What is Employee Attrition?
Employee attrition is a gradual but deliberate reduction in the number of employees in a company or business organization. Employees will at some point in time look to change their job places for a number of reasons. It might be for professional or personal reasons but it does happen.
But when the attrition rate starts to grow past some certain figures or threshold, then you have reasons to be concerned. Attrition may lead to a leadership gap in your organization if your senior leaders are the ones leaving or it can affect the diversity at your workplace if the minority groups are the ones leaving. Employee attrition can differ among organizations based on the kinds of people leaving but the definition of attrition remains the same.
To define attrition in simple terms, it is when there is a diminishing in the number of the workforce due to several factors that are very avoidable. Some of the reasons for employee attrition are a lack of confidence in the leadership and market value of the company, a work environment that is not conducive, absence of professional growth, etc.
Types of Employee Attrition
It is normal for one or two people to retire from your organization in a year. If you count that as attrition, then it means you will not be able to correctly define employee attrition. One or two persons is not large enough statistically for you to consider as attrition. Based on the attrition definition, you have a problem only if they retire in large numbers around the same period. To avoid this type of employee attrition, it’s important that you have a mix of age grades among your employees.
If you can answer the question, ‘what does attrition mean?’ Then, you will understand that this type of attrition is a very common one. Here, the employees are the ones that quit voluntarily. There are a number of reasons for a high employee attrition rate, but most of them are within your control as a business owner or employer. So, you must ensure that you take steps into ensuring that you prevent voluntary attrition in your organization.
This can lead to a reduction in the level of productivity in your organization. To avoid this type of attrition, you must put the right structures in place to make your employees believe that your company is the right place for their personal development.
If you are going to talk about attrition in business definition, then this type of attrition is not dependent on the employees. In this case, the employers or organization are the ones who initiate the attrition. It might be that they sack a number of employees because of misconduct at their work. Sometimes, this can also be due to structural reasons. A common structural reason for employee attrition is an acquisition or a merger.
To avoid involuntary attrition, your onboarding process has to be strict enough to ensure that you bring in only the best talent.
This is a case where employees quit one department for another within an organization. You can use this to determine the best job placement for employees in your company. However, you also have to be watchful. It calls for investigation if the attrition rates of a department are very high in one year. You have to ask what is wrong with that department.
What are the heads of the department doing wrongly? Making sure that all departments are active and productive will reduce internal attrition.
This is the type of attrition that is specific to a particular group. It could be people living with disabilities, ethnic minorities, veterans and old professionals, or even women. When a particular demographic group starts to exit your company in large numbers, then it is time for you to review your company’s policy.
Employee Attrition Rate
The meaning of the attrition rate is the comparison of the employees left in a company or organization to the number of employees that were taken in one year. If you need to carry out attrition analysis, then you need to learn how to calculate attrition.
Here are some steps to carry out:
- Know the total number of employees that you have in your company from the start of the year. Let us put the number hypothetically at 750.
- Have a record for the total number of employees that leave your company in that year. Let us also say that is 150 people left your organization in both involuntary and voluntary attrition.
- You should also have a record for the total number of employees that your organization hires during the course of the year. Then add up the numbers. If you hire 200 people in one year, then your total headcount at the end of the year is (750 + 200 = 950).
- The next step is to calculate the average for the number of employees that you have during that year. In this case, the number is (750 + 950)/2 = 850.
- Then, you do the calculation for the employees that left your organization from the average employee number in percentage.For this example, we have: (150/850) x 100 = 17.65%.
This explanation is to give you a better understanding of how to calculate the attrition formula.
Formula: rate of attrition = (number of employees that left the company / the average number of employees) x 100%
Difference between Attrition and Turnover
Attrition and turnover are two concepts that are similar, and many people tend to mistake the both of them. The debate of attrition vs turnover has been on for a while and they are quite different. In order to understand the difference between these two, you need to understand the basic definitions of both.
