As the world economy recovers from the pandemic, businesses now face another challenge – the ‘Great Resignation,’ a phrase coined in 2021 to describe the trend of millions of employees worldwide leaving their jobs.
In the Philippines, for instance, resignation was the top reason for unemployment in 2021. In its Mission: Rebooting Economic Activities through Community Engagement (RACE) program survey, the Department of Labor and Employment (DOLE) said that 85,045 of the over 2.39 million unemployed workers resigned from their work last year.
Meanwhile, in Metro Manila, the country’s capital, the labor turnover rate, which refers to the difference between hiring (accession) and the rate of job termination or resignation (separation), has implied negative growth in employment in the first half of 2021.
The Labor Turnover Survey released by the Philippine Statistics Authority (PSA) reported a labor turnover rate of -3.1% in the first quarter of last year. It continued to weaken during the second quarter at -1.2%. These numbers translate to reductions of 31 workers in the first quarter while 12 workers in the second quarter for every 1,000 persons employed in establishments.
How is this trend affecting SMEs?
According to a study released by SAP SE (NYSE: SAP), the Great Resignation is real and impacting small and medium-sized enterprises (SMEs) in the Asia Pacific and Japan (APJ) region today.
The study, “Transformational Talent: The impact of the Great Resignation on Digital Transformation in APJ’s SMEs,” surveyed 1,363 SME owners and decision-makers across eight countries in the region, including Australia, India, Indonesia, Japan, Korea, New Zealand, Singapore, Thailand.
Nine in ten (91%) SME respondents in APJ say workforce volatility, including the Great Resignation, has directly impacted their digital transformation plans. These plans are critical since 69% of SME respondents say that digital transformation is significant to their organization’s survival over the next year.
Meanwhile, four in ten (40%) respondents agreed that more employees are resigning now than just 12 months ago, while almost two-thirds (64%) of SME respondents said they are not finding it easy to cope with the impact of the Great Resignation.
The talent crunch is impacting organizations’ ability to transform their businesses digitally. According to the study, the lack of skilled talents also ranks as the top challenge to achieving successful transformation for SMEs across APJ. It topped traditional obstacles, such as cyber security, lack of budget, and lack of understanding of available digital solutions.
“This study shows how the “Great Resignation” can be an existential challenge to organizations. At SAP, we believe that having the right people is important to ensuring digital transformation success. As part of retention efforts, SMEs must invest in talent as much as they invest in innovation to thrive amid these uncertain times,” said Rudy Abrahams, Vice President, Head of SAP SuccessFactors, South East Asia and interim Managing Director SAP Philippines.
How are SMEs mitigating the effects of the Great Resignation?
To alleviate the Great Resignation’s effects and boost their organizations’ ability to deliver digital transformation, SMEs across APJ are investing in their workforce.
Survey respondents said they are improving their financial incentives (43%) and introducing flexible working arrangements (43%) to ensure talent retention over the next 12 months. Meanwhile, four in ten (40%) SME respondents said they would provide upskilling opportunities to retain key talents.
SMEs in the region also focus on training, with more than two-thirds (68%) of the respondents noting that upskilling to support digital transformation is urgent, leading to 72% of SMEs who will focus on digital training throughout this year.
Despite these challenges, SMEs in the region remain optimistic. Having managed significant challenges over the past two years, they are looking beyond a focus on resilience. Almost half (49%) of the respondents say that their organization is highly or fully resilient in weathering the pandemic’s impact. On the other hand, 4% believe they are not resilient.
The confidence in their ability has also resulted in optimism about their growth prospects. 81% of the respondents said they are moderately, very, or extremely confident in their growth over the next 12 months.
“The Small and Medium-sized Enterprise (SME) sector accounts for over 97% of all businesses and employs over 50% of the workforce in the region according to Asia Pacific Economic Cooperation. By harnessing their growth potentials and optimism and combining it with innovations that help foster talents and a strong partner ecosystem, we can help ensure their success in the years to come,” said Abrahams.