in the U.S. today.  The Millennial generation will continue to grow as young immigrants expand their ranks.  Millennial population is projected to peak in 2036 at 81.1 million. By 2050, there will still be a projected 79.2 million Millennials.  At that point, Millennials will be 53-69 years old, and most likely still working.

The Generational Divide

To understand how a heated job market might impact Boomers, GenXers, Millennials and iGens, one should consider how these groups think and act professionally.  There are differences in how generations think about their careers, what they value professionally and how they approach employment.  Individuals view work life through different lenses and approach their jobs with different expectations, norms, and habits.  Some of this is influenced by the circumstances – time and place — in which they grew up, defining a “generation.”   These generational differences can create miscommunications, conflicts and disappointments, and does play a role in where they choose to work.

What do Employees Want?

When unemployment gets very low, companies have to be savvy about landing and keeping talent.  Besides doing the obvious – such as offering competitive salaries, bonuses and a useful benefits plan – it takes a commitment to understand what employees want and value, individually and as a generation.   Many of these differences have as much to do with age as with being of a particular generation.

According to David Sturt and Todd Nordstrom, Contributors to Forbes’ Leadership, “it is important to understand how generations differ, especially in their perception of what motivates them, how teams function and how they prefer to be managed.” [5] Tim Shaver at Vistage agrees.  He said, “For the past five years, the Vistage CEO Confidence Index, a quarterly survey of U.S.-based executives’ outlooks and habits, has reported that executives’ primary business concern is recruiting and retaining talented employees.  In an ‘employees’ market,’ companies must adjust their management and corporate culture to meet the needs of Generation X and Gen Y workers who collectively make up 58% of the U.S. workforce based on census figures.”[6] Here is what their research indicates.

1. Baby Boomers

By and large, the Boomer generation is the oldest that is still working.  (The Silent Generation is already over 70 and the vast majority has retired.)  This generation has traditionally been more loyal to employers and apt to stay at jobs longer.  Unlike Millennials and iGens, they don’t jump from job to job, which makes them ideal employees in a particularly tight job market.  To a Boomer, a perfect boss is ethical, fair, dependable and consistent.  Work places that have a high turnover, are constantly overhauling systems, reinventing processes and utilizing unfair methods of compensation and promotion will have trouble retaining Boomer employees.

According to an article in Recruiter.com citing a PWC study and a NextGen survey of employers, most Boomers are thinking about and planning for retirement. [7] Those who are still working are doing so in order to maintain their standard of living.  So it makes sense that Boomers are looking for competitive compensation when choosing a new employer. To retain employees of this generation, it also helps for employers to offer part-time jobs (for those who want to work less) and mentoring roles that allow flexibility and taps into their wisdom and storehouse of knowledge.   This generation also values 401K contributions, financial planning services, an innovative work environment and wellness initiatives much more than other generations.

2.  Gen Xers

This generation is currently at the peak of their careers.  They are generally seasoned employees with ample experience, knowledge and skills.  They are active and are raising families.  It makes sense that this generation looks for employers who offer flexible work schedules and the ability to work remotely.  They also value wellness initiatives and career development services.

Gen Xers also represent the largest group of entrepreneurs in history, which means they can and often do take their talents and start their own businesses.  They are less likely to be loyal to an employer, especially if they don’t feel valued or adequately compensated.  According to Shaver, “The Generation X employee is highly educated, technology literate and fiercely independent (give them a project and leave them alone to do it). They have a strong work ethic…..  Gen X works on average 3 hours-per-week more than employees of comparable age did in 1977. (Source: Families and Work Institute of New York City).”[8]

3.  Millennials

Then, of course, there are the much-discussed Millennials a/k/a Generation Y.  According to Shaver, “Generation Y employees thrive in a fast-paced environment. They prefer to be managed rather than left alone, and they want immediate feedback for how well they do a work task or project.  They value opportunity, not job security; they embrace corporate positions that promote social contribution and thrive in challenging environments.”

Millennials choose an employer based on company values and state-of-the-art technology.  Over 75% of Millennials say they’d like their manager to act like a coach or mentor because they’re trying to gain skills, make connections, and advance their careers. [9]

Last but not least are the iGens.  But because they have only just started entering the work force, little is known about who they are or what drives their employment behavior.  The one thing that is fairly certain is that they are likely to be quite different from their Millennial predecessors… because each generation tends to try to be unique and different from the one before.

Workplace Qualities Appreciated by All

There are, of course, some things that all generations seem to want.  Perhaps on that is what HR departments and entrepreneurs should focus?   Here are three things employers can offer to keep valued employees and attract new talent even in the most heated job market.

1. Flex Time

A flexible work schedule is a priority for all generations.  Everyone wants to be able to choose when and how they work.  “… As work-life balance fades away and is replaced by work-life integration (the expectation of constant contact with coworkers and bosses), the demand for flexible schedules is sure to stay.”[10]

2. Genuine Recognition

Everyone also wants recognition for a job well done.  This does not vary from generation to generation.  “Studies show that companies with strong recognition programs boast longer employee tenure. And…. employees of every age report that the best way to motivate them to deliver great work is to recognize them sincerely.”[11]

3. Meaningful Work

All employees want jobs where they can make an impact.  All but gone are the days of doing repetitious, rote work that is boring and menial.  Employees want to understand the work they do and know how it contributes to the company’s success as well as the greater good.  Given the rise of robotics, there is no reason why robots can’t do the tedious, repetitive jobs and leave the meaningful work to staff.

In a recent article by David Wee, Board Advisory Member, Institute for Advanced Studies in Complex Choices, University of Singapore, entitled “Four Reasons Why You Should Stay with a Bad Manager, he points out that the current employee turnover at some of the biggest companies –including Facebook, Google, Oracle, Apple, Amazon, Twitter, Microsoft, AirBnB, Snap and Uber, is 1.23 to 2.02 years. [12] As the economy revs up, unemployment continues to drop and the U.S. labor market tightens to rates not seen since the creation of computers and the Internet, companies should expect it to become harder to recruit and even more difficult to retain talent.  Depending on the company’s goals and focus, it may make sense to create programs that appeal to specific demographics and offer a cafeteria-style selection of benefits, management approaches and positions that speak to various groups.  Given the cost of employee turnover, employee loyalty is about to become more important than it has been for the last 50 years.

Quote of the Week

“An understanding of common generational differences may be useful, particularly when the age gap between employee and manager is significant.” Rebecca R. Hastings, SPHR

© 2018, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.