Companies in the globe are fleeing Russia in an unprecedented display of corporate solidarity with their governments, appalled over the invasion of Ukraine. Over 750 multinational businesses have so far said they have curtailing, suspending or severing ties to Russia, more than triple the number that the abandoned South Africa had in the 1980s.
Many corporate statements announce the decisions made with emphasized humanitarian aspects and unity with the Ukrainian people. For example, Pepsi suspended soda sales in Russia, describing events in Ukraine as “horrific”; Ford Motor Co. cited Russia’s “threats to peace and stability” in pausing operations at its three plants in the country; And Ikea closed its stores and called the war a “human tragedy.”
Detectives have this kind of corporate do-gooder dismissal as “virtue signaling,” implying there is an ulterior motive to the grandstanding. These are but a few of the more profit-oriented drivers that work at a given time, especially when the stakes are high.
In this case, the common theme we see for many companies is the “great resignation” – and the fight to attract, picky, younger Gen Z and millennial workers, who say they want socially responsible brands to work.
A weighty decision
A company’s decision to sever its operations in a country is seldom taken lightly.
In leaving Russia, companies will incur significant costs from abandoning equipment, stores and factories, or even an entire workforce. For example, Exxon said it expects to lose US $ 4 billion in assets over its decision to exit Russia, while McDonald’s restaurant closures will cost the company $ 50 million per month.
And there is no knowing when the companies will leave Russia.
Yet that is not the hardest decision to make from the stopping number of companies. Amid their condemnations of the invasion and expressions of solidarity with the Ukrainian people, many companies also have clear business-related reasons. Appliance maker Whirlpool cited the security of its workers, Japanese automaker Toyota blamed logistics and supply-chain hurdles, and video streaming company Netflix said it would be processing payment with troubles.
Workers of Growing Power
While these practical reasons, along with the moral concerns, could be enough to drive the exodus, we believe in the great resignation, in which record numbers of workers are quitting their jobs.
Roughly 47 million US workers voluntarily left their jobs in 2021, accounting for well over a quarter of the civilian labor force, according to the Bureau of Labor Statistics. Over 4.5 million quit in November alone, a single-month record, and almost all of those continuing to hand in 2022.
It’s not just a US phenomenon. Many other countries are experiencing similarly high rates of workers voluntarily quitting their jobs.
This trend has shifted bargaining power to employees, and companies are struggling to acquire skilled workers. Employees are demanding higher pay and more benefits, and some are rethinking their caregivers so that their work is more aligned with their values.
Another sign of a shift in power is the recent success of youth-led labor organizing efforts. A growing number of Starbucks locations are becoming unionized, while Amazon got its first US-based union after workers in New York City voted on Form One in April 2022. Starbucks and Amazon have both suspended operations in Russia.
Some industries are experiencing particularly high employee attrition rates, including management consulting and oil and gas, according to a recent article in the MIT Sloan Management Review. The attrition rate measures how many workers are lost and not replaced over a period of time.
Management consulting, in which a talented workforce is vital, for example, saw an attrition rate of 16% over the six-month period, or over five times the national average.
Ukraine with Employees Demand Solidarity
This is why it is a surprise to us that the companies in these labor-strained industries are among those with the severed ties of Russia or the sooner the more so.
IT consultant Accenture, with nearly 700,000 employees, is set to set the tone for what will be expected in its industry on March 3, 2022, it said.
“Accenture stands with the people of Ukraine and their governments, companies and individuals around the world.
Competitors McKinsey and the Boston Consulting Group have initially planned to use more timid withdrawals to cut ties with the Russian government but continue to honor private contracts. But after taking a look at the social media and even the cowardice of Russia, the companies quickly announced that they were pulling out completely. All other consulting giants have done the same, including Bain, Deloitte, EY, KPMG and PwC.
The big western oil companies have similarly faced employee pressure to exit Russia, with workers going so far as to offload Russian oil and gas into their docks. This comes on top of pushing companies to take steps that go beyond the sanctions. In severing ties, companies such as BP, Shell and Exxon have abandoned significant assets in Russia, which will result in huge losses in their balance sheets.
Long-term gains for short-term costs
But accepting these short-term losses may be worth the risk.
Recruiting and retaining a talented workforce is an important driver of a company’s long-term profitability.
Training new workers is costly, and the best talent is always hard to recruit – a challenge made worse by great resignation. Survey after survey shows workers are driven by a sense of purpose and expectation to reinforce their companies.
No company that we know of explicitly cited issues related to the great resignation of a driver of its decision to leave Russia. And with the industry, high attrition rates and vocal workforces such as Big Tech haven’t seen complete withdrawals. In some cases, such as Apple, Alphabet and Meta, they’ve been suspended for some operations, but they are part of the business of trying to keep up with the important role of providing free information to Russian citizens.
Every company and every industry has its own unique analysis to go through based on exposure to business and reputational risk in Russia. We believe the great resignation compounds this risk, in some cases. And employees are reporting feeling stressed out over Ukraine.
Almost universally in the West has been condemned Russia. Given that, many of the companies that have severed ties – while sacrificing short-term profits – are likely to be more likely to be more harmful to their brand, not just customers but their employees as well.
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