The reason for attrition(1) can be the same as turnover but they are quite different.
|It doesn’t put strain on employer.||It puts strain on employer.|
|The employees don’t have to be replaced.||The employees must be replaced.|
|Attrition can be both positive and negative.||Turnover is viewed more negatively.|
This is when the employees of an organization decide to quit the organization. It might be because they got a better offer elsewhere or a lack of opportunities for personal development and growth in the company. Other factors that might cause a voluntary turnover(2) are a poor payment, hostile or unconducive work environment, the feeling of under-appreciation, etc.
This is when the employees of an organization are forced to leave the organization. This happens when the employers have to fire or terminate an employee and start to look for ways to replace them.
Factors that lead to Employee Attrition
The attrition factor deals mainly with voluntary attrition i.e. situation where an employee leaves an establishment or quits their job by themselves. If you understand the meaning of the attrition factor, then you definitely know that voluntary attrition is just the employees looking out for themselves. Here are some of the factors that cause or affect employee attrition.
This is when there is a change in the personal life or goals of the employees which will compel them to change their jobs. The motivation might be to change their children’s school and it causes them to change their location too. The reasons are numerous. That is why employee attrition is inevitable.
This is a typical attrition example where employees exit a company because they do not feel like your company offers them opportunities for them to progress in their careers. Your company’s HR is vital to helping you control this type of attrition. This happens in many companies where young talents have to fight tooth and nail on their way to the top. If the employees start to feel like they can do better elsewhere, they will leave.
This is one of the commonest reason for voluntary attrition and is important to answer the question “what is attrition in business?”
This is the company’s self-made problem, and it is one that is easy for them to deal with. It is important that the leadership of a company pays attention to the needs of the employees. You should give them everything that they need to be happy at work. Once you make your employees happy and they have reasons to believe that their personal and professional development goals can be achieved in your company, they will be more willing to continue working with you for as long as possible, and you would have easily solved the issue of voluntary employee attrition or turnover in your company.
Job not being right for an employee
This also refers to a bad employee-to-job placement. This can sometimes be due to problems with your company’s onboarding process. There are times where employees have joined an organization with so much enthusiasm. But two or three months into the job, they no longer want to continue. This mostly means that the job is not suited for the candidate that was employed to fill it.
This is where you have to look back on your entire on-boarding process and ask yourself where you got it wrong. Check your job description if it is right for the available post and make sure it is clear enough. This way, the employees know what to expect and the likelihood of experiencing attrition from your new hires is few.
Can Attrition be Beneficial?
There are such things as positive attrition and negative attrition. This implies that attrition can have a positive effect on the organization. So, attrition can be beneficial.
Attrition can be beneficial to an organization if the employee(s) that are leaving are those that have a negative effect on the work culture and ethic of the organization. There are usually people that have a negative impact or influence on the productivity of the organization. When these people leave, you can be sure that the negative influence will wane and this gives you the chance to effect a positive culture in your organization. Underperforming employees can also choose to leave by themselves and this will lead to more productivity for you.
Recent Trends in Attrition
A 2018 report by LinkedIn(3) showed the rate of employee attrition in different industries, and the marketing industry is the industry with the highest rate of attrition with 19.8%, followed by technology (13.2%). The least is media and entertainment at 11.4% with the retail & consumer products industry at 13%.
A recent report of retention by a Work Institute(4) highlights the recent trends in attrition;
According to the report, the prevalent attritions are the ones that can be prevented. From the report, 10% attrition was due to relocation, 6% were due to retirement, and another 6% was due to termination. This means that the bulk of attrition was due to issues the organization can deal with.
The 3 major reasons for attrition in the report are career development, work-life balance, and manager behavior. All of these three are preventable.
Based on the recent trends, experts already predict that by 2023, the attrition rate will be as high as 35% and people will constantly change their workplace.
There are a number of reasons why you would want to ask the question “what is attrition?” But from this article, you already have a strong understanding of what employee attrition is. If you want to know how well or how much your company is doing to retain staff, carry out a survey of attrition vs retention. If you have a higher amount of attrition or turnover in comparison to your level of retention, then there is a big problem. And you need to sort it out as soon as possible.
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