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Across the globe, we are losing $1.9 million a minute in lost productivity, according to the World Health Organization, with 12 billion working days lost annually from anxiety and depression alone.

It’s a yearly bill that runs to $1 trillion in lost productivity, and yet, here we are, still making the business case for mental health to leaders.

Thankfully, it’s not just mental health advocates who are now making the case to the c-suite and

A new report by McKinsey & Co – The State of Organizations 2023: Ten shifts transforming organisations –  highlights ten seismic shifts that business leaders must address in order to thrive in the current environment. Unsurprisingly six out of the ten specifically focus on the human aspect of the world of work.

Their research is based on thousands of responses to surveys conducted in seven major countries, the UK, the US and Canada, France, Japan, China, Germany and Spain.

The Great Attrition

One of the most pressing issues facing organisations is the so-called Great Attrition, which is affecting workers of all levels. This phenomenon is characterised by employees leaving their jobs for a variety of reasons, including seeking better compensation, work-life balance, and job opportunities elsewhere. There is a disconnect between employers and employees in terms of the reasons for this attrition. Employers focus on transactional elements of the work experience, while employees ask for more emphasis on relational factors such as feeling valued and belonging at work.

The authors, Patrick Guggenberger, Dana Maor, Michael Park, and Patrick Simon, wrote: “The Great Attrition is affecting workers of all levels. All types of employees across all income levels, from managers on the front line to leaders in the C-suite, are leaving their jobs. No role, level, or industry is impervious to the trend. Moreover, expectations are high that it will continue. When asked about expected voluntary attrition over the first half of 2023, almost 40 percent of our survey respondents say they expect the rate at their organization to be higher than that seen in first half of 2022.”

There is a disconnect between employers and employees

“When we surveyed employers and employees in August 2021, employers said the top reasons that their employees were quitting were that they were looking for better jobs, compensation, and work– life balance,” wrote the report.

“But employees’ responses painted a different picture: among the top reasons they gave for quitting were not feeling valued by the organisation or by their individual managers and not feeling a sense of belonging at work. The employers were focusing on transactional elements of the work experience, while employees were asking for more emphasis on relational factors.

“Gone are the days when simply focusing on compensation, job title, and financial security was enough to keep most of a workforce satisfied.”

To address this disconnect, business leaders must focus on leading themselves first. They must build a keen awareness of themselves and the operating environments around them. This includes creating a true hybrid work model that allows employees to work from off-site locations for some or much of the time.

The authors wrote: “It’s becoming increasingly important for organisations to encourage well-being, connection, and authenticity in the workplace, and leaders need to set the tone in this regard. Individual leaders will need the courage and humility to embark on what we call a “leader self-journey.”

“It starts with leaders building self-awareness of their own strengths and default tendencies, especially under stress, and identifying strategies to manage through their fears and limitations. With this self-awareness, leaders will be better equipped to tap into their passions, renew their energy, and help others achieve their full potential—and that of their organisations.”

Leaders must also invest in mental health interventions to address the root causes of mental health and well-being challenges.

Employee mental health is becoming a C-suite issue

The report authors wrote: “In a McKinsey Health Institute Global Survey on Mental Health and Wellbeing, almost 60 percent of respondents say they have experienced at least one mental-health challenge at some point in their lives—a figure consistent with other global research.1

“This trend holds true regardless of country, industry, age group, role, or gender. The message is clear: most employees are directly or indirectly affected by mental-health-related challenges, and they can’t be treated in isolation from the workforce or excluded altogether; they are the workforce.

“Four of five HR leaders around the world report that mental health and well-being are now top priorities for their organizations. And despite concerns by some about a potential rise in “wellbeing washing,” estimates show that nine of ten organizations are offering some form of structured wellness programs to employees, incorporating benefits such as yoga classes, mindfulness and time management workshops, paid subscriptions to meditation apps, and extra days off work for mental healthcare.

“However, many workers continue to feel overwhelmed. Our research and experience in the field suggest that this may be because their organisations, with the best of intentions, have focused on launching interventions that remediate symptoms of mental distress rather than on addressing root causes of poor mental health and well-being among employees.

“Since the problem is systemwide, we encourage employers to invest in systemic interventions that are developed and managed with the same rigour and strategic thinking as for other corporate initiatives.”

