Why is the Attrition rate essential for your company

June 15, 2022

If you're wondering why is the attrition rate essential for your company, then look no further as we will explore it in this article. The short answer is that attrition tracks the rate your employees are leaving your company. Therefore, keeping tabs on your company's attrition rate is essential in today's marketplace. 

First, the millennial workforce is much more ready to leave their workplace and search for better opportunities. Second, a lot of people are questioning their role within their workplace because of the global pandemic. It's simple when one employee leaves, that can be sad, but when 50 of them leave at once, that can be a potential tragedy. 

So let's explore the definition of a company's attrition rate, its types, and how HR can help keep the numbers at a minimum. 

The Definition of Attrition Rate

The definition of a company's attrition rate is a way of measuring the number of employees your company loses and gains in a certain period. The other common term for this is the turnover rate, usually measured in a percentage. 

However, some argue the terminology and say that the turnover rate is the number of people replacing people who left, and attrition is when those positions don't get filled again. 

Whatever the terminology you use, the results are precise. While both of these numbers are high, your company is in trouble. Sometimes you need to manage a toxic work environment, and other times your company's problems can run deeper. 

Types of Attrition Rates

There can be many different types of attrition rates; some can be voluntary while others less so. When things are voluntary, it can be due to personal reasons, like when it is a seasonal job, and people don't need to work for that period. For example, a rush in holiday deliveries at Amazon or picking produce at fields. Sometimes a manager you like has left the company, and people don't like the new person in charge. Other times people don't leave the company outright but change teams in the search for a better fit with their mind space and skills. Finally, sometimes there is a demographic shift, and people can leave in droves.  

When things are less voluntary, they are usually due to some violation an employee has been doing, like harassment or underperforming. Next, some people are toxic in their workplace, which can destroy your company's culture and bottom line. And lastly, age. After a while, people leave because they are retiring. Depending on the company and its founding, this can be a cascading effect. 

youbelee retiring type of attrition

Effects of higher attrition rates

Effects of higher attrition rates can feel like a wave through your company. We discussed why it is in a company's best interest to keep its employees for as long as possible. One of the biggest reasons is the company's bottom line. Constantly training new employees is a) expensive and b) extremely time-consuming. Every time you fill a job, you must find the right candidate, negotiate their salary, and bring them on board after a long process. 

And while all this is going on, you will no doubt see a dip in profits until the new employees find their footing. Not to mention your poor HR, who will not be able to focus on anything else until the onboarding process. This requires a lot of HR's attention and bureaucracy, both for incoming and outgoing employees.

Your company will develop a bad reputation. If your attrition rates are high, people will know that your company is just a quick stop to something better. This in turn, will lead your workers to deal with new management constantly, causing them to leave sooner. And studies have shown that the longer employees stay at a company, the more loyal they are.   

Can HR lower attrition rates?

What can do to lower attrition rates is to take a long hard look at their company culture.

hr is downsizing youbelee

Change anything in their company culture that may promote harmful work practices and reward problematic behavior. These things always come from the top, and once upper management starts to change, it usually trickles down to the entire company. 

The second thing is to have a comprehensive onboarding for all new employees. Every new employee should know what their job will entail. And once you are clear with their job, reward them for joining the team. Make sure you celebrate their addition to your company with a small gift or even a non-generic acknowledgment

When an employee does quit, have HR do an exit interview. Once employees are out the door, they will be more than happy to share what went wrong. This can be extremely useful if you notice that certain job positions or managers have a higher than average attrition rate. This way, HR is at the heart of the problem and can act quickly. 

Conclusion

An important thing to note is that high attrition rates do not necessarily have to be wrong. It all depends on the company's needs at the moment. For example, some jobs might become obsolete or redundant if a company undergoes a merger or restructuring. And it might even be in the company's best interest to downsize as much as possible. 

More often than not, however, it is usually the wrong kind of high attrition that plagues business. Instead, it is typically high turnovers or problematic work culture. If that is the case, your HR should nip it in the bud as soon as possible. It should communicate with employees and see how things can change for the better. 

On a related topic check out our article on identifying and addressing productivity challenges among remote workers!

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