European talent is ready to walk out the door. How should companies react? (2023)

How do companiesKeep your current workforce happy while attracting the best people? Of course, talent managers have always asked this question, but the answers have become much more complex since the COVID-19 pandemic triggered a workforce exodus that has rocked companies around the world.

McKinsey analyzedthis great attritionWe took an in-depth look at the talent trend, showing why people have given up in droves and how companies have responded when they were unaware.1Aaron De Smet, Bonnie Dowling, Marino Mugayar-Baldocchi, and Bill Schaninger, “'Big Wear' or 'Big Attraction'? The Choice is Yours,” McKinsey Quarterly, September 8, 2021.We updated our research earlier this year and found that workers are not only still quitting, but are also changing roles and what we call industriesthe great renegotiation.2Aaron De Smet, Bonnie Dowling, Bryan Hancock, and Bill Schaninger: “High turnover makes hiring difficult. Are you looking for the right talent pools?”, McKinsey Quarterly, July 13, 2022.We offered ideas on how companies could support different groups of employees in filling jobs.

Now we turn to Europe, where theDestabilizing war in Ukraine, risingInflationand growing fears of hiring freezes and job losses have created a difficult environment for businesses. We wanted to know if the talent trends we've been tracking in the US and elsewhere over the past two years are having a similar impact in Europe. The answer is a resounding yes. Businesses can't get the people they need and are losing the workforce they already have while falling behind in areas like technology and innovationhave an impact on the long-term competitiveness of the region.3 According to a sample of more than 2,000 European and US companies, between 2014 and 2019, large European companies were 20 percent less profitable, grew sales 40 percent slower, invested 8 percent less and spent 40 percent less on research and development than other companies turnover of more than 1 billion US dollars. For more information, see "Keeping Europe Competitive: Closing its Technology Gap", McKinsey Global Institute, 22 September 2022.

Our new analysis, which includes a survey of more than 16,000 respondents across nine European countries, shows that a full third of respondents say they expect to quit their job in the next three to six months (see sidebar About the Study"). ). While this proportion of the workforce is below the 40 percent in our April global survey,4The six countries studied were Australia, Canada, India, Singapore, the United Kingdom and the United States.It's a remarkably high churn rate for Europe, where health and safety and cultural factors - not to mention them - applya likely economic slowdown– tend to stay in the job. Companies that believe that attrition is a problem unique to the United States should be aware that one in three of their workers could quit in the near future.

But high turnover is just one of the challenges facing European employers. The job vacancy rate almost doubled from 1.6 percent in June 2020 to 3 percent in June 2022.5Although the proportion of people who have started a new job in the last three to six months is increasing, the job vacancy rate is still well above normal. For more information, see "Job vacancies statistics", Eurostat, September 2022.This makes it more difficult for companies to fill vacancies. In addition, companies across all sectors face a skills shortage and a high number of retirees who are unlikely to return to the labor market.

At the same time, European employers have the opportunity to improve their value proposition. They can use this moment to address chronic, systemic talent issues by offering appropriate compensation, career advancement, and caring leaders while also focusing on newer employee needs created by the pandemic. In this article, we analyze our new data to show how companies can retain those considering leaving, provide support to turn "quiet quitters" into more engaged employees, and more effectively recruit top talent to fill a gap build a productive workforce that can deliver on time radical uncertainty.

The European talent landscape: Top reasons for leaving the company reflect shifting employee values

Our survey found a consistent turnover rate of about a third of those surveyed. The outlier was Poland, where half of people say they will be at least some departure from their job in the next three to six months (Figure 1).6This higher number for Poland can be partly attributed to the impact of higher inflation and a refugee crisis due to the war in Ukraine along Poland's eastern border.

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That so many workers are considering leaving shows a dramatic level of turnover in Europe, where occupational health and safety is more stringent than in other countries. Retirement is also often a milestone to look forward to, thanks to pensions and a robust social safety net. Our survey found that 24 percent of Europeans have retired (early or at natural age) in the past seven years. Unlike the US, retirees in Europe are not as interested in returning to work for the right offer. When they retire, they are more likely to do sofinally gone7Only 5 percent of those who retired early or at natural age plan to return to work at some point in the future, our research shows. For more information, see Aaron De Smet, Bonnie Dowling, Marino Mugayar-Baldocchi, and Bill Schaninger, Gone For Now or Gone For Good? How to Play the New Talent Game and Reclaim Manpower,” McKinsey Quarterly, March 9, 2022.—Reducing the pool of potential labor for European employers.

This large number of people watching exits is not much less than the 40 percent in our earlier sample of six countries. In fact, when comparing very different labor markets and staggered timeframes - April for the global data and September for Europe - and allowing for deteriorating economic conditions, we see similar turnover rates. This is not a favorable environment for European companies looking to retain and attract workers.

