Employee attrition, on the face of it, may seem like a legitimate part of a cutback program or as a method to create efficiency. But before companies decide not to hire replacements, they need to understand the full ramifications of attrition–especially when it comes to unforeseen skill gaps.
What Is Employee Attrition?
Employee attrition happens when somebody leaves their job and is not replaced, or is only replaced after a long time. Reasons for leaving can include getting fired, quitting, relocating, illness, and retiring. Employee attrition is also the effect of eliminating a job position. This can mean that tasks are taken on by remaining workers, or that the function that the employee served is no longer needed.
What Is the Difference Between Employee Attrition and Employee Turnover?
Both employee turnover and attrition count the number of workers who leave both voluntarily and involuntarily. However, vacancies created by attrition are at some point deleted from the organizational chart. In comparison, vacancies left by turnover are meant to be filled as soon as possible by external hiring or talent mobility programs.
What are the different Types of Attrition?
There are several different categories of employee attrition. Voluntary attrition is when employees choose to quit their jobs, whatever their reason may be. Involuntary attrition is when the employer initiates the employee’s departure, whether that’s a direct firing, layoffs due to mergers and acquisitions, structural reasons, and the like. Internal attrition is when employees leave jobs in one department to take a job in a different department within the same company. Demographic-specific attrition is when a specific group of people leave their jobs, such as women, ethnic minorities, people with disabilities, veterans, or older professionals. And finally, if more than a few employees retire simultaneously, this can also cause attrition.
Why Does Attrition Happen?
Companies that do not refill a job position may do so for a number of reasons. For example, the work being done was for a purpose that is now obsolete, let’s say, in the case of a product that has been removed from the company’s catalog. Another instance is where the resources related to the position are no longer available, like raw materials that can only be bought from a supplier that has gone out of business. Sometimes, a job can be replaced by technology, or because a new technology is required that the current employee cannot or will not learn.
Jobs can also be eliminated if the organization is adopting a new strategy, and the position is not needed; in such cases, entire divisions can be attritted. This was the case with many companies during the Covid-19 pandemic. Positions were cut without any clear idea as to when they would be refilled. This move was not a strategy in the sense that it was thoroughly planned, but it was still an organization-wide action meant to promote survival. The world eventually saw the effect of this, for example, in the crisis of understaffing at many airports.
How Do You Calculate Your Employee Attrition Rate?
The formula for calculating your employee attrition rate is quite straightforward:
Unreplaced employees/average headcount*100.
First, count the number of employees who have left (and not been replaced) in a given period.
Then divide that number by the total number of employees in that same period.
Take that number, multiply it by 100, and there is your attrition rate.
Is Attrition a Good or a Bad Thing?
Sometimes, closing out a position is necessary. Rapid advances in technology often mean that machines replace people, and there is no economically viable way for an organization to keep related workers on the payroll.
However, it is often the case that organizations eliminate jobs as a short-term solution and actually suffer more as a result.
Attrition can have many negative effects on an organization, such as:
- Reduction in performance and productivity
- Poor levels of customer satisfaction
- Decreased morale and increased stress on remaining employees
- Lack of operational continuity
- Increased skill gaps
- Loss of institutional knowledge
The longer it takes to deal with these issues, the worse the situation can become. For example, when remaining employees need to take over for a position that has been cut, stress levels increase over time. This can lead to them quitting, which puts the company in an even worse position.
Resources and Attrition
The money saved from lower salary costs does not always make a long-term difference to the health of the company. In this study, researchers discovered that financial resources were not a factor in preventing bankruptcy. Companies that laid off many employees were twice as likely to file for bankruptcy compared to organizations that retained workers.
The same study found that attrition led to more than just increased workload for remaining employees. Attritted employees had also contributed significant know-how and were important to the culture. This left both knowledge and skill gaps that were difficult to deal with.
In contrast, retaining talent had a positive impact on company survival. Experienced employees discovered innovative ways to deal with the threats that caused other companies to lay off workers. They reorganized existing resources and found less expensive ways of doing business.
What are the best Ways to Reduce Your Employee Attrition Rate?
The key to reducing an employee attrition rate is to keep employees happy. That means taking good care of them, but also, hiring the right people in the first place, and asking the right questions when they leave. Important feedback and lessons can be learned from beginning to end with every employee, which will ultimately impact your attrition rate.
1) Offer career growth opportunities: Providing learning and development programs makes employees feel invested in, cared about, and less likely to walk away.
2) Ask for feedback: Give employees a chance to share what’s on their mind on a regular basis, whether that’s through an anonymous form or one-on-one meetings with HR or managers.
3) Competitive pay package: Employers who pay a bit more than their competition are at an advantage when it comes to holding onto their people.
4) Employee benefits: It is equally important to offer the benefits employees need, whether that’s health insurance, paid time off, disability, life insurance, maternity leave, etc.—or else they may go look for it elsewhere.
5) Employee wellness: Maintaining a work/life balance leads to happy employees. A flexible mindset is required here, whether that’s allowing employees a remote working arrangement, managing their own schedule, letting them bring their dog to work on occasion, subsidizing meal or gym memberships, and the like.
6) A thorough exit interview: Something can be learned from every exit interview. Use the opportunity to hear about what didn’t work and detect any problematic trends. These insights can be highly valuable in rectifying issues for going forward, which can boost your attrition rate.
GrowthSpace for Attrition Skill Gaps
By holding on to current workers, companies can also reskill and upskill more easily. It’s simpler to add a related skill to an employee’s ‘inventory’ than it is to teach remaining workers how to do an unfamiliar job from scratch.
For companies that have lost skills to attrition, GrowthSpace is essential. GrowthSpace’s talent development solution connects employees at all levels to experts who can upgrade their skills, quickly and efficiently. For HR departments that are concerned about post-attrition productivity issues, GrowthSpace can help fill in the gaps.