Employee attrition and retention are important concepts for businesses to understand. Attrition refers to the process of employees leaving a company, resulting in a shrinkage of the workforce.
On the other hand, employee retention refers to the act of keeping employees within the organization, thereby ensuring stability in the workforce.
The difference between the two is crucial, as high attrition rates can lead to decreased productivity, while high retention rates can result in a stable and engaged workforce.
Both attrition and retention rates provide valuable insights into the state of the workforce, and it’s crucial for companies to monitor and address both.
Organizations can ensure stability, productivity, and growth by understanding the reasons behind employee attrition and taking steps to improve retention.
What Is Employee Attrition?
Attrition occurs when your workforce shrinks due to unavoidable factors such as employee resignations.
Employees are entering the workforce more swiftly than they are employed, which is often out of the employer’s control.
Let’s say you open an office serving your company’s Sales Hub. All salespeople must work from this office – but some employees cannot relocate and choose to leave the organization. This is one of the most familiar reasons for employee turnover.
A hostile work environment, a lack of professional growth, or declining confidence in the company’s market value can also contribute to attrition. Weak leadership is another factor.
Types Of Employee Attrition
Employee attrition can be classified into five types:
1. Attrition due to retirement
Statistically, this is not considered attrition if two or three employees retire from your company this year. However, if a large part of your workforce exits simultaneously, this can result in attrition.
Senior professionals may retire early or become independent consultants for various reasons other than age. Pay attention to attrition due to retirement.
2. Voluntary attrition
There can be multiple reasons for volunteer attrition (more on that later), many of which are within your control.
The company should proactively seek to curb voluntary attrition among high-value talent, which can lead to reduced productivity over time. For example, if marketing experts are moving out of different business units, it’s a major cause for concern.
3. Involuntary attrition
In this scenario, the company and not the employee initiates the exit. An employee may have shown misconduct in the workplace, for example – a common reason for involuntary attrition. A wave of involuntary attrition often follows mergers and acquisitions. Structures could also contribute to attrition.
4. Internal attrition
During internal attrition, employees leave one department to join another. This can be a good thing as it routes talent to more profitable areas. It also ensures a better fit between employees and their jobs.
A department with a high attrition rate is worth investigating. Is there something wrong with the job? Is the manager inadequately skilled? These are questions HR should ask and answer.
What Is Employee Retention?
Employee retention is a phenomenon where workers decide to continue working for their current employer and don’t aggressively look for other employment opportunities.
Employees leaving the organization for various reasons is turnover, which is the reverse of retention.
Retention is a business’s procedure to ensure employees don’t stay in their positions. The percentage of employees stuck with the company during a specific period varies depending on the company and industry.
Attrition Vs Retention
A retention rate indicates how many employees a business has held onto over a certain period. To demonstrate, if an organization began 2018 with 20 staff and finished the year with 15, their retention rate would be 75 percent – three-quarters of their workforce remained.
The opposite concept is attrition which is the percentage of departed employees. If they started 2018 with 20 and then ended it with 15, in that case, their attrition rate would be 25 percent.
Put, attrition measures what your business has lost. Retention measures that your organization has retained. However, the differences are much more complicated than this simple distinction.
For the month a new hire is hired, they do not count toward the retention rate (and so are excluded from the retention rate). However, attrition rate calculations include people employed during that period – a distinct difference in the excluded employees per calculation.
As these employees aren’t necessarily people a company wants to retain, you might exclude involuntary turnover when calculating your retention rate based on your business. Attrition/turnover will always include involuntary turnover, however.
Period of measurement
Typically, retention rates are measured over a long period (i.e., between one and five years) based on changes in policy, practices, and people strategies.
However, attrition indicates what’s happening with employees who leave. Compared to attrition rates, it’s easier to compare month to month.
Employers can learn various reasons why an employee is quitting during exit interviews. This is a great chance to apply the findings to increase staff retention.
