Attrition, or Employee Attrition, occurs when employees leave a company and their positions are not refilled promptly. The decrease in the workforce can be due to a variety of factors and often significantly affects the organization.
Attrition v/s Turnover
Both Attrition and Turnover are closely related to the departure of employees from an organization. However, while Turnover simply concerns the number of employees who have left, Attrition also considers whether or not they have been replaced appropriately. While an organization’s Turnover can be high, it does not necessarily mean that its workforce is shrinking.
Consider a restaurant, that often sees its servers leave. If they are promptly able to replace them with new employees, the company maintains its workforce at a constant level, despite the high turnover.
On the other hand, if the restaurant was unable to fulfill one of its positions, say that of a sommelier, then it would be termed as Attrition. This often leads to a skill gap within an organization, though the reasons behind the phenomenon would determine the next steps.
Types of Attrition
While Attrition can occur for a variety of reasons, they are often segregated into two broad categories:
Voluntary Attrition
If an employee has left the vacant position willingly, whether to retire or simply switch, it’s called Voluntary Attrition. While the reasons behind the departure might be beyond the employee’s control, their decision to leave on their own, with the employer not replacing them for a long time, refers to Voluntary Attrition.
Involuntary Attrition
Involuntary Attrition occurs when the employer decides to let the employees go. The reasons behind this can range from restructuring to financial constraints, and the organization ultimately does not find a replacement for the position that was vacated.
Attrition Rate
Attrition Rate is a crucial metric for any organization to evaluate its performance and engagement factor. Keeping track of this can help in creating effective strategies and evaluating if the implemented plans are working as intended.
To calculate the Attrition Rate over a set period, we have to divide the number of unfulfilled positions by the average number of employees and multiply it by 100. The average number of employees refers to the sum of the number of employees at the start of the period and the number of employees at the end of the period, divided by 2.
The formula for calculating the Attrition Rate is as follows:
Attrition Rate = [No. of Ex-Employees Who Have Not Been Replaced During the Period/{(No. of People at the Start of the Period + No. of People at the End of the Period)/2}]*100
For example, consider a company that has 1000 employees at the start of a year. By the end of the year, it had 30 fewer employees. In this case, the Attrition rate would be calculated as follows:
30/[(1000 + 970)/2]*100 = 3.05%
Reasons for Attrition in a Company
Several factors contribute to organizational Attrition. In many cases, more than one of these reasons might be involved:
Voluntary Resignations
Voluntary Resignation refers to the workers deciding to leave an organization on their own. There are many reasons why an employee may choose to leave an organization on their own. Identifying these factors and addressing them at an organizational level can indeed help companies manage Attrition more efficiently.
If any employee has left for reasons such as low compensation, poor work-life balance, lack of recognition or career development, or a hostile work environment, chances are that these same factors might hamper the company from hiring a new candidate for the position.
Restructuring
Restructuring occurs when a company decides to overhaul its workforce structure either to increase efficiency or to work towards a new objective. Attrition is bound to be high in organizations going through restructuring, but it is not necessarily a negative factor.
During a restructuring process, many roles or even departments might become obsolete within the organization. Since these roles have deliberately been left vacant, Attrition is expected but not unwelcome.
Technological Advancements
Given the ever-changing world of technology, it is unsurprising that many jobs have been automated to be more efficient and time-consuming. This means that companies might opt to let the human workers go or just reduce that particular department to maintain human supervision. While this might result in attrition, the overall productivity of the company is often not affected adversely.
Under Saturated Employee Availability
In certain industries, a lack of suitable candidates might also lead to Attrition. If the industry has a low unemployment rate and does not have enough potential employees to fulfill the demand, then hiring a vacant position can be a time-consuming process.
Financial Difficulties
It is not uncommon for organizations to experience financial difficulties that hinder their capacity to sustain their workforce. If profits are down, a company might be forced to let its employees go. This could either be an industry-wide phenomenon or an organization-specific problem. In either case, the organization would prefer not to refill these roles until it feels financially secure, leading to Attrition.
Impact of Attrition
In the face of Attrition, a company can often see itself affected in a lasting manner. Some crucial consequences of Attrition include:
- Gap in Skillset: Every employee brings a unique set of skills to an organization. Hence, their departure and the inability to replace them effectively can affect how the company operates.
- Increased Workload: If the workforce continues to decrease but the work itself remains the same, the responsibilities will ultimately fall on the company’s existing employees. This can lead to burnout among the workers and further contribute to the increasing number of departures.
- Changed Company Culture: If a large number of employees leave around the same time, it will definitely affect the work environment. A company’s culture comprises its employees, and their departure can result in low morale and enthusiasm.
Conclusion
Whether intended or not, Attrition can leave a lasting impact on an organization. It can cause skill gaps and effectively change how the company operates after an employee’s departure. Addressing the reasons behind Attrition is crucial for any company seeking to retain its effectiveness.