Companies typically see a variance in their workforce numbers every year independent of the economic conditions. Employee turnover and attrition, two very common occurrences for every organization are some of the most important factors of gauging an organization’s health. Typically high numbers of turnover and attrition can have a negative impact on the organization.
Turnover and attrition are used interchangeably but they don’t mean the same thing.
What is Turnover?
Turnover is simply the rate at which an organization replaces departing employees with new employees over a period of time. These employee departures can both be voluntary or involuntary. Only positions that are vacated and then filled can be referred to as turnover.
If vacant positions are not filled, they can either be attrition or an intentional workforce reduction.
What is Attrition?
Attrition refers to a company’s decision to not replace employees after they depart from the organization voluntarily.
An employee can leave voluntarily for multiple reasons including finding a better position or simply retiring from their jobs. The key aspects of attrition are that employees vacate the position voluntarily and the company does not refill that position.
If a company terminates employees and chooses to not refill the position, it is referred to as restructuring.
Turnover as well as attrition can be unexpected, expected, planned, or unplanned. For example, a fast-food restaurant would typically expect high turnover as people move to higher paying jobs. Similarly, a sales job would also witness a high turnover as junior members get promoted and fill the more senior positions.
Similarly, during an economic downturn or slower business times, companies might choose to not refill positions vacated by employees without the disruption of a layoff. Also, as senior partners retire, companies might choose to not promote juniors members to the position.
In both cases, a different rate of turnover or attrition than expected or budgets for is when the issue arises.
Average Turnover Rates
According to The US Bureau of Statistics, the average rate of turnover is typically 15%. Some other organizations determine the average rate to be around 10%. So typically, it is a good idea for organizations to keep their rate of turnover between these two figures.
The Cost of Turnover and Attrition
Attrition is typically a cost-cutting measure employed by companies by implementing a hiring freeze or choosing to not replenish their workforce numbers.
On the other hand, turnovers are a costly proposition to organizations especially when a vacant position needs to be filled immediately. According to Gallup, the cost of replacing an individual employee can range from half to two times the employees’ salary. US businesses are cumulatively losing over a trillion dollars due to voluntary turnover.
Some of the most major reasons behind employees’ voluntary changing employees are career stagnation, lack of work-life balance, and financial insecurity. In fact, a poll by Gallup found that over 51% of employees who quit their jobs had not had a conversation with their managers in over three months.
While not entirely avoidable, companies can work to reduce voluntary employee turnover by investing in manager training, employee reward and recognition programs, and creating a company culture that celebrates and encourages their employees. Meaningful conversations where employees feel heard and appreciated are important. Constant progress towards instituting a positive employee-friendly work environment and employee culture is key to retaining your top talent.
