What's the Right Amount of Employee Attrition in the Great Resignation?
Many employees no longer feel shackled to a particular job because of the flexibility now given to them by remote work. And with the Great Resignation still going strong, many companies are walking back their requirement to return to the office in order to avoid losing talented people.
Just a few days ago, Apple learned that lesson the hard way when one of its top machine-learning executives left for Google’s DeepMind division, a move he says was caused by Apple's in-office requirement policy. This is, perhaps, not surprising. A survey from FlexJobs indicated that 44% of people knew at least one person who had already quit or was planning to quit their job due to in-person work requirements.
And while losing employees can hurt, some level of employee turnover can be beneficial for a company. For instance, new employees can raise the talent bar and promote higher productivity and performance. It also enables the onboarding of fresh perspectives and can support innovation.
But what is the right amount of healthy turnover? Does the 10% turnover rate that's long been considered reasonable hold up in the current environment when the quits rate is at its highest level in years and companies are struggling to find the people they need?
Calculating the Attrition Rate
There are different types of ways employees and employers can part ways: voluntarily, where employees leave of their own accord; involuntarily, where the company chooses to part ways with them; and due to internal moves such as when an employee changes roles via promotion or lateral move.
It's first important to look at how turnover is different from employee attrition. Employee turnover generally refers to the balance of people leaving the organization, voluntarily or involuntarily, and then being replaced. Attrition is slightly different. Generally speaking, attrition refers to the rate at which employees leave a company, leading to a gradual reduction in employee numbers. The formula most commonly used to calculate attrition is:
# of employees who left the company during a specific period
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((# of employees at the start of that period ) + (# of employees at the end of that period) / 2) x 100
The period used in the formula can be days, weeks, months, quarters or years. It can also be applied to multiple timeframes to draw trend lines over a certain period.
Doing so over time is particularly helpful when attempting to measure the effectiveness of a program designed to lower attrition. Leaders can see, with the formula, whether they have succeeded in their effort — all while accounting for external influences in the process.
Related Article: Why Leaders Are Leaving
What's a Good Attrition Rate Today?
For more than two decades, businesses have relied on Gallup's 10% turnover rule as a sign of health. Whether or not that's still relevant depends on the company and the industry.
Joshua Rich, CEO and founder of Somerville, NJ-based Bullseye Locations, said companies shouldn't worry too much about that number, unless it starts to climb over 20%. “A fair level of attrition should be anything below this rate," he said.
However, because many of the issues that lead to higher attrition — e.g., work culture, commutes, stress — have been shown to improve with remote work, fully remote companies may want to establish a slightly lower baseline. "With remote workers, the attrition rates should be even lower as they work from the comfort of their homes," Rich said.
Hybrid companies, for their part, may find a good attrition rate to be more in line with in-person workplaces because despite offering some remote possibilities, that environment also opens doors for other risks such as proximity bias and a relative lack of flexibility for those workers preferring to work from anywhere.
Related Article: Blind Survey Finds the Great Resignation Is Still Great
Learning Opportunities
How to Know It’s Time to Accept Employees Will Leave
It may sound counterintuitive for leaders to not only accept but also expect — and maybe even hope — that employees will leave. But a certain level of attrition can be good for the company and the rest of the team. This is particularly true when an unhappy employee risks ruining team morale or affecting productivity, innovation and growth.
In the end, leaders should seek happy and engaged team members. An individual who does not fit the company culture and team mindset may be better off elsewhere. That departure can be positive for the organization as well as for the employee leaving because it opens up new opportunities on both sides.
“When managers see that their employee satisfaction rates are sufficient, they should believe that this attrition is healthy for the business,” said Rich. This indicates that most employees are satisfied with things at work, and the issue is most likely limited to the person leaving.
Related Article: The Right Way to Offboard an Employee
4 Ways to Keep Employee Attrition in Check
If some level of attrition is good, too much can be problematic. Here are four ways to keep employee attrition in check before it spirals out of control:
1. Lend an Ear
In the current labor market, there is perhaps little more important than ensuring employees have what they need. Rich recommends checking up with team members periodically to make sure they are satisfied with their jobs and the work culture in general. This includes pay, policies, learning and development, as well as opportunities for advancement. Think of the reasons why employees leave employers, and survey team members to see if there's any one of those factors that could trigger departures.
2. Show Appreciation
Recognition and praise can be excellent motivators. “Show your employees that you appreciate them by publicly recognizing excellent successes on a regular basis,” said Steve Pogson, founder and e-commerce strategy lead at Portland, Maine-based FirstPier.
Acknowledging employees' contributions to organizational success can encourage them to work harder and remain engaged.
3. Offer Competitive Salaries
Since pay is one of the primary reasons employees leave a company, remote leaders should aim to at least keep up with the market rates for key positions. There's no need to outdo the competition for every role in the company, but top performers should be rewarded and incentivized — or risk losing them. There's a lot of star poaching these days, and leaders should do their best to retain their top talent. Pay is a great incentive to keep up the good work and avoid employees feeling undervalued.
4. Focus on Career and Skill Growth
One of the main reasons for employees leaving is opportunities for growth. Few employees, particularly at the beginning of their careers, will accept remaining stagnant in the same role for years. Managers should seek to provide training and development opportunities so employees can advance, remain engaged and motivated, and better support the organization. Courses, seminars and coaching can be huge difference-makers in whether an employee stays and grows within an organization or searches for opportunities elsewhere.
About the Author
Kaya Ismail is a business software journalist and commentator with years of experience in the CMS industry.
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