Understanding the flow of employees in and out of your business should be a priority. After all, unless you can maintain a certain amount of control and influence over this, there tends to be a range of negative outcomes. Productivity can suffer, company culture can become inconsistent, and there can be knock-on effects on wider engagement.
As such, employee turnover and employee attrition are key areas of focus. Both of these metrics involve workers leaving your business, but they have very different impacts and drivers. Your understanding of how these concepts work and where they differ can help make sure your retention methods are fit for purpose.
We’re going to explore employee turnover vs employee attrition a little further. What do you need to know about these terms and how they influence your operations?
What Are the Differences?
Let’s start with the basics. While there are certainly some areas of crossover between turnover and attrition, they are 2 distinct concepts. The ways they diverge come down to a few key characteristics.
Method of Exit
Perhaps the most obvious difference between turnover and attrition is how employees exit the company. Attrition has a more natural flow, usually the result of a worker’s or a role’s lifespan with the business coming to an end. This often revolves around retirement, a project ending, or the position no longer being a relevant part of the company. Turnover, on the other hand, involves more disruptive methods of exit. In these instances, workers resign or they are terminated from their position due to underperformance or poor behavior.
Influencers of Exit
You’ll also find that the respective root causes of turnover and attrition are usually different. Attrition tends to be subject to longer-term influencers. Retirement often comes after decades of positive service. Position elimination occurs from the completion of a project or gradual changes in the shape of the business. As such, there’s usually more time to strategize and make arrangements to address the gaps this leaves. The influencers of turnover, though, are more volatile in nature. Common factors here include employee dissatisfaction, personal challenges, ethical or behavioral issues, and a lack of career development opportunities within a business. The sudden or negative nature of these causes can leave businesses struggling to cope, particularly when it happens on a large scale.
The Business’ Response
Turnover and attrition also tend to diverge in a business’ reaction to each situation. When turnover leaves positions vacant, there is usually a need to fill the role immediately. The result is that human resources (HR) need to affect a swift and effective hiring process to ensure there is a minimal lag in productivity. Attrition has a different outcome in most cases. There may have already been workers progressing through the company ready to transition into a role left vacant by a retiree. However, many businesses will simply remove the position from the business, or have other roles absorb its responsibilities.
How Does Each Affect Your Business?
One thing to consider about employee turnover vs employee attrition is that in both cases there are significant impacts on your business.
Let’s begin with the cost impact. The fact is, both attrition and turnover have the potential to be costly issues. The costs of turnover are often felt more immediately, as there is a large amount of capital spent in hiring, onboarding, and training new workers. If your company is subject to dysfunctional rates of turnover, this is likely to represent a significant outlay in the long-term, too.
While attrition may not necessarily involve the same hiring and training costs as turnover, there can still be expenses involved. For instance, distributing an eliminated role’s responsibilities among other positions can impact productivity and, in some cases, morale. This can result in loss of profit from inefficiency and disengagement over time.
This brings us to another potential area of effect on the company. Both attrition and turnover can impact the company culture. When there are negative circumstances surrounding turnover — termination or widespread job satisfaction, for instance —this tends to hit employee morale. Again, the disruption is usually more immediate in nature. Unless this is addressed, the result can be higher disengagement which not only impacts productivity, but it also can lead to further turnover.
The more organic causes of employee attrition tend to mean that the split between workers and the business is more amicable. As such, there isn’t usually the potential for the negative cultural shock that can come from turnover. Nevertheless, when there is a high rate of attrition in the business, you can find your culture can suffer from this vacuum in the long run. This is because your most experienced workers are no longer sharing the benefit of their skills, ethics, and history with less-experienced team members.
What Are Considered Healthy Rates for Each?
Employee turnover vs attrition can have various causes and outcomes. But when it comes to understanding whether there is room for improvement, you need to understand what are considered healthy rates for each. A recent U.S. Bureau of Labor Statistics report found that the average turnover rate in 2020 was 57.3%. However, this doesn’t mean this is a number you should be shooting for. The ideal metrics for both turnover and attrition vary from industry to industry. As such, it’s important to review the current averages for yours and aim lower.
To be able to compare your turnover and attrition rates to national averages, you’ll need to perform a couple of relatively simple calculations. While these can be applied to monthly turnover or attrition rates, you’ll likely find annual or quarterly calculations more serviceable.
1. Determine the average number of employees for the period you’re assessing.
2. For turnover, determine the number of employees who quit or were fired by your organization. For attrition, determine the number separated due to organic causes.
3. Divide the number from step 2 by the number from step 1.
4. Multiply this by 100 to determine your turnover percentage.
The work doesn’t end with the comparison, though. If your rates are high, it’s important to gain intelligence as to the causes of this. Issuing employee experience surveys can help you obtain your workers perspectives on the drivers behind turnover or how attrition is affecting them. You can then utilize this data to strategize any changes that can have a positive impact on reducing any dysfunctional turnover or attrition. It’s also wise to keep the lines of communication open through anonymous feedback channels. You’ll tend to find this empowers employees to keep you abreast of their thoughts on the change process and where any hurdles lie.
Both turnover and attrition are common aspects of the employment landscape. While these are distinct metrics with very different causes, both have the potential to significantly impact your organization. Some of these effects will be largely financial in nature, while others can disrupt the cultural stability of your business. It’s worth taking the time to calculate your turnover and attrition rates and compare these to the averages for your industry. If your rate appears to be high, it’s time to explore the reason behind this further so you can mitigate negative outcomes.