Attrition can be defined as the number of employees leaving the organisation includes both voluntary and involuntary separations. Employee turnover is not a new issue. It is relevant today and its importance will be even greater in the coming years ahead.

Silence attrition is new phrase for an old problem, the gradual defection of internal customers who would gradually reduce their relationship with the company than complain about the factors responsible for it.

Instead of clearing the air they distance themselves gradually from the company concerned.

Many studies indicate that, there will be 20 million jobs unfilled by the end of 2008. Some analysts are projecting a shortfall of up to 30 million employees.

Identify the problem

This is approximately twice the number of unfilled positions in early 2007. Voluntary resignations are at the highest level in over 20 years.

Appropriate definition of turnover for many organisations is not quite standardised. Process must clearly spell out either voluntary or involuntary. It must bring out all types of employee separation with more clarity.

Turnover rate by various demographics showing functions, divisions, plants, age, gender etc would be lot more useful for exact calculations. Critical Job groups need to identified and monitored separately. Turnover rate must be reported with costs associated with each separation.

Turnover effect

Attrition is a symptom not a problem. No company has a turnover problem. Turnover is the manifestation of deeper issues that have not been resolved. This could be due to low morale, no career path, lack of recognition, poor employee manager relationship etc. High turnover has a tremendous negative impact on the quality of customer service.

Turnover of front line employees is often regarded as the most serious threat to providing excellent customer service.

Turnover costs have a huge economic impact on the organisation, both direct and indirect costs. Translating turnover into numbers that executives understand is essential because they need to appreciate the true costs. Most of the business executives look for sales, expense budgets but not really the expenses towards employee attrition.

Tip of the ice berg

This is due to the difficulty in calculating all costs of employee separation. Direct costs (recruitment costs, joining bonus, consultant fee etc) are easily calculated which form the tip of the ice berg when compared to indirect costs. (Team morale, productivity loss, customer service, contacts, training costs, administration costs, management time etc).

Recent surveys indicate that 56 per cent of all employees do not last their jobs for full two years. Attrition is costing the US economy an estimated $160 billion.

Keep employees Inc (KE i) US business report 25- 30 per cent unwanted employee turnover rate. KE i says this high figure is due to bad hiring and bad treatment of employees.

The KE i recommends that to calculate the attrition costs at worker level it costs 0.25 to 0.5 times, supervisor/ manager level it costs 1 to 1.5 times; top executive level it costs 3 to 5 times of annual salary and benefits.

Employee category

We tried calculating the attrition costs for Indian conditions by capturing direct and indirect costs for the four categories of employees:- operators / workmen it costs 0.20 to 025 times; supervisor /manager level 0.5 to 0.6 times; senior level it costs 1 to 2 times of the cost to company approximately.

Many organisations take lightly the cost of attrition due to the myths such as: Costs are not too high, Some turnover is good for the company, It is an industry problem, it is out of control, It is an unavoidable cost of doing business, can be solved by more salaries and it is a HR problem.

Visible benefits

Organisations must compare the turnover rates within the industry, best employer of choice, with history, with expectations of management. These comparisons give deeper understanding of the issue. 

Organisations to develop trigger points for when alarm to go and when to implement retention interventions.

One of the most visible benefits of lower turnover is, it translates in to fewer operational problems, fewer delays, increased customer service, smoother flow of work, and improved quality of transactions.

Hence organisations must give strategic importance to employee retention as it strengthen profits.

The writer is Head-Learning & Development for APC - MGE Pvt Ltd. He can reached on: Vasudeva.naidu@apcc.com