How human psychology can help leaders prevent the Great Resignation

Before the pandemic, effective leaders benefited from a deep understanding of human psychology, including what motivates people and makes them feel fulfilled. Today, they require it.

Abstract psychological concepts like intrinsic motivation and a sense of belonging are the main indicators of strong work performance and company loyalty, David Rock, cofounder and CEO of the NeuroLeadership Institute, tells Fortune. “This was true in normal times, when the outside world wasn’t really stressful.”

But over the past year and a half, employees’ need to feel motivated at work and to find meaning in the work they are doing has become critical for managers to understand, Rock, a neuroscientist, says. “When the outside world is really uncertain, you need more purpose in your day-to-day.”

According to the Bureau of Labor Statistics, since April 2021, nearly 20 million workers have left their jobs, which has left countless companies in the lurch, desperate to attract new talent.

Employers must recognize that over the past 18 months, the workplace-worker dynamic has seismically shifted. No longer are jobs a means to an end; workers increasingly expect their employers to provide benefits, allowances, and flexibility conducive to a work/life balance that, pre-pandemic, may have seemed unattainable. And if companies don’t meet their needs, they will take their labor elsewhere.

Leaders keyed into the human factors driving the Great Resignation, and who build a culture of belonging for their existing workers, are best positioned to attract and retain them, a report from Ernst & Young (EY) found last week.

The study authors recommend CEOs, to better execute in this new terrain, revisit the basics of human psychology and understand what makes their employees really tick.

What’s behind the Great Resignation?

The pandemic, which, for the better part of a year, kept many people stuck at home, also provided them with a rare chance to reevaluate their priorities, values, and circumstances. For many, this included realizing the ample benefits of a flexible working life.

“Those who hunkered down, grateful for a job through the crisis, are finally taking a breath and considering their options,” the authors write. “They believe having more time and flexibility for family, hobbies, and exercise is more than just a nice-to-have—it’s essential.”

The current widespread labor shortage shows millions of employees have come to this realization, and have left their jobs in search of greener pastures: an employer with greater respect for their nonwork lives. The gap between what workers are after and what their employers are offering has widened enough to warrant a phenomenon with a name you may have heard: the Great Resignation.

But for employers, it’s not a lost cause, EY notes. The Great Resignation can serve as an opportunity to reimagine the parameters of their business and their most valuable employee relationships.

Seizing the moment

To entice new workers to come on board, and to dissuade current workers from jumping ship, many companies are offering material perks like higher salaries, flexible hours, and remote work stipends. But, research from McKinsey & Co. found in September, those don’t tell the whole story.

Among nearly 6,000 employee respondents, the top three reasons for quitting a job were not feeling valued by their organizations (54%), not feeling valued by their managers (52%), and not feeling a sense of belonging at work (51%). Even worse for employers, 40% of respondents said they are at least somewhat likely to quit their jobs in the next three to six months.

Even a salary bump wouldn’t be enough for many employees to remain at a company they felt didn’t value their personhood and respect their life outside the job. BetterUp’s Meaning and Purpose at Work report, compiled in 2018, found nine in 10 career professionals would sacrifice nearly a quarter (23%) of their future earnings for “consistently meaningful work.”

This, EY says, is where consulting Maslow could become useful.

What is the hierarchy of needs?

Essentially, it’s a psychological model designed by 20th-century psychologist Abraham Maslow meant to depict the basis of human motivation and behavior. Physiological needs, such as nourishment, shelter, and physical safety, must be met before someone can move into more abstract needs, like belonging and confidence.

Photo credit: Ernst & Young

Pre-2020, company executives mainly considered their work done if they were able to take care of the bottom two tiers. “In return for dedicating a large portion of their careers to a single organization,” EY explains, “workers accepted a standard package of benefits that addressed their level 1 physiological needs: food, clothing, and health benefits, and their level 2 safety needs: job security and a regular paycheck.”

But people are naturally inclined to go beyond the basics, reaching for the top-tier emotional goals. Traditionally, few workplaces worked to help them.

The desire to belong socially makes us human, a Harvard Business Review study noted in 2019. “It’s hardwired into our DNA, and yet, 40% of people feel isolated at work,” the study said, which has resulted in lower organizational commitment and engagement.

Feeling excluded in the workplace can keep people from critical opportunities to gain perspective from others, mentor colleagues, and even strategize ways the company can improve. Feeling included and supported has the inverse effect: These workers consistently perform better, remain with the company longer, and miss fewer days of work.

For many, the pandemic has shown that it is possible to be a productive employee and still satisfy higher-tier needs. The Great Resignation, EY suggests, may be underpinned by employers’ refusal to help them do so.

Shifting the tides

By understanding and internalizing Maslow’s hierarchy of needs, leaders can take advantage of an integral moment and revise their operating models to better meet their employees’ higher-level, basic needs. By homing in on issues of belonging, inclusion, acceptance, and life-outside-work values, they stand to improve retention and bolster creativity, productivity, and engagement.

EY outlines four basic, immediate steps for CEOs looking to make the change.

1. Build a culture of belonging.

Leaders should consider drafting a new employee-employer contract that allows for improved ability to satisfy top-tier needs and bolster self-image. Workers with the highest sense of belonging at a company, BetterUp research found, reported a 34% higher intent to stay put than did those who felt out of place.

2. Keep in mind: A culture of belonging is built one team at a time.

By teaching other executives to empower their smaller teams to foster a high-belonging environment, leaders can initiate a trickle-down effect, in which each person at each level of the company shares in the common goal.

3. Hold team leaders accountable for achieving, creating, and sustaining high-belonging teams.

With other leaders, devise a list of key performance indicators (KPIs) that materially show how engaged, included, and valued employees are feeling. Routinely monitor these KPIs and incentivize meeting them by doling out rewards to the leaders and teams who attain them most often.

4. Balance purpose with vision.

Workers overwhelmingly say they want to work for a company with a coherent, meaningful vision. By ensuring workers are able to carve out time to attend to their nonwork lives, while during business hours contributing to an admirable mission, leaders at least stand a chance of keeping their best people around. Fulfillment and satisfaction, after all, are hardly a passing trend.