Do you need help with high employee turnover at your company? Do you want to understand the root causes and find ways to reduce them?
Employee attrition is a significant concern for businesses of all sizes. It refers to employees leaving an organization, either voluntarily or involuntarily. According to recent statistics, the average employee attrition rate in the United States is around 18%, with the cost of replacing an employee estimated to be between 16% and 213% of their annual salary. But what does this mean for your company?
A company must spend money recruiting and training a replacement if a company loses an employee. This can be expensive, especially if the position is highly specialized or difficult to fill with quality candidates. In addition, turnover creates gaps in knowledge and expertise within organizations.
Therefore, understanding and managing employee attrition is crucial to a company's success and financial stability.
This article will explore the different types of employee attrition, the causes, how to measure and analyze it, and strategies for managing and controlling it. We will also distinguish between employee turnover and attrition and examine their impact on a company. By the end of this article, you will have a comprehensive understanding of all you need to know about employee attrition.
What are the types of employee attrition?
Employee attrition is when workers leave their jobs due to everyday life circumstances. It’s the cycle of employment. Turnover refers to those who quit because they’re unhappy or feel they could do better elsewhere.
Retirement is a normal part of the employment cycle, but if you’re losing more staff than usual, they could be leaving due to factors other than their age.
Voluntary attrition occurs when employees leave the job of their own accord. This can be due to various reasons, such as a lack of job satisfaction, a better job opportunity elsewhere, or personal or family reasons. Voluntary attrition is generally more challenging to control, as it arises from the individual employee's motivations and circumstances.
Involuntary attrition refers to employees terminated or laid off by the company. This can be due to poor performance, restructuring, downsizing, or other business-related reasons. Involuntary attrition can be more straightforward to manage, as the company's needs and policies drive it.
Internal attrition refers to employees who leave their current position within a company but remain employed by the organization. This can happen when an employee is offered a promotion or transferred to a different department or location. While internal attrition can benefit employee development, it can also be disruptive and costly if it occurs too frequently.
Demographic-specific attrition refers to employees who leave due to factors specific to their demographic group. For example, an employee may retire or leave to care for a family member. This attrition type can be more predictable and easier to plan for, but replacing employees with specialized skills or experience can also be challenging.
By understanding the different types of employee attrition, companies can better tailor their retention strategies and proactively address potential issues.
What is employee turnover vs attrition?
The terms "employee turnover" and "attrition" are often used interchangeably, but they have different meanings. Understanding the difference between the two is crucial for effectively managing and reducing them.
Employee turnover refers to the rate at which employees leave an organization, and new hires take over. Employee turnover can be voluntary, involuntary, or a combination of the two.
On the other hand, employee attrition refers to the overall process of employees leaving an organization, whether they are replacements or not. It includes all types of employee departures, including voluntary, involuntary, internal, and demographic-specific attrition.
The impact of employee turnover and attrition on a company can be significant. High turnover can lead to increased costs for hiring and training new employees and disruptions to productivity and team dynamics.
High attrition can also negatively impact a company, including the loss of institutional knowledge and expertise, the burden of replacing departing employees, and the impact on morale and culture.
By understanding the difference between employee turnover and attrition and the impact of each on a company, businesses can develop targeted strategies for improving employee retention and recruitment.
What are the causes of employee attrition?
The causes of employee attrition can vary based on the type of attrition, but some common themes can help companies better understand the issue and prevent it in the future. These include:
1. Poor training
Staff who aren’t comfortable in their new roles won’t last long—many will leave before completing their first year. Better training can remedy this. If training gets rushed to place staff into roles too quickly, they won’t perform as well as they would with all the right tools for the job.
2. Poor management
Being happy at work plays a huge part in role retention. Good management goes a long way to keeping your teams happy. There’s far too much truth in the adage of ‘employees leave managers, not jobs.’
3. Financial stress
You might not think it’s up to you how your staff manage their lifestyle and financial responsibilities. Still, one of the main reasons employees consistently leave roles is to pursue higher wages.
Are they living beyond their means? Are you paying fair rates? Could you afford to pay a little more if it meant hanging on to your key players? Or maybe a little education with a financial wellness program wouldn’t go amiss?
Financial stress also affects your employee’s functionality and efficiency in the workplace. Even if you don’t lose them, they might not be operating at their best for you.
4. A lack of opportunity for growth and advancement
The latest wave of Gen Xers and their Millennial predecessors have changed the way the current market views employment. They put far more emphasis on job satisfaction, and the right role with better benefits can often win out over higher-salary roles. They want to feel like they’re achieving something and moving forward.
Too many employees leave good jobs purely because they’re stagnant, bored, or can’t see a way to grow or advance up the career ladder.
5. Personal or family reasons
Personal or family circumstances can also drive employee attrition. For example, an employee may need to relocate for a spouse's job or take time off to care for a family member. While these circumstances may be beyond a company's control, understanding and support can help retain employees.
Companies can take proactive steps to address and mitigate the reasons for employee attrition only when they understand the underlying causes.
It's important to note that there may be some other reasons that are hard to control, such as a poor economy or a particularly competitive job market. Regardless, companies should focus on what they can handle. The goal is to ensure a more stable and prosperous workforce.
