They may sound similar, but attrition and turnover rates in the workplace have very different meanings. Whereas turnover is negatively associated with losing staff due to mismanagement, attrition can actually have a positive influence on the workplace. Here’s why.
What is ‘attrition’?
Attrition is essentially defined as people leaving a company, most often when someone chooses to retire or the position is eliminated. So it’s unsurprising that many business owners confuse ‘attrition rate’ for ‘turnover rate’ when measuring the company’s overall wellbeing. After all, low attrition must mean everything is peachy in the workplace, while high attrition must indicate a serious problem, right?
Actually, some of the most popular and people-focused companies may have high attrition rates for any number of reasons – whether people are retiring after several years at the business, or the company is consolidating and eliminating unnecessary positions. The key is knowing the difference between ‘good’ and ‘bad’ attrition, which we will touch on later.
What is ‘turnover’?
Turnover comes about from several different actions, most notably discharge, termination, resignation or abandonment. Unlike attrition, there is no such thing as ‘good’ turnover. Whether it’s a poor performer who receives a notice of termination or a high-flying staff member who quits because they feel they aren’t being adequately rewarded, turnover is an issue that needs to be rectified.
Attrition can actually be a good thing
In any organisation – no matter whether it’s a small business or multinational – people will join and leave for different reasons. In service industries, for example, where most employees are hired on casual or part-time contracts, this is common, and attrition is completely normal.
Spotting good and bad attrition is important so you don’t get bogged down in hard figures of ‘losing staff’. The loss of a poor performer – while appearing negative on paper – could actually be a positive for the business. In terms of attrition, this may be done by eliminating unnecessary positions. When the time comes to expand again, you can then hire new staff and train them up to avoid the pitfalls of previous poor performers.
On the other hand, losing a star employee – whether it’s to a competitor or due to bad management – can have a negative impact on the whole team. This is bad attrition and should be avoided at all costs. Conducting an exit interview is recommended for learning why a staff member has decided to leave.
Good attrition is when people leave the business and don’t diminish the overall output of the team. That is the key point to remember when reviewing attrition rates.
High turnover is always bad for business
High turnover can occur for various reasons, and none of them positive. Whether it’s an inefficient hiring process, poor training or general mismanagement of staff, high employee turnover can create:
• Cost problems: Hiring staff is expensive. There’s the job-search process, recruitment costs, training and more. Retention is almost always the better option.
• Reduced business performance: High turnover often impacts the staff who remain, with lower productivity and less incentive to be efficient as they are forced to absorb the duties of exiting employees.
• A revolving workforce: If high turnover is allowed to continue, then that means the problems at the core of the business have neither been addressed nor resolved. This can lead to a revolving door of short-term employees.
How to spot the signs of high turnover
If you are concerned about staff leaving, there are several tactics you can use to spot the signs of high turnover:
• Review your hiring process: In order to get the right people for the right role, it’s crucial that you create accurate job descriptions, have a structured interview and hiring process, and convey your company culture to all applicants.
• Listen to team leaders: Working with staff day in, day out, team leaders have their ear to the ground and may provide unique insights on fellow employees.
• Conduct regular surveys: Boost transparency by allowing staff to have a voice with ongoing surveys. This can help you improve the inner workings of the business.
• Interview star performers: Top employees can give you information on what they love about the business, as well as ways in which you might be able to improve retention.