Business leaders must also focus on closing the capability chasm by building institutional capabilities that enable them to consistently outperform competitors. This includes effectively deploying resources to where they matter the most, and tailoring employee value propositions to individualised preferences in ways that can help close the gap between what workers want and what companies need.

Finally, business leaders must make meaningful progress on diversity, equity, and inclusion (DEI) by identifying opportunities to make progress both in their organisations and in their communities and broader society. This requires a renewed focus on addressing the causes of DEI challenges rather than relying on one-off and incremental fixes.

The report authors wrote: “CEOs together with their leadership teams around the world have been operating in a highly volatile and uncertain environment, first having to cope with the COVID-19 pandemic and then with the ensuing economic slowdown, soaring inflation, and geopolitical disruption.

“In such an unsettled period, it’s no surprise that efforts to strengthen short-term resilience have dominated the agenda at many companies. Less obviously—but no less importantly—business leaders are having to address a range of organisational shifts that have significant implications for structures, processes, and people. These shifts are both challenging and harbingers of opportunity, depending on how organizations address them.

“Some shifts, most notably how to strike the right balance between in-person and remote work, took place at the height of the pandemic and have lingered. Others, such as an ongoing mismatch in the labour market and a decline in employees’ mental health, have been accelerated by the COVID-19 crisis.

“Still others, such as effective leadership development and capability building, are perennial organisational issues that have proved more vexing — and more important to get right—in the current environment. All of these shifts have long-term consequences, and all require clearheaded thinking and decisive action that can’t be postponed.”

McKinsey’s ten transformational shifts

  • Increasing speed, strengthening resilience. Half the respondents in our survey say their organisation is unprepared to react to future shocks. Those able to bounce forward—and quickly—out of serial crises may gain significant advantages over others.
  • ‘True hybrid’: The new balance of in-person and remote work. Since the COVID-19 pandemic, about 90 percent of organisations have embraced a range of hybrid work models that allow employees to work from off-site locations for some or much of the time. It’s important that organisations provide structure and support around the activities best done in person or remotely.
  • Making way for applied AI. AI is more than just a potential opportunity to boost a company’s operations; it can also be used to build better organisations. Companies are already using AI to create sustainable talent pipelines, drastically improve ways of working, and make faster, data-driven structural changes.
  • New rules of attraction, retention, and attrition. People are revising their attitudes both to work and at work. Organisations can respond by tailoring employee value propositions to individualised preferences in ways that can help close the gap between what today’s workers want and what companies need.
  • Closing the capability chasm. Companies often announce technological or digital elements in their strategies without having the right capabilities to integrate them. To achieve a competitive advantage, organisations need to build institutional capabilities—an integrated set of people, processes, and technology that enables them to do something consistently better than competitors do.
  • Walking the talent tightrope. Business leaders have long walked a talent tightrope—carefully balancing budgets while retaining key people. In today’s uncertain economic climate, they need to focus more on matching top talent to the highest-value roles. McKinsey research shows that, in many organisations, between 20 and 30 percent of critical roles aren’t filled by the most appropriate people.[4]
  • Leadership that is self-aware and inspiring. Leaders today need to be able to lead themselves, lead a team of peers in the C-suite, and exhibit the leadership skills and mindset required to lead at scale, coordinating and inspiring networks of teams. To do that, they must build a keen awareness of both themselves and the operating environments around them.
  • Making meaningful progress on diversity, equity, and inclusion. Many organisations are prioritising diversity, equity, and inclusion. (DEI), but in many cases, the initiatives aren’t translating into meaningful progress. To realise DEI aspirations, leaders will need to identify opportunities to make progress both in their organisations and in their communities and broader society.
  • Mental health: Investing in a portfolio of interventions. About nine of ten organisations around the world offer some form of well-being program. But global health and well-being scores remain poor. Organisations need to refocus their efforts on systematically addressing the causes of mental health and well-being challenges; one-off and incremental fixes won’t be enough.
  • Efficiency reloaded. More than one-third of leaders in our survey list efficiency as a top three organisational priority. Boosting efficiency is about more than managing immediate crises or getting the same work done with fewer resources; it means more effectively deploying resources to where they matter the most.

Read the full report by clicking the cover image below