What Is Attrition in Business?

The term attrition refers to a gradu🧔al but deliberate reduction in staff numbers that occurs as employees leave a c🍸ompany and are not replaced.

It is commonly used to describe the downsizing of a firm's employee pool by 澳洲幸运5开奖号码历史查询:human resources (HR) professionals. In this case, downsizing is voluntary, where employees either resign or retire and aren't replaced by the ꦕ🍒company.

Understanding Attrition

Employee attrition refers to the deliberate downsizing of a company's workforce. Downsizing happens when employees resign or retire. This type of reduction in staff is called a 澳洲幸运5开奖号码历史查询:hiring freeze. It is one way a company can decrease 澳洲幸运5开奖号码历史查询:labor costs without the disruption of layoffs.

There are a number of reasons 🐷why employee attrition takes place. They include:

• Unsatisfactory pay and/or benefits
• Lack of opportunity
• Poor workplace conditions
• Poor work-life balance
• Illness and death
• 澳洲幸运5开奖号码历史查询:Retirement
• Relocation

Types of Attrition

Voluntary Attrition

Voluntary attrition occurs when employees leave a company of their own volition. Employees leaving voluntarily may indicate that there are problems at the company. Or, it may mean that people have personal reasons for departin💙g that are unrelated to the business.

For example,📖 some employees voluntarily leave when they get a new job elsewhere. They may be moving to a new area which makes the commute impossible. The🦄y might have decided to try a different career and therefore need a different type of job.

Voluntary attrition can also occur when employees retire. This is also referred to as natural attrition. Unless a company experiences an unusually high rate of early retirements, employees retiring shouldn't be a cause for concern for management.

Involuntary Attrition

Involuntary attrition occurs when the business dismisses employees. This can happen because of an employee's poor or disruptive performance. Dismissal might be tied to an employee's misconduct.

Companies may have to eliminate an employee's position. Or, they might have to lay off employees due to worrisome economic conditions.

Internal Attrition

Internal attrition refers to movement out of one department or division and into another. The employee isn't leaving the company. They're simply making a move within it.

For instance, internal attrition can occur when an employee gets promoted to a d🍒ifferent management level. Or, they move laterally to a different section with a more🦩 suitable job.

Internal attrition can signal that a company offerꦓs good opportunities for career growth. On the other hand, if one department has a high internal attrition rate, it may be experiencing problems. The company should investigate and address them if need be.

Demographic-Related Attrition

Demographic-related attrition results when people identified with certain demographic groups depart a company unexpectedly an๊d quickly. These could be women, ethnic minorities, veterans, older employees, or those with disabilities.

Such an exodus could mean that employees have encountered some form of harassment or discrimination. That should be of concern to all compani🌼es because such behavior can undermine a positive workplace environment and successful business operations.

Action should be taken quickly to understand what caused such departures. Rectifying demographic-related attrition is a must because inclusion should be a top goal of every company. Plus, a company can put a halt to the loss of employees of great value and promise. Diversity training can help.

Customer Attrition

While not related to employee attrition, it's important that a business also be aware of customer attrition.

Customer attrition happens when a company's 澳洲幸运5开奖号码历史查询:customer base begins to shrink. The rate of customer attrition is sometimes referred to as the 澳洲幸运5开奖号码历史查询:churn rate. Customer attrition can mean that a company🦩 is in trouble and could suffer a loss of revenue.

Customer attrition can take place 💯for a variety of re𒉰asons:

• Loyal customers switch their preference to products of another company
• Aging customers aren't being replaced by younger ones
• Bad 澳洲幸运5开奖号码历史查询:customer service
• Changes in product lines
• Failure to update product lines
• Poor product quality

Benefits of Attrition

Attrition has its positive aspects. By its simplest definition, it's a natural diminishing of the workforce. This can be welcomed when the economy is in bad shape or a recession looms and, if not for attrition, a company would face the prospect of having to lay off employees (when it doesn't want to lose them).

