If you are a corporate employee, then, in all probability, you've heard, read, or overheard the word "attrition" more than just once. The internet is full of articles, opinion pieces, and expert panels debating attrition. But what does attrition mean, and how does it impact organizations and employees?
What Does Attrition Mean?
Whether you're a corporate employee, business owner, working professional, or industrialist – understanding the concept of attrition is essential to running any successful organization.
For those of us who are not familiar with the term, attrition can feel like a complex concept.
Simply put, it is the natural decrease in the numbers or size of a workforce due to retirement or resignation. It occurs when an employee leaves voluntarily or involuntarily from their position without being replaced.
Why Attrition Matters
Losing employees is an unavoidable, albeit unfortunate, process in all organizations. Regardless of their industry or sector, businesses of any size must determine a baseline range for normal attrition and then track trends within that range to be proactive in hiring and training new team members to replace those leaving.
In this blog post, we'll discuss what attrition is, the different types of attrition, and how to calculate your organization's own employee turnover rate. Knowing these key aspects can help you maintain morale among existing staff while managing personnel costs as you seek out qualified talent replacements where needed.
Attrition: Definition And Types
Attrition is the natural decrease in personnel due to resignations, retirements, and other voluntary or involuntary separations. It's a normal part of any organization's life cycle as roles evolve and different skills are needed to stay competitive. Layoffs, downsizing, and mergers and acquisitions can also cause attrition.
Types Of Attrition
The types of attrition can be classified as voluntary, involuntary, internal, and demographic-specific.
Voluntary Attrition
Voluntary attrition happens when an employee voluntarily leaves the organization for another job or to pursue a new career opportunity. It is important to monitor voluntary attrition levels to gain insight into why employees are leaving and take action on how to retain them.
Involuntary Attrition
Voluntary attrition occurs when an employee is terminated from the company due to performance issues, reorganization, budget cuts, etc. Companies should strive for minimal involuntary attrition as it indicates that there may be problems with their management practices or operational processes that need to be addressed.
Internal Attrition
Internal attrition is when employees leave their current position and switch departments within an organization.
Replacement Attrition
Replacement attrition occurs when a position is vacated and filled by a new employee. Companies should monitor their replacement attrition rate as it indicates the level of difficulty in filling open positions or the need for better recruitment processes.
Demographic-specific Attrition
When people of a particular age, gender, or ethnicity start leaving an organization, it is called Demographic-specific attrition.
Such attrition should be a cause of concern for organizations as it indicates a bias or discrimination against a particular community of people.
Total Attrition
Total attrition includes all forms of employee turnover, including voluntary and involuntary departures. This type of attrition is often used to measure an organization's overall health and stability, as it can be indicative of a lack of morale or other issues within the company. Companies should track total attrition over time to identify any trends that need to be addressed.
Attrition is an unavoidable part of operating any business. While it cannot always be prevented, companies should have processes in place to monitor different types of attrition and take steps to address any issues that may arise. By doing so, companies can ensure they retain their best employees and create an environment where all employees will thrive.
What Is Attrition Rate & How To Calculate It?
Attrition rate is a measure of employee turnover, indicating the number or percentage of employees who leave an organization within a certain period. Organizations must track attrition rates, as high levels of turnover can be detrimental to productivity and morale.
To calculate your organization's attrition rate, you must first determine the total number of employees who left the organization during a selected period. Dividing the number of employees that leave by the number of employees at the beginning of that period and multiplying it by 100 will give you the Attrition Rate.
Attrition Rate = (Number Of Leaving Employees / Number Of Employees ) x 100
For example, if an organization had 100 employees at the start of the month and 10 left during that month, its attrition rate would be,
Attrition Rate = (10/100) x 100
= 10%
If you want to get more specific, you can also calculate the attrition rate within a precise time frame.
You can gauge early attrition that occurs within the first 90 days (probation period) of joining by dividing the number of employees leaving by the total number of new employees that joined your organization and then multiplying them by 100.
Suppose 70 employees joined your organization within the last 90 days, and 14 of them quit before completing probation; then, the early attrition rate would be as follows:
Early Attrition Rate = (Number Of Employees Quitting Before End Of Probation / Total Number Of New Joinees) x 100
Early Attrition Rate = (14/70) x 100
= 0.2 x 100
= 20%
Advantages Of Knowing Attrition Rate
1. Improved Employee Retention:
Understanding your organization's attrition rate can help you better maintain morale among existing staff by providing targeted support and resources where needed. This could include improved recognition programs, career development opportunities, or flexible work arrangements.
2. Cost Savings:
By understanding which positions are most likely to experience turnover, you can be more strategic in allocating your personnel budget when seeking replacements. You can also use this information to plan ahead and forecast costs related to recruitment and potential training investments for new hires
3. Increased Strategic Planning:
Knowing the reasons behind why employees choose to leave your organization can help you evaluate current practices, policies, and processes—allowing you to take steps toward improving employee satisfaction. This can help reduce attrition rates, allowing you to develop a more stable and productive workforce that is better prepared for long-term growth.
4. Identifying Retention Strategies That Work:
With an understanding of the various types of attrition and their causes, organizations can craft tailored retention strategies that address specific issues. From offering additional benefits or resources within the organization to developing creative incentives like career progression opportunities, identifying these most effective strategies can be invaluable in helping you retain existing staff while attracting qualified new employees.
5. Calculating Your Organization's Turnover Rate:
The formula for calculating employee turnover rate is as follows:
(Number of Separations/Average Number of Employees) x 100 = Employee Turnover Rate
By tracking the number of separations (employees who leave the organization) annually and comparing it to your average number of employees, you can accurately determine your employee turnover rate. This figure will provide key insights into how sustainable your staff retention strategies are and how successful you've been in attracting qualified new employees.
Conclusion
Attrition can be a costly endeavor for companies of all sizes, but understanding the different types and how to calculate your organization's own turnover rate are key steps in managing personnel costs. By taking the time to implement effective strategies that fit within your budget constraints and organizational culture, you'll ultimately be able to create an environment where employees feel valued and engaged — setting up your business for greater success in the long run.
