What is employee attrition?
To ensure that we have a pre-defined framework around this hotly debated subject, it is important to clarify that attrition here means the rate of employee turnover, solely attributable to the employment termination actions initiated by the employee himself and does not include any involuntary terminations initiated by the organization. It is important to provide this context because the organizations would only like to control that part of employee turnover that they themselves did not initiate.
Organizations get really serious about attrition control only when it starts affecting their day to day efficiency. The effects can be seen in terms of cost of lost productivity (during notice period, time to recruit and induction) and cost of lost knowledge, expertise and business relationships (perhaps picked up by a competitor). However, it is important to note that these tangible losses are invariably and also inevitably accompanied by the intangibles such as low motivation, low morale, lack of sustained and mutually dependent relationships, to name a few.
Factors responsible for attrition
I know of some organizations running with annualized attrition rates of 100+%! Flip off the coin, I also know organizations that have managed to contain their annualized attrition around 10%. This is certainly no apples to apples comparison; yet, these starkly contrasting statistics give me the following leads:
Ø Attrition is a function of economic forces
It is very important for us to first understand how the economic forces at a global/regional/national level can influence attrition in specific organizations. The most powerful example that comes to my mind is that of dot com boom that took the whole world by the storm around the turn of the millennium. Suddenly the young IT professionals in India found multiple opportunities to work in their dream locations in Silicon Valley, leading to very high attrition rates in Indian IT sector.
Ø Some industries have greater difficulty in retaining employees than others
The ITeS, catering, leisure, hotel and retail industries are associated with very high attrition rates. The 100+% example is from ITeS segment. These industries are in a ferociously expansion mode trying to figure out ways of better managing demand-supply gap for human resources. The predominant workforce in these industries are young professionals who are required to work all kinds of odd hours in highly demanding work environments without any clarity on personal development/progression.
The Financial services and IT sector is also in the growth mode, although the attrition rates there are not in the same league as in case of the above mentioned industries. My example of 10% annualized attrition is from a very well-managed IT organization. Employees working in these industries are also subjected to demanding work environments, although in different degrees, when compared to the industries in the first category mentioned above. Even here the skills shortages are prevalent and the macro-level skill shortages keep on influencing micro-level attrition.
Now let’s look at the more traditional industry sectors such as manufacturing and engineering. The growth rates in these industries are moderate and the employees working there have the mindset of a lifetime employment with one organization. As a result, attrition is a non-existent issue there.
Ø Geographic location of the organization impacts average job tenure
The variation in job tenure in different locations is perhaps due to the type of industry prevalent and the labour market available within particular regions. Let’s take a specific example here. Bangalore - the IT hub of India, has attrition running at significantly higher levels when compared to other markets such as Hyderabad or Pune.
The reasons for understanding the above external factors are twofold.
1. Creating an awareness that every measure around managing employee attrition does not lie within the organization’s purview.
2. Clearly establishing external factors that cause employee attrition with a view to help the organization become better prepared to manage their human resources in the wake of changing external environment.
Now comes the real challenge. Giving due credence to these external factors, how can organizations deal with internal factors effectively, so that they can still manage to keep attrition within their control. It is conceivable that within the same economy different companies bear the brunt of employee turnover very fundamentally different to each other. And conversely, it is therefore conceivable, that organizations in the same economy/geography/industry with fundamentally different employee retention strategies can manage employee attrition with varied levels of effectiveness.
So, what do organizations typically end up doing to curb attrition?
Organizations, at this stage, start closely scrutinizing various data cuts around employee attrition e.g. what are the predominant reasons for attrition, is there a pattern emerging? – are more employees being lost in a particular experience band or those working on some specific projects or departments etc. This is done with a view to create initiatives and programs around the identified patterns related to attrition. While the organizations believe, that putting such initiatives in place would eventually bring down the attrition, it does not necessarily yield results at the levels expected. Reason? – such initiatives emanate from the information gathered only from the exiting employees, leaving a much larger pool of existing employees out of its purview.
Hearing the voice of exiting employees and taking corrective actions, therefore, is just one way of overall attrition management. I would actually call it a lagging way of attrition management--simply because these attrition control measures lag the actual attritions.
What if we were to change the paradigm here and focus our efforts on creating an environment that facilitates employee retention than only narrowly concentrating on attrition control measures? If we do that effectively, (and the existing highly competitive war for talent is compelling the organizations to look at newer ways of managing this problem) then we should actually be looking at the leading ways of employee retention. By definition, these are more proactive efforts that will lead to better employee retention.
