Fighting Attrition: How to Arm Your Organization Effectively

Posted by Trakstar • May 8, 2023 • 9 min read

Employee attrition is one of the most significant hurdles that organizations face today – and there are fears that it may not slow down anytime soon. We’ve all heard about the Great Resignation, but it goes deeper than that.

Your employee attrition rate is something that your Human Resources department needs to pay attention to, particularly if you’re worried about employee engagement. It refers to the gradual loss of employees for various reasons, such as resignation, retirement, or termination. The impact of this phenomenon is felt across all industries and can be detrimental to a company’s success in many ways. You can see more about people’s fears around voluntary and employee attrition rates here.

Why should you worry about attrition? Employee turnover has always existed, and it always will. Still, it is something to keep your eyes on and monitor – because it can reveal something far worse at your organization! The effects of employee attrition can be costly, from decreased productivity and morale to increased training costs and recruitment expenses. But don’t worry! In this blog post, we’ll explore different types of attrition, their causes, costs, and how you can arm your organization effectively against it. So let’s get started!

What is Attrition?

Attrition is the gradual reduction in the workforce due to various reasons. Voluntary or involuntary factors, such as resignations, retirements, layoffs, and terminations, can cause it. The attrition rate is often used as a metric to evaluate an organization’s ability to retain employees. Typically, this data is held by the HR department and is sometimes labeled as the turnover rate or staff turnover, but that is slightly inaccurate.

Why Are People Leaving?

There are several types of attrition that organizations face. Firstly, natural attrition occurs when employees leave their jobs due to retirement or voluntarily choosing not to continue working with the company. Some would call this employee churn. The average number, or what constitutes a “high turnover,” depends on the organization, company culture, and industry. Secondly, functional attrition happens when low-performing employees are terminated for underperformance or misconduct. Using a performance review system, HR can prioritize retention efforts, identify who impacts employee morale, and who is helping reach organizational KPIs. A performance management system is helpful here – to learn more about Trakstar Perform, you can schedule a demo here.

Dysfunctional attrition refers to losing high-performing employees who decide to leave because of poor management practices within the organization. This type of attrition can significantly impact morale and productivity levels in your workplace. Training your managers, improving employee morale and company culture, and focusing the HR teams’ additional resources on keeping valuable employees should be a high priority. This will limit the total number of good employees who will leave.

The First Step is Understanding

Understanding what employee attrition means for your company is essential if you want your business operations to run smoothly without interruptions and increased losses associated with recruitment costs and reduced productivity levels, among other things. While much of the work falls on HR professionals, institutional knowledge and overall high employee performance can limit the total number of resignations.

Let’s break down those types of attrition a little more.

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The Different Types of Attrition

Attrition can be classified into various types depending on the nature of the departure. One type is voluntary attrition, which occurs when employees leave their jobs willingly. This could be due to various reasons, such as better opportunities elsewhere, dissatisfaction with their current role, or company culture.

On the other hand, involuntary attrition happens when an employee is terminated from their job due to poor performance or violating company policies and rules. This type of attrition can also occur during downsizing exercises that are undertaken by organizations for cost-cutting purposes.

Another form of attrition is internal attrition, where employees move within an organization from one department to another or take up different roles within the same department. External attrition refers to losing employees who have left an organization for better companies, higher pay, or personal reasons.

There’s also functional and dysfunctional turnover. Functional turnover occurs when low-performing employees leave a company voluntarily, while dysfunctional turnover involves losing high-performing workers who would have otherwise been valuable assets to your organization. Typically, we do not count employee retirement in these numbers, but some organizations and HR teams might.

Understanding these different forms of attrition helps companies analyze why they’re losing staff and devise appropriate strategies that help mitigate this problem in future recruitment efforts.

The Causes of Attrition

Attrition is a common problem in many organizations, but what causes it? Several factors contribute to employee attrition. A high turnover rate signifies the presence of a problem, but a lower turnover rate may not show that everything is good. An exit interview with a departing employee might be a good place to start getting whispers of problems when your rates aren’t that high.

Firstly, poor management can be a significant cause of attrition. Employees who feel undervalued or unappreciated by their managers may become disengaged and start looking for other job opportunities. Think of managers as your front line – when a worker has a problem, they’ll likely go to their manager first.