Despite the structural and perceived differences in the European labor market, we unexpectedly found that the top three reasons Europeans give for leaving their jobs are similar to those in our global sample: inadequate pay, lack of professional development and advancement, and unresponsive and uninspiring leaders (Appendix 2).

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Fair compensation and a clear career path are the most enduring motivators for workers in any job. We consider compensatory table bets because they are enough to get you a seat at the table but not enough to get you a winning hand. Since the beginning of the pandemic, the lack of caring leaders, which is also a consistent reason for people in all countries to quit their jobs, has become more important. The similarities in key departure drivers across regions and time periods show that the pandemic has normalized these employee hirings across all worker segments.

People of all ages and experience levels care more about whether these factors are taken into accountin combinationare enough to create a desire to stay in an organization for the long term. They need tangible and conclusive proof that they have a bright future—in other words, the full package: rewards, caring leaders, advancement. The fact that many Europeans say, "I need a job, but I don't need one."yourJob” is a clear sign of this new focus.

Meanwhile, since the start of the pandemic, other factors have gained prominence for European respondents, particularly those related to unreliable and unsupportive people in the workplace and an uninclusive and unwelcome community.

The emphasis on these relational 'human factors' marks a remarkable shift in thinking among European workers. More than ever, employees are saying they need to feel engaged and supported in an inclusive and welcoming environment. In particular, unsustainable work expectations and a lack of support for employee well-being are associated with employee burnout ratesResearch from McKinsey shows that the numbers are at an all-time high.8 “Tackling Employee Burnout: Are You Solving the Right Problem?”, McKinsey, May 27, 2022.

We also found that the reasons why employees consider changing jobs are remarkably consistent across European countries. The two most important factors in any country are insufficient remuneration and insufficient career advancement. But relationship factors also rank high, including indifferent and uninspiring leaders and unsupportive colleagues.

Focus on the entire workforce (the happy, the unhappy, and those in between)

Most Europeans in our sample say they intend to stay in the job and their motivations differ from those of their departing colleagues. Again, compensation is a key reason, but it's more of a hygiene factor than anything else. Motivators include flexibility, meaningful work and supportive colleagues – once again confirming factors that have become more important to Europeans during the pandemic.

People stay in a job for the opposite reason they leave it: because they are paid well, their needs for advancement and skill building are met, and they see a future for themselves. However, what sets Europeans apart from others is the extent to which they value a safe work environment. This factor ranks in the top three for Europeans, while it ranks eighth overall for the global group (Figure 3). Reasons for this include the fact that many COVID-19 restrictions ended over the summer, leading to staff worrying about how safe they would be back in the office and whether they even want to go back.

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Companies must remain flexible if they want to retain people who have not yet signaled a willingness to churn. Throughout the pandemic, employees have been — fromworking parentsto younger people just starting out to workers approaching retirement age - all say they want more control over their working hours so they can do sobetter work-life balance.9 “To Slow Attrition, Pay More Attention to What Workers Really Need,” McKinsey, September 22, 2022.

This raises a crucial point: in creating a compelling employee experience, European companies must avoid falling into the trap of focusing solely on those workers unfortunate enough to leave at short notice. Of course, retaining them is important, but companies must also ensure that the majority who do not indicate they are leaving do not fall into this category.

In other words, leaders need to take care of talent retention before they can start thinking about those leaving the company. The stability of the organization, which we discuss below, is part of this active investment in the entire workforce.

The sound of "quiet cessation"

To make it easier to assess all of their employees, companies can divide their employees into four broad categories: those who are happy with their job but are considering better options, those who leave because they don't like their job, and those who stay , because they are happy, and those who are remain passive but don't really want to be there. This last group consists of "silent quitters" or members of the engaged but unengaged workforce.10 This group does not include people who continue to do their jobs but have attempted to reduce their workload to manageable levels to prevent burnout.

European employers, like organizations everywhere else, are faced with the problem of workers leaving – and workers who are staying but may be behaving as if they have already left. Our research shows that in Europe, the majority (79 percent) of those reporting low levels of engagement or support factors are likely to leave the company. However, a small but significant portion (21 percent) of those reporting low engagement or support factors plan to stay in their jobs. Although these employees do not quit, they are likely to distance themselves from their work, which may take the form of withdrawal or neglect of their duties.

If we calculate that a third of workers leave and a fifth of those who stay fall into the group of those who don't necessarily work to keep up, that works out to about 44 percent of the workforce. It is clear that this number of dissatisfied employees is not sustainable in a healthy company.