Ø Developing a system that tracks "Early Warning Indicators" around those employees who are thinking of moving out of the organization
This will enable organizations to arrest the “flight risks”. These indicators are fairly common-sensical and are invariably reflected in employee’s declining or fluctuating productivity, increased absenteeism or tardiness, rejections for internal job postings, drop in work quality, visible signs of frustration, breaking of some workplace relationships and a multitude of others. While there is no perfect science around either picking up the incidence of such behaviour or the varying intensities of the same, managers with moderate levels of sensitivity should be able to pick some patterns indicating these “Early Warning Indicators". Managers can then dig deeper to address areas that cause such behaviour, hopefully leading to better employee retention.
Ø Another way can be finding out the organization’s strengths from the employees who have stayed with the organization for longer periods. Obviously the assumption here is that some of these organizational strengths have favourably impacted their long tenure.
Ø It is important to remember that, working only on the reasons pertaining to why employees have left the organization, will help us clinch the issue that, many a time the causes around attrition are not in congruence with those around retention. An example here might help illustrate the point. An employee who is frustrated with his/her work environment may continue to work in the same organization till he comes across an employment offer that has substantially higher compensation to offer. This employee may, therefore (and in all probabilities he would), state in the exit interview that the most important reason for him/her to leave the organization was “offer of a substantially high compensation”. Now if the organization were to understand this feedback as ‘attrition due to dissatisfaction over compensation’, it will then focus its efforts on compensation, whereas, the reason why this employee looked at the alternative proposition was anything but compensation! It is, therefore, important for the organization to base it’s efforts on what it hears from existing and exiting employees continuously and not one to the exclusion of the other.
Ø People join the organizations and leave the supervisors
Clichéd as it may sound; this truth does not go away. I strongly recommend that before getting into finding any reasons around employee attrition, one should always rule out a possibility of whether it was caused by the direct supervisor of the exiting employee. Supervisor’s behaviour has a huge impact on the work climate and is a critical component in any employee engagement and motivation initiative.
Here is a summary of what workers responding to a Gallup survey said, they wanted from their managers;
· Focus on me
· Know me
· Care about me
· Hear me
· Help me feel proud
· Help me review my contributions
· Equip me
· Help me see my value
· Help me grow
· Help me see my importance
· Help me build mutual trust
· Challenge me
And what should the supervisors do?
· Provide feedback and guidance
· Make real time to discuss problems
· Seek ideas and input from everyone
· Provide the resources to solve problems or to do a job well
· Give real recognition and/or reward
· Provide opportunities for people to develop their potential
· Keep the pressure to perform and achieve more
· Provide opportunities for social interaction
· Train people how to resolve interpersonal conflicts
· Promote joy and appropriate humor within the office
· Be flexible; help people to actively balance work and home responsibilities
Ø Quite often, organizations don’t realize that the employees’ continued interest in the organization is highly influenced by the quality of employees that the organization attracts and retains. This is particularly so, in the knowledge industry like IT, and I am not saying that it is not applicable to other industries as well. But let’s take the IT example. An attriting employee will rarely say that the cause of the exit is attributed to the fact that, the organization no longer has an edge over its competitors, when it comes to attracting and retaining talent. And yet, when the same employee was not in the mental state of leaving the organization, s/he drew a lot of energy and professional stimulation by interacting with colleagues that s/he perceived had a very high skill/knowledge/professional standing. It is therefore, my case, that any erosion in hiring process has a long term negative impact on talent retention.
Ø Yet another powerful retention anchor, albeit, oft understated, is how effectively the organization has leveraged its brand internally. Somewhere, the organizations seem to work on the notion that branding dollars are best spent in creating external visibility. While that is not untrue, we must remember that strong internal branding leads to inculcation of pride among the employee constituency. An employee’s emotional ties with the brand are very important when it comes to his making long term emotional contracts with the organization. The enthusiasm, with which an employee flaunts his /her business card in social situations, is generally directly proportional to his/her pride for working with the organization.
As some closing food for thought, I will quote from Curt Coffmans and Gabriel Gonzalez-Molinas’ book titled Follow this Path 2002 - "Great organizations achieve sustainable growth and profits because they do what other organizations don't: they maximize the innate, individual talents of their employees to connect with customers. They know that tapping the resources of humans is the only remaining area where significant improvements can--and do--lead to an unlimited source of competitive advantages." –and that, to my mind, underscores the importance of retaining talent.