For instance, if 80% of workers who leave a company within a certain length of time blame bad management, your employee retention strategy must aim to solve this through manager training and coaching or role and responsibility redistribution.
What Influences Employee Attrition?
New parents might want to transfer to a city with more suitable schools, and a mid-career professional may wish to return to school – these reasons are endless.
With detailed exit interviews, you can stay in touch with these employees and ensure they consider your company in the future.
Motivation for professional development
Employees might leave your organization because they feel there aren’t enough opportunities for career advancement.
Human resources can play a crucial role in controlling attrition. Technology companies are experiencing this issue, where technical talent has to fight for managerial positions as they advance. Microsoft created a long-term technical track to prevent attrition among professionals.
Workplace challenges can range from uncollaborative leaders to a need for appropriate tools.
Ask for regular feedback, listen to the employee’s voice, and address any gaps in the employee experience. Most employees who are happy at work will only quit if most of their workplace requirements are met.
The employee-to-job fit could be better.
The fact that a candidate joins a company with enthusiasm only to leave a few months later could indicate that the position needed to be better for them.
Fine Tuning your job descriptions and onboarding process opens a new window; you can reduce new-hire attrition. Workers will know exactly what to predict, and you will be less likely to lose workers.
What Influences Employee Retention?
Please provide them with challenging tasks.
The more you give your top performers a new target to work toward, the more engaged they will be. The positive impact on their employability will make them more loyal to your company. It also allows them to further their careers and acquire new skills and achievements.
Develop cross-disciplinary skills in them.
It will ensure that the employee does not jump shift in search of their “dream job” and has a chance to transition into a similar role within the company laterally once they become an expert in one area.
Establish a succession plan and implement it.
Succession planning creates a talent pipeline and enhances employee retention by preparing today’s top performers for future leadership roles. Employees who are part of succession planning know where they are going.
Attrition Reasons For Employees
Your attrition rate indicates the decrease in your workforce – whether through retirement, death, or resignation. It may not include cases where a job vacancy has been created and filled. An elevated rate could be a warning sign for your HR department, prompting them to consider policy changes.
Alternatively, the drop may be caused by waning business or product demand. Many organizations carry out exit interviews when an individual leaves voluntarily to help determine what elements of the workplace drove their decision to resign.
Your attrition rate should not be confused with your turnover rate, as it shows a total reduction in personnel rather than roles that have been vacated and re-filled.
Retention Reasons For Employees
Your retention rate is an important indicator of your company’s performance. A high rate typically means employees are content in their roles, and benefits packages are competitive.
On the contrary, a low rate may indicate that changes to policies and procedures should be explored.
Conduct surveys annually to better gauge employee sentiment and identify what aspects of the workplace may be driving successful retention.
Retention And Attrition Of Customers
Small businesses often rely on their retention and attrition rates to measure customer loyalty. The clientele that stays with you is counted in your customer retention rate; conversely, consumers who no longer use your product or service trust your customer attrition rate.
The two of these can be utilized to identify changes in the market, captivating customer service, quality of the product, and more.
Gathering feedback from retained and non-retained customers may help to find ways to improve your business.
In conclusion, employee attrition and retention are important aspects of a business’s operations. Attrition is the workforce reduction due to employee resignations, retirement, and other unavoidable factors.
Retention is the process of keeping employees from leaving their positions and keeping them motivated. There are five types of employee attrition, including voluntary and involuntary attrition.
Motivational factors, professional development opportunities, workplace challenges, and employee-to-job fit influence employee retention. Businesses need to understand these factors and regularly review their attrition and retention rates to ensure their employees are happy and satisfied.
How can companies reduce attrition?
Companies can reduce attrition by offering incentives for employees to stay, such as career development opportunities, flexible working arrangements, and better compensation and benefits.
How can companies improve retention?
Companies can improve retention by creating a positive work environment, providing opportunities for growth and development, offering competitive salaries and benefits, and promoting work-life balance.
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