Some employers believe that quitting quietly is just a phase, but there are two reasons to disregard this. First, despite the trendy name, there have always been quiet quitters — people whose level of commitment is below what managers might want. The other reason is that in a predicted economic downturn, when companies are often forced to freeze hiring or downsizing, they will need the remaining workforce all the more productively.

Silently quitting is not just an individual issue, it is a mutual responsibility between the employee who is no longer engaging and the organization that is not providing enough support. Solving this problem requires both greater commitment and support.

An overwhelming majority of employees who report high levels of engagement factors (e.g., finding meaning in their work) and support factors (e.g., reliable and supportive people at work) are likely to stay in and stay in their jobs be productive (Figure 4). .

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The (new) value system: Emphasize personal development and recognition to reward employees

The European labor market is unique, with stronger worker protections, better pension schemes and longer parental leave, to name just a few, benefiting workers – and society at large. Culturally, workers in this region do not leave their jobs as often as in the United States and other countries.

However, with an aging population and a deteriorating economy, European employers face a complex environment in which to operate. This requires more creative solutions. Businesses can take inspiration from the ways other organizations, including in other regions, are trying to solve the problem of attrition. They can find new ways to attract younger people to jobs and make the workforce they have feel more engaged and productive.

Here are five ways European companies can be proactive in retaining employees, foster a healthy work environment and look beyond traditional recruitment pools.

Handle the turnover

The first step is to turn inward. Organizations should take stock of the turnover already experienced and take steps to reduce further resignations by addressing the motives of their employees. Our European data shows that the reasons people left their jobs and the reasons they want to leave are the same. So companies can stay ahead of the next wave of churn by understanding why others have already quit. Employers should consider increasing their focus on providing appropriate total compensation packages, investing in employee development and providing meaningful advancement opportunitiesThey demonstrate a more caring and inspiring daily and strategic leadership.

Don't overlook "the others".

When companies focus primarily on attrition and recruitment, they often overlook the need to actively support employees who remain. Sticky CompaniesAnticipate and address employee concerns. They ask people what they need to be successful in their role - and listen to the answers. They push people to grow in their job and encourage a growth mindset across the organization. Based on the feedback, these companies could innovate jobs, teams, or hiring practices. They're not afraid to give employees the flexibility they need to create a work-life balance that helps keep employees engaged and productive. These cultural factors help to make it more attractive to join a company and, ideally, provide more incentives for employees to stay and continue to engage. You can also re-engage those who are silently giving up.

Reward loyalty by building skills

Career advancement is a top priority for European workers. A company that rewards its employees by investing in their development reduces their incentive to look elsewhere while increasing overall engagement. With this in mind, leaders can begin to reward those already with the organization with career development and advancement opportunities. This investment in the workforce is based on gratitude and trust and underscores that past work is valued and that the company believes in its employees' ability to continue to do valuable work in the future. Then executives can also search outside of the company for the talents they still need. In the larger context, Europe experiencesa growing gap in technology, innovation and corporate performancecompared to other regions. With recent headlines about the loss of jobs in the technology sector, companies that need to increase their technical expertise could take advantage of the newly available positions. However, companies should also focus on using the right levers to prevent these potential hires from taking a non-traditional position or, worse, switching to the competition.

Rethink corporate culture

Since the pandemic began, organizations have scrambled to help burned-out employees. However, it is crucialFocus on positive behaviors to prevent burnoutisn't a problem at first. Once it takes hold, even the most well-intentioned remedies (or yoga classes) won't solve the problem. As our survey data shows, European workers now value other factors when it comes to a satisfying employee experience. They want more flexibility in the workplace, as well as a physical andpsychologically safe workplace.11 “Psychological Safety, Emotional Intelligence, and Leadership in a Time of Change,” McKinsey Quarterly, July 2, 2020.McKinsey studies show that caring managers can also make a big difference in engagement by reaching out to employees more often and by focusing on what excites employees and gives them a sense of purpose.

Think outside the (recruiting) box

Existing talent pools of traditional workers in an aging market are insufficient to replenish retired workers. European organizations need to care for those who have left the traditional workforce, including the self-employed, those working in the gig economy or not currently in full-time positions in companies, younger people just entering the labor market and those who are about to do so think about retirement. Because these groups emphasize different factors (older workers want more caring leaders and younger people want strong support networks), companies need to target these groups differently. And while these labor pools may be smaller in Europe than, for example, in the United States, they are there and companies can tap them.

Even the European workforce is not immune to the turnover trend that we have been able to observe in all countries in recent years. The mindset of European workers has changed since the pandemic began, and many are no longer willing to stay in organizations that don't value their contributions or offer a future they are excited about. Now more than ever, companies should demonstrate a commitment that is both wide-ranging and focused on individuals—a commitment that is central to their health and future growth.