If you’ve never heard of employee attrition before, raise your hand.
Oh, don’t be shy or feel ashamed. No man is an island of knowledge, and where one person’s knowledge ends is where another person’s knowledge begins. Sorry, that adage slaps harder in Yoruba.
SEE: Idioms and Proverbs You Should Know
Either ways, just because you don’t specifically know what employee attrition means doesn’t mean you’re not knowledgeable. Who knows, but you just might know it by another name.
Employee attrition: Definition
Attrition refers to the departure of employees from an organization’s workforce, for any reason. See? You’re not a dullard after all. You do know about the concept, not just by that name.
Everyone has, at some point, had to leave a place of work for one reason or another. It could be voluntary, like resignation due to better prospects, or involuntary like forced resignation due to a scandal, termination, retirement or even death. Attrition, however, isn’t so much concerned with the how or why as it is the occurrence itself.
Therefore, to be more elaborate, employee attrition occurs when the size of a workforce diminishes over time. And while it is sometimes out of the employer’s control, reasons for attrition can include:
- A hostile work environment
- Lack of professional growth
- Weak leadership
- Declining confidence in the company’s market value, among others.
What Is Attrition Rate?
Attrition rate is the rate at which employees leave an organization divided by the average number of employees present over a given period of time. It measures how many people left a company/office/department compared to the average number of people employed in that year. This takes into account fresh hires as well.
Here’s a simple formula to help calculate attrition:
- Conduct a headcount to know how many employees you started with at the beginning of the year. Let’s say this number is 500.
- Keep track of how many people leave throughout the year. Let’s say 100 employees left the company due to voluntary and involuntary reasons.
- Keep track of the employees hired across the year, and conduct a final headcount at the end of the year. Let’s say that you hired 200 people that year – this means your final headcount is 700.
- Now, calculate the average number of employees for that year. In our example, this will be (500+700)/2 = 600.
- Finally, calculate the number of employees who left as a percentage of the average number of employees. This will give you the attrition rate: (100/600) x 100 = 16.66%.
Attrition Rate = Number of Attritions/Average Number of Employees x 100
As you can see, the impact of attrition cannot be negated by going on a hiring spree. This is what makes it such an important metric for companies, and what differentiates it from turnover.
Employee attrition vs. turnover
Attrition is different from turnover, as vacancies from the latter aren’t filled up immediately. This is because, as said earlier, a lot of factors can contribute to attrition, including retirement, planned resignations, and structural changes.
In contrast, turnover is a more short-term metric, and the vacuum it creates must be addressed immediately by rehiring.
Types of employee attrition
There are five major types of employee attrition, which are:
This is the most common type of attrition.
Here, employees decide to simply quit their jobs. There can be many reasons for voluntary attrition, and luckily, most of them are within the employer’s control.
An employer should proactively try to curb voluntary attrition among high-value talent, as this can bring down productivity over time.
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In this scenario, it is the company and not the employee that initiates the separation. It could be due to professional misconduct on the employee’s part, which is usually the most common reason for involuntary attrition.
Structural reasons could also cause attrition, as mergers and acquisitions are often followed by a wave of involuntary attrition.
Attrition due to retirement
Two or three people retiring from your company in a year is statistically too small a demographic to count under attrition. However, if a sizable chunk of your workforce retires at the same time, this can cause attrition.
Employee attrition due to retirement shouldn’t be swept under the rug, as age may not be the only reason your senior professionals may choose to retire early. Especially if it’s a mass retirement.
Here, employees are quitting their jobs in one department to join another department. In some cases, internal attrition is desirable, as it routes talent towards more profitable areas. It also ensures better employee-job fitment.
But if a specific department has witnessed a high rate of attrition one year, it merits an investigation. Is there something missing in the job? Is the manager inadequately skilled? These are questions that HR needs to ask and find answers to.
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This means that employees from a single group – women, ethnic minorities, people with disabilities, veterans, or older professionals – are leaving the company in droves.
Demographic-specific attrition is a significant concern for progressive companies trying to build an equal-opportunities workplace. You need to immediately deploy employee surveys to identify the root cause of demographics-based attrition before it affects your workplace culture.
A positive culture can be the antidote to the quitting epidemic.
Factors Affecting Employee Attrition
An employee might leave because they feel there simply aren’t enough opportunities for career progression in an organization. This is the case in several technology companies, where technical talent is forced to fight for managerial positions as they move up the ladder.
This is where HR could play a massive role in controlling attrition. Take inspiration from Microsoft‘s implementation of a long-term technical track to prevent professionally-motivated attrition.
This refers to changes in an employee’s personal life that compels them to switch jobs. New parents might want to move to a city with better schools, or a mid-career professional wanting to return to school.
By conducting detailed exit interviews, an employer can keep in touch with these employees and ensure that, should they have an opportunity in the future, they will consider your company.
This is another common reason for attrition. Challenges in the workplace can range from uncollaborative leadership to the lack of requisite tools for work.
This type of attrition is the easiest to fix. By asking for regular feedback, listening to the voice of the people (not Olamide, mind you), and addressing any gaps in their employee experience, workplace attrition can be avoided.
An employee who is happy with their job and whose workplace requirements are men won’t quit if they can help it.
Poor employee-to-job fitment
We have all seen employees who join a company full of enthusiasm, only to leave a month or two later. Why? The job was not right for that candidate, to begin with.
An employer can address this kind of attrition by finetuning the job descriptions, as well as the onboarding process. Employees will know exactly what to expect, and the employer is less likely to witness new-hire attrition.
Best practices to reduce employee attrition rate
Attrition has a lot of disadvantages – the company’s workforce shrinks in size, it loses out on valuable product/domain knowledge, and there is risk of damaging the brand. And while it is unavoidable, employers can reduce it by:
- Offering learning and employee development opportunities to accelerate career growth
- Conducting detailed interviews after an employee has exited to spot attrition trends
- Regularly soliciting feedback on employee satisfaction questions
- Assessing for job and culture fitment right at the time of hiring
- Ensuring a competitive pay package compared to other companies
SEE: Common Job Interview Questions and Answers
Employee attrition: Conclusion
It should be noted, however, that attrition isn’t always a bad thing. In many cases, it can actually be good for a business for the following factors:
- Roots out poor-fitting employees who probably shouldn’t have been hired in the first place.
- Helps create a dynamic workforce, allowing employees with different perspectives to help run the company instead of a monopolized dynasty.
- Allows poor-performing employees to leave the company, reducing overheads and making room for new talent.
- Enables diversity in one-dimensional workplaces, e.g. tech companies that employ a disproportionately large number of men.
- Required in times of structural alterations, like when a company is headed towards a new business direction or has insufficient funds.
Now, you know what attrition means. And if you’re an employer, you also now understand its various nuances.
Now, remember that there is no one-size-fits-all model that defines the causes of employee exits. Keep these possibilities in mind when analyzing your employee attrition rate. It will depend on the kind of talent lost, and why they left to figure out the impact of attrition on your business.