Secondly, a lack of career growth and development can also lead to attrition. Employees who feel stuck in their current position with no opportunities for advancement are more likely to leave the organization in search of better prospects elsewhere. Most employees now think they need to leave one job to get a better one, particularly in some areas. This is called demographic-specific attrition.

Thirdly, inadequate compensation or benefits packages can also contribute to high attrition rates. Employees who do not feel fairly compensated for their work will often seek employment elsewhere where they believe they will receive better remuneration. Labor statistics show that pay is one of the main reasons employees leave.

Workplace culture plays an important role in employee retention. A toxic work environment characterized by harassment and discrimination can drive employees away.

There are several causes of employee attrition that organizations must address if they want to retain top talent. By creating a positive work environment with good management practices and opportunities for growth and development alongside competitive compensation packages, businesses stand a greater chance at retaining skilled workers.

The Costs of Attrition

Whether voluntary or involuntary, attrition can be costly for organizations, the financial impact of losing an employee goes beyond just the cost of hiring and training a replacement. There are several costs associated with attrition that companies need to consider – especially for companies where labor costs are spiraling. 

There is lost productivity when it takes for a new hire to become fully trained and productive in their role. This can take months and result in decreased output from the team impacted by the loss. Hiring a new employee can be challenging, but having an applicant tracking system (ATS) can help ensure you make good hires that lead to low turnover rates.

Secondly, there is also a potential loss of institutional knowledge when experienced employees leave. This knowledge may not be easily transferable to new hires, resulting in long-term impacts on performance. You can plan for retirement, but high turnover that takes away your historical best performers is something you cannot.

Thirdly, high attrition rates can damage company culture and morale as remaining employees may feel overworked or undervalued, leading to further turnover.

Last but certainly not least important are recruitment costs such as job postings, recruiting events attendance fees, or headhunting services, which all add up quickly, making it more expensive than retaining existing talent within your organization.

Overall, these costs pale compared to how much money you might lose if you don’t address this problem accordingly.

How to Prevent Attrition

Preventing attrition is crucial to the success of any organization. Here are some effective strategies for avoiding employee turnover:

  1. Hire the right people: The first step to prevent attrition is to hire employees who are a good fit for your company culture and have the necessary skill set for their role. Click here to learn more about making better hires.
  2. Offer competitive compensation and benefits: Fair salaries, bonuses, and benefits packages can help retain top talent.
  3. Provide growth opportunities: Employees want to feel like they’re learning and growing in their roles. Professional development opportunities or career advancement paths within your organization can keep employees engaged and motivated. To invest in a learning management system, consider scheduling a demo of Trakstar Learn.
  4. Foster a positive work environment: A supportive workplace where employees feel valued, respected, and heard will prevent them from seeking employment elsewhere.
  5. Address concerns early on: If an employee seems unhappy or dissatisfied with their role, promptly address them. Ignoring these issues could lead to further dissatisfaction and ultimately result in turnover.

By implementing these strategies into your organizational practices, you’ll be able to prevent attrition rates from rising while also creating a more productive workforce.

How to Respond to Turnover

When an organization experiences attrition, responding promptly and effectively is important. The first step is to identify the root cause of the attrition and take measures to address it. This could include improving employee engagement or addressing concerns around compensation and benefits.

It’s also crucial to communicate with your remaining employees about the situation and reassure them of their job security. Open lines of communication can help maintain trust within your organization.

Another effective response strategy is to implement retention programs such as training opportunities, career development plans, or mentorship programs. These initiatives can help keep employees engaged while also providing them with a sense of investment in their future within the company.

By implementing these strategies, organizations stand a better chance of minimizing any potential damage from attrition while also maintaining a positive relationship with their current workforce.

Schedule a Demo of Trakstar Today!

Attrition is a major challenge for organizations across different industries. The cost of losing employees can be significant, and it can affect the performance and productivity of an organization. However, with proper strategies in place, organizations can minimize or prevent attrition.

Organizations should focus on creating a positive work environment that fosters employee satisfaction and engagement to prevent attrition. This involves offering competitive salaries and benefits packages, providing career growth and development opportunities, recognizing employee achievements through rewards programs, and promoting work-life balance initiatives such as flextime and remote working options.

When responding to attrition events after they occur, it’s important to conduct exit interviews to understand why employees leave. Organizations should also take proactive steps to promptly address any issues identified during these interviews.

To get started on crafting a better talent management strategy, click here to schedule a demo of Trakstar.

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