People in companies and other organizations come and go. This is a fact of life. When people leave a company, this is what you call attrition.
High levels of attrition can be debilitating to businesses, especially when those who quit are adept at their jobs. When talented and hardworking people quit, businesses have to find replacements for workers who have left, train the new hires and bring them up to speed. This, unfortunately, costs a lot of time and money to the organization.
If you’re running a business, you’ll need to make sure to keep your attrition rate at a manageable level. A high attrition rate can prevent your company from growing and even cause you to lose money.
Attrition Rate: An Overview
Let’s first define what attrition rate means. This term, which you can also call churn rate, refers to the rate at which workers quit an organization from a specific group, such as a department or division, over a specified period.
Ideally, companies should target a low attrition rate. The number that constitutes a low rate varies depending on where you’re looking. Gallup, a management consulting, analytics and advisory company, says that 10 percent is healthy.
Alternatively, many of the companies listed in the Human Capital 30 list by Forbes maintained much lower rates of just three to five percent. Whatever percentage you go with, just remember that every industry and every organization is different.
When determining the level of acceptable attrition rate, you want to look at the rates your competitors are facing and check if the people leaving are helping or hurting your organization. You should be fine if you have many low-performing employees quitting the company.
On the other hand, you should be worried if highly skilled employees or top performers leave the business, as replacing them can be potentially costly and difficult from a quality standpoint.
Possible Reasons Behind a High Attrition Rate
Employees have many reasons for quitting the organization they’re working in and moving to a new company where the grass is supposedly greener on the other side. These reasons could be due to the high attrition rate of an organization.
Common reasons include the following:
Toxic Work Environment
A toxic workplace goes beyond affecting the productivity levels of an organization. It can negatively impact relationships among colleagues and even customer or client relationships, causing damage to the reputation of your brand and possibly even prompting a loss of business.
Zero Opportunity for Growth
Top-performing and hardworking employees want to grow and move forward in their careers. They develop new skills, hone existing ones and take on exciting opportunities that will add value to the organization.
A great salary is not the only thing that drives them to succeed. They also want to gain mastery of their jobs and feel confident in a solid career plan and the ability to grow alongside the organization.
Workers won’t stick around if they feel that:
- Career or growth opportunities do not exist in the company
- They are unable to move into appropriate roles as a result of being undervalued or overlooked, or due to company politics
- They are not made aware of opportunities to grow within the organization
Lack of Recognition
Sometimes, team leaders and managers are too preoccupied to stop what they’re doing and give recognition. These leaders may feel distracted or feel intimidated by a top-performing employee and take the credit for themselves.
The result is that workers overlooked by their team leaders or not receiving credit for their work or contribution begin to feel frustrated or demotivated. What’s worse, they may start to resent their managers.
How to Calculate Attrition Rate
Many organizations use special software to calculate attrition rates. Learning the formula, however, can help you better understand the percentages and numbers involved. Companies typically determine attrition rates over a specific timeframe (year, quarter or month).
When determining employee attrition rate, you can use exact numbers.
Here’s a step-by-step guide to getting this figure:
- Note the number of employees at the start of the period.
- Identify the number of workers who left during your specified period.
- Determine the number of people hired during the period.
- Add the number of new hires and the number of employees who exited to find out how many workers you ended with.
- Determine the worker average by adding ending and starting numbers and dividing by two.
- Using the average you’ve got, divide this figure by the number of workers who left the organization to arrive at the decimal rate of attrition.
- Multiply this figure by 100 to obtain the attrition rate percentage.
You’ll want to calculate the attrition rate regularly to identify trends. If you coordinate this figure with employee surveys, you could discover connections between the two that can help improve the organization.
How to Improve Attrition Rate in Your Organization
Curbing a high employee attrition rate is possible with the right strategies.
Here are a few suggestions to help improve your company’s attrition figure:
Improve Working Conditions
What you provide is a huge deal for your workers. Top companies in the world known for providing great perks usually have fun work cultures, great benefits and strong development programs. When an organization knows to satisfy the needs of workers beyond the office, they benefit more from their employees.
Although you may be unable to compete with what Facebook, Google, Tesla and other big firms have to offer, you can enhance work conditions by providing flexible work schedules that help promote a good work-life balance.
Enhance Your Benefits and Compensation Package
Your salary packages and raises need to be prevalent with the current range of your competition. No matter how driven or loyal your employees are, they will look for new jobs if their salary doesn’t meet their financial needs. Work on improving your salary if necessary.
An excellent addition to any salary package is the benefits. You can add in education assistance, stock options and more paid time off. You can also give added perks, such as transport pick up to and from the office, travel discounts and day care services. Figure out which benefits would be beneficial for you and your workers.
Engage Your Employees
When you have awesome employees on your roster, find ways to help them expand your skillset. Provide feedback and let them know what you think. Engage them by paying attention to their needs and letting them know that you’re there for them.
Driving your attrition rate all the way down to zero is impossible. You can, however, overcome high attrition by meeting the needs of your employees and giving them whatever they need to succeed.