ODIN Consulting

Attrition Rate and the Causes of Staff Turnover

HR discussing churn rate

Attrition and Turnover. Not the same thing.

Both Attrition and Turnover are obstacles to operational excellence. However, businesses often use Attrition and staff turnover interchangeably, but they are not the same thing. Although they are similar, there are differences between the two.

The difference between attrition and turnover is that attrition occurs specifically when a company decides not to fill the role that has been vacated. This is a voluntary course of action. A company does this to ultimately reduce the number of employees the business has.

In contrast, a businesses will measure the number of employees that have left the business but are replaced. This is the staff churn or staff turnover. Despite the differences, both terms look at how many employees have left the company over a certain period of time. 

What are the causes of Attrition?

Whenever an employee decides it’s time for them to leave the business, the first thing that most managers and the HR department want to know is what their reason is for choosing to go.

The trouble is that most companies don’t have any kind of employee exit procedure in place, such as an interview. This leads to them failing to gather information on why someone has chosen to leave their post. 

Lack of this insight leads often to inadequate or inaccurate information being gathered. The wrong information being inputted or recorded. Without any validation from an existing employee, some HR departments have been known to simply just guess at why someone has left. This could be based on rumor or gossip. The other alternative is that they don’t record any information at all. 

Some of the most common causes of staff leaving the business include: 

  • Values no longer align with those of the business
  • Feeling undervalued in a current role
  • No room or opportunity for career progression or self-improvement
  • Offered a better salary for a similar position in another company

The Impacts of Attrition on the Business

Whenever an employee leaves, especially a long-standing team member, it can have a significant impact on the business and those who worked closely with them. A loss of knowledge can take a long time to rebuild when a new employee takes their place.

The knock-on effect of not being accurate, or not knowing at all why an employee has left, can have a devastating impact on employee morale and business success. It can prevent you from fixing the problems that caused employees to go in the first place. 

Common problems associated with a high staff turnover rate are:

  • Cost – Every new employee that you hire will have to go through a training procedure. Either by shadowing an existing employee, that will cause them to be less productive, or on a paid training course like health and safety. To place job ads and take time out to interview, the business incurs expenses, time, and money. 
  • Time – If you do have some sort of exit procedure in place, this will take up the time of HR staff that could be doing something more productive. Similarly, if you are always hiring new employees to replace old ones, on-boarding, and setting up payroll and security checks all takes time. 
  • Customer Satisfaction – In a service industry, especially, customers may not be happy having to deal with new people often. They the relationship building with the business is valuable. A high turnover rate may also be a warning sign for new customers that something in the business isn’t quite right. 

Conclusion

A low employee attrition rate, or turnover and churn rate, are a sign that the business is on its way to operational excellence. Often if they are recorded, there is no action by management to change poor numbers. Often businesses don’t measure at all. Some businesses will naturally have a higher churn rate than others. Businesses that hire many low skilled workers suffer from the highest churn. Ironically these are the businesses that pay the least attention to their people metrics.