Attrition – A business perspective

Attrition, is a phenomena affecting any business organization in the industry. Over the past few years, organizations have taken an increased interest in aligning their HR practices to their business goals. What was originally seen as the time-keeping, records-maintaining department of the has today metamorphosed into the equivalent of a dynamic business consultant, providing strategic support. Managing a highly discerning, mobile and independent workforce has thrown up exciting challenges for the HR fraternity. Important questions on how well an organization integrates its people practices to its business objectives and the resultant pitfalls of a poor marriage of the two – are the focus of many research studies.

Deficiencies like inability to influence employee perception of growth; not aligning employees to roles based on their individual talent, inflexibility in leadership styles, are causing conflicts at a very intrinsic level, resulting in knowledge employees choosing the proverbial “easy way out.” Employees thus attempt to change the manager or the work environment, resulting in employee attrition.

Though the current environment in terms of Talent demand and supply, presents enough opportunities for people with relevant skill sets as also enough manpower for organizations to choose from, employee turnover without doubt, bleeds value out of any organization, both in terms of time and money. As such Employee Attrition is a major Organizational issue, which different Knowledge industries manage in varying ways.

Attrition is a dynamic that impacts business performance in more ways than the usually perceived Human Resource development angle. It is an issue which gives rise to questions like Organizational health, morale and motivation and leads up to very tangible aspects such as shareholder return and value. Attrition as a problem is also seen as the origin of further dialogues about Talent management and sourcing.

Cost of Attrition

This was usually done by calculating what it on average to replace a leaver with a new starter in each of major employment categories of the organization. This figure was then multiplied by the turnover % to calculate the total annual cost of turnover. The major categories of costs taken into account were:

Many of these costs consisted of management or administrative staff time (opportunity costs) but costs were also substantial where advertisements, agencies or assessment were used in the recruitment process. More complex approaches to turnover costing gave a more accurate and invariably higher estimate of total costs. A widely quoted method involved estimating the relative productivity of new employees during their first weeks or months in a role and that of during the period that they are working their notice

The business costs of attrition also merited serious discussion, since in situations where an organization loses staff to direct competitors or where customers have developed relationships with individual employees as is the case in many professional services organizations, the revenue lost by the movement of the employee related directly to the top line results.

In industries such as Personal Financial Services, Management consulting, Recruitment Consulting and IT, the change in account managers or service providers set the relationship back by months and this gave competitors a weighty advantage. This was especially true if the transition to new account personnel was not well managed. At a certain point, regular changes in account personnel also sent out a message of organizational instability and created the impression that the organization does not care about the account relationship.