News Article

October 18, 2023

Looking beyond January 1st

Navigating RIFs, Retirements, and Succession Planning in 2024

          It wasn’t that long ago that we were “Beyond the Next “Big”” and into the Big Stay, the market trend characterized by less frequent job hopping and more employees electing to remain in their current roles. The Big Stay was the antithesis of its predecessor, The Great Resignation, which bore the opposite effect: a high number of resignations as workers sought to improve their pay and advance their career by changing companies. In that vein, none of us should be surprised by the latest shift back towards increased movement. The Greek philosopher Heraclitus is quoted as saying, “There is nothing permanent except change.”

        Time out: you didn’t think you’d be reading about a parallel between contemporary insurance market conditions and a Greek philosopher today, did you?

         Time in: There are numerous indicators that the Big Stay is easing into, well, there’s no gimmicky name for it at the moment. What about the “Can’t Stay, Gotta Go”? Fine, it still needs more tweaking, we’ll come back to that later. Whatever the moniker, it is evident that there is a transition taking place with more employees willing to consider moving out of their current role and into a new one. This change in direction will have ramifications for both employee and employer alike. For now, let’s focus on the company who may well face complex, difficult challenges involving themes like succession plans, talent retention, and Reductions In Force (“RIFs”), which will have meaningful short- and long-term effects for their organization.

            There are several reasons driving the ease of the Big Stay. The first is a general lessening of concerns regarding the state of the U.S. economy. During the bulk of the Big Stay, apprehension, and anxiety were prevalent as numerous economic forecasts indicated a looming recession with inflation levels, amongst other things, causing heightened concern. In this environment reminiscent of the 2008 downturn, workers were less likely to tempt the unknown by leaving for another company and instead were more or less resigned (pun intended) to ride out their current situation. Today there appears to be less of a worry about a recession and more assurance for people to test the job market. While this doesn’t appear to have reached the levels seen in the Great Resignation, the shift is enough to garner companies’ attention as they look to their own talent pool. “The market has already begun its shift,” says Matt Nickens, Senior Partner of Coleman Search Group, “and it’s made evident, in part, by candidates that historically weren’t open to discussing opportunities who are now beginning to proactively reach out to us to see what’s out there. They want to know who we have relationships with and who we’d recommend they consider.”

         The second and third issues evident here are closely linked as they both relate to how organizations are managing their financial health in conjunction with current and projected future market conditions. The second aspect is seen through RIFs and reorganizations which, as a natural consequence, puts laid-off workers on the job market. While we may tend to think of job market movement being mostly on a voluntary basis – that is to say, people in existing roles choosing to leave for another role elsewhere – it is also important to consider the talent pool who are in the job market because they’ve no other choice.

        The third factor at play is market conditions, which is tangential to the second aspect as both drive organizational decisions of a company. At present, companies are exploring various strategies to leverage an abundance of capital growth opportunities. This could have some combination of the following consequences: organizational change prompts existing employees to question whether they wish to stay with the company through a time of transition; if they don’t want to stay, this would in turn prompt them to test the job market for a more favorable situation. For companies, a departing employee or the need for additional talent will often prompt them to look externally for talent that may not be available internally.  

            Moreover, having a better grasp on some of the dynamic forces generating this recent trend will reveal some central considerations and challenges that companies will face. In the context of RIFs and reorganizations, for example, it will be crucial to consider how an organization ensures they will retain their best and brightest talent. More specifically, are their highest earners expendable during such a reshuffle? Decisions to offload a high-earning individual may initially appear as a smart cost-saving measure; but will a savings be realized if the company must return to the job market to replace that person? Availability and cost of replacement talent then become parts of the broader conversation and reorganization strategy.

         While it is important to deal with the problems at hand, organizations must also be aware of what lies just over the horizon from a talent composition standpoint. It is no secret that the industry is already dealing with the early effects of the Boomer generation retiring. As Doug Bailey explains in his Insurance Newsnet article titled, “Insurance industry still faces recruitment, retention challenges,” “Moreover, say talent consultants, the industry is “aging out,” with a huge number of workers facing retirement in what has been called the “great retirement.””

           Hold on. Yes, we’re aware of the overuse of “Great” and “Big”. No, we don’t come up with these monikers. Maybe Heraclitus would be helpful here?

         Back to talent composition: in the context of your company’s employee population, what is the average tenure? How close are employees to retirement? As mentioned in Accenture’s Insurance industry outlook, “The growing talent shortage trend in insurance is becoming a pressing challenge for the insurance industry. While some functions will be replaced or enhanced by intelligent technologies, there is still going to be an anticipated gap in human skills, with thousands of positions expected to be left unfilled. This is largely owing to a great amount of insurance and underwriting skill sets being held by middle and retirement-aged people, with less than 25% of the insurance industry being under 35 years of age.”

As Matt Nickens points out, “One of the challenges that carriers will be faced with is how to balance the current hiring needs with long-term strategic succession planning. ‘Could this candidate grow into a leadership role?’ ‘Is this someone I can groom to be my successor?’ ‘Do they have the polish and capacity to ultimately lead a region?’ ‘Do they even want to lead a region?’ As the tidal wave of retirements approaches, the ability to identify soft skills and leadership traits in candidates will be vitally important for long-term organizational success. Finding talent is one piece, but having the leadership in place to develop and retain that talent is vastly different.”

        It should come as no surprise that companies with a considerable portion of their employee population retiring in the next five to ten years also may not have a sufficient succession plan in place. How will the current job market conditions coincide with your company’s talent management plan? As Jay D’Aprile writes in his piece titled, “The Future Is Now: Reinventing Talent Strategies in Insurance”, “As demand continues to significantly outweigh supply, insurers must turn their attention to transforming talent strategies to attract and retain a skilled workforce. Without significant changes—particularly to company culture—organizations may struggle to fill the roles they need to drive growth and maintain forward momentum.”

            We are seeing indications that the Big Stay is transitioning to a new phase with signs of increased job movement throughout the market. This change is largely being driven by lessening economic concerns, expense factors such as RIFs and reorganizations, and market conditions such as an abundance of capital and growth plans. Companies will be faced with a myriad of challenges. As this Russell Reynolds article titled, “Attracting and Cultivating the Next Generation of Insurance Leaders” states: “Insurers face a dual-edged talent challenge: it is difficult to attract the right talent, and retention proves equally challenging.” That, in conjunction with other long-term issues, namely The Great Retirement, and companies will have more than enough problems to occupy themselves while the market comes up with another new name for the next Big/Great/Etc.



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