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By Claire Davis and Christine Edmonds | January 10, 2022

The “Great Resignation” in tech: looking back and moving forward

Insights from our new series on the Future of Work

Since the onset of the COVID-19 pandemic nearly two years ago, the workforce has seen rapid change across multiple dimensions. From mass layoffs and pay cuts to the transition to remote work, companies have been grappling with difficult decisions amid ever-changing circumstances.

Now, as we adapt to living with the implications of the pandemic, perhaps for the long-term, companies are establishing new policies and reimagining how they define work. At the same time, employees are leaving their jobs at record rates,¹ leading to the so-called “Great Resignation”.

Below we share select findings from our new study titled The Future of Work, which explores whether this mass re-organization of the workforce is impacting tech companies to the same degree, if certain groups of employees are driving the trend, what motivates tech employees to leave their jobs, and the likelihood that these trends will continue through 2022 and beyond.

We’ll also be sharing these findings — and discussing strategies for hiring and retention — in a January 25 webinar with Gem CPO Heather Dunn and BambooHR HR Director Cassie Whitlock. Please RSVP here: Hiring in 2022: Attracting and Retaining the Future Workforce.

How is the “Great Resignation” impacting tech companies?

 

Many sources reporting on the “Great Resignation” reference data from the US Bureau of Labor Statistics (BLS). This data looks at how “Quits Rate” — the number of people that reported quitting as a percent of total employed during that period — has changed over time across different industries.

According to BLS data, Quits Rate increased 30% year over year from November 2020 to November 2021 across all industries. The largest increase occurred in the Education & Health Services (+47%) and Leisure & Hospitality (+39%) sectors, an unsurprising outcome given these industries were most directly impacted by the pandemic.¹

Somewhat surprisingly, however, the next largest increase in Quits Rate occurred in the Information sector (33%), the category that includes most software and internet companies.

Though the BLS’s Information sector includes tech companies, it also contains a mix of traditional media, broadcasting, and telecommunications companies.³ To understand whether the Great Resignation was impacting tech companies in particular, we surveyed chief human resource officers (CHROs) and heads of people at technology companies.

In the second half of 2021, HR leadership at tech companies reported voluntary employee attrition was up nearly 50% year over year, from an annualized ~13% in 2H 2020 to ~20% in 2H 2021.² This suggests the “Great Resignation” did impact technology companies, and perhaps to a larger degree than other business sectors.

Which tech employees are leaving their jobs?

 

In the second half of 2021, General & Administrative (G&A) employees had the highest attrition rates, and the largest increase in year over year attrition, compared to other role categories at the tech companies surveyed. While G&A employees had the highest voluntary attrition rates (20% annualized), Research & Development (R&D) employees had the lowest (13%).²

What could account for the differences in attrition across these roles? One hypothesis is that G&A employees, especially HR and recruiting professionals, were disproportionately challenged by market dynamics in the last couple of years, such as the mass transition to remote work. Another hypothesis is related to slower relative wage growth: while salary growth recovered to pre-COVID levels for R&D roles and sales and marketing (S&M) roles in 2021, it did not recover for G&A roles.²

To understand more about which employees were quitting and why, we surveyed employees from more than 70 tech companies. When looking at reported resignations by employee location over the last two years, resignation rates were highest for employees located in the Bay Area (56%) versus non-Bay Area employees (45%).⁴

Though this trend may have been exaggerated recently by the “Great Resignation” wave, it’s likely this finding is more geographically ubiquitous. Research from PRO Unlimited has shown employees located in the Bay Area are 50% more likely to engage with unsolicited recruiter outreach than the national average — more than any other geographical cohort. The next highest cohort was employees located in New York City, who were 25% more likely to engage than national average.⁵

Of the tech employees surveyed, those with director-and-higher seniority (e.g., director, vice president, C-suite) reported higher resignation rates than mid-level employees (e.g., senior associate, manager).⁴ Visier research on resignation rates showed similar trends in 2020: the highest year-over-year increase in resignation rates was seen among employees aged 30+ (in tech, those most likely to have a director or higher level title).⁶

One hypothesis for higher resignation rates in senior versus mid-level employees is based on management status: resignation rates may have increased for managers due to challenges with hiring, onboarding, managing, and retaining a remote workforce.