澳洲幸运5开奖号码历史查询: Here are other🌳 times when attrition might help:

• If one company acquires another and must deal with redundancies.
• If a company redirects its vision toward a new goal and must restructure or reduce the workforce.
• When new employees are needed to refresh a workplace environment with new ideas and new energy.
• When a company seeks natural opportunities to better diversify a department or division.
• When employees with poor attitudes or performance should be removed to improve workplace culture, reduce costs, or make room for new hires who are a great fit.

The Attrition Rate

The attrition rate is the rate at which people leave a company during a particular period of time. It's useful for a business to track attrition rates over time so it can see whether departures are increasing or decreasing. A change in the attrition rate can alert management to potential problems within the company that may be causing employee departures.

澳洲幸运5开奖号码历史查询: The for𝓡mula fꦚor the attrition rate is:

Attrition rate = number of departures/average number of employees¹ x 100

Say that 25 employees left ABC Company last year. In addition, the company had an average of 250 employees for the year ((200 + 300)/2).

With those figures൩, you can now calculate the attrition rate:

澳洲幸运5开奖号码历史查询: Attrition rate = 25/250 x 100

澳洲幸运5开奖号码历史查询: Attrition rate = 0.1 x 100

澳洲幸运5开奖号码历史查询: Attrition rate = 10%

¹ To calculate the average number of employees, add the number that existed at the beginning of the time period to the number that existed at the end of the time period. Then, divide by two.

Why It's Important to Measure Attrition

By measuring attrition rates, a company may pinpoint problems that are causing voluntary attrition. That's important because the costs associated with losing valuable employees whom you'd like to retain can be staggering.

For example, the cost🍬 to hire and train a new employee when one employee voluntarily departs can be one-half🐬 to two times that employee’s annual salary.

Company🤪 profits can be affected negatively when knowledgeable, experi♈enced employees leave and productivity suffers.

Loss of customers can go hand in hand with the loss of valued emplo🧔yees. That can mean another hit to profits tied to former employees who understood company products and services, and how to sell them.

Attrition vs. Layoffs

Sometimes, employees choose to leave an existing job to take a new one or because they're retiring. An attrition policy takes advantage of such voluntary departures to reduce overall staff.

Laying off employees doesn't involve a voluntary action on the part of the employee. However, layoffs do result in attrition when a company doesn't immediately hire as many new employees as it laid off.

Layoffs occur when a company is faced with a 澳洲幸运5开奖号码历史查询:financial crisis and must cut its workforce to stay afloat.

Sometimes, due to changes in company structure or a merger, certain departments are trimmed or eliminated. Rather than re🉐lying on natural attrition associated with voluntary 🌳employee departures, this usually requires layoffs.

Attrition vs. Turnover

Turnover tak♍es place in a company's workforce when people leave their jobs and are replaced 🏅by new employees. In such instances, there is no attrition.

Employee turnover is generally counte♓d within a one-year period. This loss of talent occurs in a company for many reasons. As with voluntary attrition, employees may retire, relocate, find a better job, or change their career.

Companies can study turnover to make needed changes. For instance, many employees leaving within a short period of time probably signals issues wi꧒thin a company that must be dealt with.

Just as with voluntary attrition, management can use turnover information to initiate changes that will make the company a more amenable place for new and existin𒀰g employees.

The Bottom Line

Attrition refers to the gradual but deliberate reduction in staff that occurs as employees leave a company and aren't replaced.

Employees may leave voluntarily or involuntarily. Or, they may simply move from one department to another. In that case, attrition occurs when the former department doesn't replace the employee. Employees may also leave for reasons of discrimination.

Calculating and tracking attrition rates can be useful to companies. High attrition rates indicate more people are leaving. They can signal that some problem is causing the🥀se departures and must be dealt with to improve the working environment.

Of course, a certain level of attrition can be helpful because it can avoid the need for layoffs in difficult economic time𝐆s.