Managing Attrition in Organizations

Reasons for Attrition

Attrition is a fact of life for contemporary organizations. Employees leave organizations for a variety of reasons including:

• dissatisfaction with pay and benefits,
• lack of job satisfaction,
• problems with their immediate managers,
• relocation to other cities and countries,
• unhappy at being overlooked for promotions, and most importantly,
• for better pay and prospects elsewhere

Indeed, among all the reasons for attrition, the two most important ones are that employees do not leave the organizations but their managers and those they leave because they are getting a better pay and better role in other organizations.

Attrition can be Debilitating to the Organizations

Attrition is debilitating for the organizations since they are losing resources that have been trained and are adept at their jobs. To find replacements for the employees who have left and to train them and bring them up to speed entails costs for the organizations.

Moreover, attrition is harmful for the morale in the organization since it is infectious meaning that when people start leaving, it can soon turn into a torrent wherein other employees also leave. In addition, loss of managers and senior management personnel is extremely painful for the organizations since these employees who were handling sensitive and critical roles are often responsible for formulating and executing strategy.

Involuntary Attrition is Good for the Organizations

Having said that, not all types of attrition are harmful for the organizations. For instance, attrition of poor performers whether voluntary or involuntary makes many managers and HR managers happy as they can now focus on finding replacements who are more capable and better motivated.

In addition, involuntary attrition which is when organizations ask employees to leave is a type of attrition that many organizations resort to weed out the poor performers every year. Indeed, some consultancies and investment banks have policies that mandate firing the bottom 10% of the performers every year so that the culture of excellence is maintained as well as to send a message to the existing staff that they need to perform or perish.

Moreover, involuntary attrition is also beneficial to the organizations since they were incurring costs on the poor performers which can now be utilized for the other employees.

Industry Averages and Comfortable and Problematic Rates of Attrition

In recent years, some organizations have seen unusually high rates of attrition. Some examples would be Infosys in India and Microsoft in the United States. The rule of thumb for HR managers is that attrition which is near or below the industry standard is manageable and the problem starts when attrition is above the industry average.

Typically, most industries have average attrition rates at or between 10-15%. Any figure above this is considered problematic and the examples cited above had attrition rates that were beyond this figure. Indeed, when attrition is manageable, the HR managers usually do not mind it since it leads for fresh energy coming into the organization and deadwood being replaced with green shoots.

Senior Level Attrition

Of course, one must take into account the fact that most technology companies have young professionals who leave to pursue higher studies and to take sabbaticals for educational and personal reasons. This is a form of attrition that is again factored into the calculations by the HR professionals.

However, the worst form of attrition and the one which is the most worrying is when senior and middle level managers leave. The reasons for this can be that they have been overlooked for promotions or they do not see themselves progressing into the executive and leadership positions. In these cases, the CEO and the Board often step in to persuade and convince these management figures from leaving.

The At Risk Watch List

In most multinational companies, there is something called the “At Risk” list which the managers prepare in consultation with the HR managers about employees who are likely to leave in the next quarter. This list is maintained because the organization has to have a grip on who is likely to leave and hence, backup plans have to be put in place.

This list is usually prepared periodically and updated regularly to ensure that the managers and the HR managers have mitigation measures in place to deal with the exits of these employees. Moreover, such lists also help the organization in preparing for any eventuality when high profile figures in the organization leave.

Employees Leave Because of their Managers

Finally, as mentioned in the introduction, most employees leave because of differences with their managers. This means that managers at all levels of the organizational hierarchy are responsible to handle their team members and direct reports in a professional manner.

Indeed, most attrition at the junior levels happens because these employees and their managers cannot get along well with each other.

Despite extensive studies that indicate these aspects, sadly not many organizations take steps to correct this since they feel that the managers are more valuable than the employees who are leaving. While we do not say that this should stop, we would like to conclude this article with the hope that junior level exits are taken as seriously as the senior level exits in all organizations.