 

Why do tech employees leave — and why do they stay?

 

The most common reasons cited for employee resignations in the last two years were job satisfaction (relevant to 83% of resignations), career advancement and professional development (78%), and compensation (75%), closely followed by stress and burnout (73%).⁴

Though it wasn’t reported often as a primary resignation reason, belief in company mission was cited by 62% of respondents as at least somewhat relevant to their resignation. Additionally, only 24% of respondents cited team and company culture as at least somewhat relevant to their resignation.⁴

The most common reasons cited for staying at a company were career advancement and professional development (97%), salary (92%), and team and company culture (90%), closely followed by company mission (89%) and equity (88%).

Career advancement and professional development was the most common primary reason for staying (52%), followed by team and company culture (32%).⁴

Interestingly, tech employees report team and company culture as a “nice to have” — a reason to stay but not a reason to leave. While 90% of employees cite team culture as a reason to stay at a company, only 24% reported it as a reason to leave.⁴ This discrepancy has likely been exaggerated by the rise of remote work as employees start to prioritize career advancement, compensation, and flexibility over workplace culture. However, the trend will likely continue given the prevalence of long-term remote and hybrid work.

Will the “Great Resignation” continue through 2022 and beyond?

 

As of October 2021, 76% of the tech HR leaders we surveyed said they expected voluntary attrition to increase either slightly (56% of respondents) or significantly (17% of respondents) in the next 6 months or so.²

Employees most likely to leave their jobs in the next 6 months are those at larger, slow growth tech companies, where a meaningful 58% of employees report intent to resign, with 29% report their resignation as a certainty. Comparatively, only 12% of employees at high-growth companies reported intent to resign, with 6% reporting their resignation as a certainty.⁴

It’s likely these trends are related to the current start-up market, in which record levels of private funding⁷ are reducing the risk associated with early-stage companies and increasing the rate of entrepreneurship⁸, while high growth environments are increasing opportunities for career advancement and potential monetary upside.

Voluntary attrition has been on the rise for years. On average, BLS data shows annual Quits Rate increased every year from 2016 (the first year data was collected) to 2019.⁹ While Quits Rate dropped in 2020 for the first time in four years, this was likely due largely to the pandemic, during which layoffs increased, and uncertainty kept some from quitting. Tech company HR leaders report a similar upward trend in historical voluntary attrition, though data was only collected starting the first half of 2019.

Given these upward historical trends — both those seen across most industries and those specific to technology companies — as well as the outlook reported by HR leaders, we believe high rates of voluntary attrition are likely to endure through 2022 and beyond.

As job-switching becomes the norm, leading technology companies are implementing new strategies, policies, and incentives to stay competitive. From tactical improvements to the recruiting process such as manager-driven outreach and faster recruiting cycles to expanding incentive programs, many companies are innovating to keep up with the demands of the new workforce.

Check out our full Future of Work series introduction for additional information on these trends and how companies are adapting. And stay tuned for future chapters addressing topics such as employee engagement, performance management, and the future of employer benefits.

 

[1] Bureau of Labor Statistics, Job Openings and Labor Turnover — November 2021; [2] ICONIQ Growth proprietary survey of HR Leaders at technology companies; [3] Bureau of Labor Statistics, Industry Categorization by NAICS Code; [4] ICONIQ Growth proprietary survey of employees at >70 technology companies; [5] PRO Unlimited, Workforce Management Annual Benchmark Report; [6] Visier, Visier Insights Report: Stop the Exit; [7] Crunchbase, The Q3 2021 Global Venture Capital Report: Record Funding Trend Held Strong; [8] United States Census Bureau, Business Formation Statistics; [9] Bureau of Labor Statistics, Annual Quits Rates by industry and region