6. Poor compensation or benefits
Compensation and benefits are important factors for many employees, and a lack of competitive pay or perks can drive them to seek employment elsewhere.
Companies should regularly review and assess their compensation and benefits packages to ensure they are competitive and meet the needs of their employees.
7. Poor management or leadership
Employees who feel unsupported or mistreated by their supervisors or managers may be more likely to leave. Good management and leadership are crucial for employee retention and should be a focus for companies.
What is good attrition and bad attrition?
There are, as there are with most things in life, positives and negatives to employee attrition. Where possible, a natural cycle of staff turnover creates opportunities as well as issues.
Many of the staff who choose to leave their roles will have been unhappy. If they weren’t up to the job, or they were better suited to working elsewhere, then your business gets an organic removal of a poor performer.
However, losing your best players because they’re bored, unhappy with their managers or their working environment, or they’ve been tempted away by more forward-thinking companies—well, that’s bad news.
Especially when you consider, with a little observation and a few changes, you could have retained them and saved yourself not only the problem of finding an equally strong performer but also all the associated costs.
How does employee attrition impact a company's culture and morale?
High employee attrition can also negatively impact a company's culture and morale. Constant staff turnover can create instability and disrupt team dynamics, leading to a hostile work environment and low morale. In addition, the loss of valued employees can demoralize the remaining staff. Companies can foster a positive and supportive culture and improve morale by managing and reducing employee attrition.
How to measure and analyze your attrition
Measuring and analyzing employee attrition is crucial for understanding its impact on a company and identifying strategies for managing it. Here are some critical considerations for measuring and analyzing employee attrition:
Calculating the employee attrition rate
The attrition rate measures how many employees leave an organization over a particular period and is expressed as a percentage. You can calculate it by dividing the number of employees who went by the total number present at the beginning of the period.
For example, if a company has 100 employees and ten leave in a year, the employee attrition rate would be 10%.
While some companies measure employee attrition in terms of the percentage of employees who leave the company over a certain period, others prefer to look at it from a dollar amount perspective. In either case, an accurate metric is essential for understanding its impact on your business and developing strategies for managing it.
Understanding the costs of employee attrition
Employee attrition costs go beyond just the expense of hiring and training replacements. There can also be indirect costs, such as the impact on productivity and morale, the loss of institutional knowledge and expertise, and the disruption to team dynamics.
Companies need to understand the full extent of the costs of employee attrition to assess its impact on their operations and bottom line.
Identifying patterns in employee attrition
Analyzing employee attrition data can also help identify patterns and trends. For example, a company may find that employee attrition is higher in specific departments or for certain demographic groups. Understanding these patterns can help a company focus its retention efforts and address particular issues.
Assessing the impact of employee attrition on the company
It's essential to determine the impact of employee attrition on the company as a whole. This includes not only the financial costs but also the impact on productivity, morale, and overall business performance. Companies can better prioritize and allocate resources to address the issue by understanding the full effect of employee attrition.
Measuring and analyzing employee attrition gives companies a lens through which they can view their overall business performance, gain valuable insights into the root causes of attrition, and develop effective strategies for managing and reducing it.
How to manage and control attrition
Managing and controlling employee attrition is crucial for the success and stability of a company. Some of the strategies you can use to manage and control employee attrition include:
Identifying and addressing root causes
The first step in managing and controlling employee attrition is identifying and addressing the root causes. This may involve implementing new policies or procedures, improving working conditions or culture, providing additional training or support, or addressing issues with leadership or management. Companies can significantly reduce the turnover rate by addressing the underlying causes of employee attrition.
Implementing retention strategies
Retention strategies are measures designed to keep employees from leaving a company. These include offering competitive compensation and benefits packages, providing training and development opportunities, promoting work-life balance, and recognizing and rewarding employee contributions. By implementing retention strategies, companies can increase employee satisfaction and reduce the likelihood of employees leaving.
Encouraging employee engagement and satisfaction
Employee engagement and satisfaction are essential drivers of retention. Companies should create a positive and supportive work environment and regularly assess employee engagement and satisfaction levels. Only by doing so can they address any issues and foster a sense of purpose and belonging among employees, increasing retention.
Providing career development opportunities
Presenting employees with career advancement and development opportunities can be a powerful retention tool. This can include training programs, mentorship opportunities, and clear career paths. By investing in employee development, companies can increase employee satisfaction and reduce the likelihood of employees leaving.
By implementing these strategies, companies can effectively manage and control employee attrition and create a more stable and successful workforce.
What is a good employee attrition rate?
A healthy attrition rate is consistent with industry standards and allows a company to maintain a stable and productive workforce.
It is essential to regularly assess and compare your company's attrition rate to industry benchmarks to determine if it is healthy or if there are areas for improvement.
A rate significantly higher or lower than industry norms may indicate the issues to address. Generally, a healthy attrition rate should be between 5% and 10%.
As with so many easily ignored business practices and their data, you are working on your employee attrition, and turnover rates can significantly improve your budget and financial performance. It should also help you create and hold onto the strongest teams and players possible.
It makes sense to make it part of your regular HR and management practice. Improving your ROI isn’t always to do with marketing and sales, after all.