Understanding Attrition: How Do You Calculate and Reduce Employee Turnover?

Hi All,

How to calculate attrition rate? What are the basic principles to remember before calculating the attrition rate? What are the steps to follow to decrease attrition in any company?

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Hi,

Attrition Rate: There is no standard formula to calculate the attrition rate of a company. This is because of certain factors such as:

- The employee base changes each month. So if a company has 1,000 employees in April 2007 and 2,000 in March 2008, then they may take their base as 2,000 or as 1,500 (average for the year). If the number of employees who left is 300, then the attrition figure could be 15 percent or 20 percent depending on what base we take.
- Many firms may not include the attrition of fresher who leave because of higher studies or within three months of joining.
- In some cases, attrition of poor performers may also not be treated as attrition.

Attrition rate can be calculated using a simple formula:

Attrition = (No. of employees who left in the year / average employees in the year) * 100

Please let me know if you need any additional information.

Dear,

Attrition is the bane of the industry, and the best way to overcome this is to have a good strategy based on the following. Firstly, follow the technique of Recruitment for Retention. Secondly, implement Realistic Job Previewing (RJP). Then, judiciously follow the steps below:

1. Good people management.
2. Cordial work environment.
3. Total welfare.
4. Show concern for employees.
5. Recognition of contributions made.
6. Appropriate rewards when necessary.
7. Flexibility in work schedules.
8. Attractive benefit packages.
9. Generous retirement plans.
10. Employee Stock Ownership Plans (ESOP) and other welfare measures to complement.

This approach should help in reducing attrition rates, at least to some extent.

Warm Regards, RGS.

Hello Engage India:

How to calculate attrition rate?
See attached file "to_rate.xls"

What are the basic principles to remember before calculating attrition rate?
Count all people that leave.

What are the steps to follow to decrease attrition in any company?
- Hire competent people.
- Hire people who have excellent job talent.
- Compensate fairly.
- Reward for performance.
- Don't tolerate ineffective managers.

Bob Gately
gately@csi.com

Dear Mr. Gately,

The steps mentioned to reduce attrition are excellent but the problem lies in hiring competent people and those who have good job talent as you say. Assuming they are hired, do you think they are going to stay put in the organization for long? Research/surveys reveal that the so-called highly competent and those with exceptional job talent are the ones who quit early compared to the average ones. Given this, don't you think it is better to hire average talent and train them to be competent, compensate them better, and make them feel wanted and important in the organization?

Furthermore, another point to note is that even if highly competent employees are loyal and committed to the organization they work for, don't you think there are poachers all around to tempt and grab them come what may? Besides, not tolerating ineffective managers doesn't arise because very rarely do highly competent personnel slide down to being ineffective. Do you get my point?

Warm Regards,
RGS

Hello RGS:

The steps that are mentioned to reduce attrition are excellent.

Thanks.

But... the problem lies in hiring competent people and those who have good job talent as you say.

Most managers are good at hiring competent employees.

Most managers are not good at hiring competent employees who also have a talent for the job.

Assuming they are hired, do you think they are going to stay put in the organization for long?

Yes, if they are not mismanaged.

Research/surveys reveal that the so-called highly competent employees can be highly competent yet have inadequate job talent.

And those with exceptional job talent are the ones who quit early as compared to the average ones.

Quite the opposite. I think we are not talking about the same talent. Talent is not acquired in schools or colleges, and talent cannot be acquired after the hire.

Given this, don't you think it is better to hire average talent and train them to be competent, compensate them better, and make them feel wanted and important in the organization?

No, it is never better to hire average talent over the more talented.

Further, one more point to note is that even if highly competent employees are loyal and committed to the organization they work for, don't you think there are poachers all around to tempt and grab them come what may?

As long as they have a good job match, i.e., good talent, and they are managed well and paid well, they'll stay. Employers cannot cheat on any of an employee's success requirements: effective management, competitive salary, career planning, etc.

Besides, not tolerating ineffective managers doesn't arise because very rarely do highly competent personnel slide down to being ineffective. Do you get my point?

Oh my, are you suggesting that competent and effective are the same thing?

Bob Gately
gately@csi.com

Dear Mr. Gately,

Definitely not, I am not suggesting competence and effectiveness as one and the same, but I surely would like to say that generally with competence comes effectiveness.

I do understand there's a common misconception that a person's skill is his talent. Skills, however, are not talents. Talents, on the other hand, require skills, I believe.

People can have skills and knowledge in areas where their talents do not lie. Stephen Covey says if people have jobs that require their skills but not their talent, their organizations can never tap into their passion or voice. So, fire and motivation must come from within to bring out the best.

An employee may have the KSA's, but if actual application doesn't take place to carry out the assigned task, then it surely amounts to incompetence, isn't it? There is a mismatch here in terms of job, person, as well as competencies. Do you agree? This is where a good number of managers falter in Recruitment and Selection and end up selecting employees to perform tasks that do not suit their competencies, resulting in dissatisfaction leading to high attrition rates.

Warm Regards,
RGS.

Hello RGS:

I am not suggesting competence and effectiveness as one and the same, but I surely would like to say that generally with competence comes effectiveness.

Competence with talent brings effectiveness.

Competence is required for job success but it is not sufficient.

I do understand there's a common misconception that a person's skill is his talent.

I agree.

Skills, however, are not talents.

I agree.

Talents, on the other hand, require skills, I believe.

I disagree since a person can have excellent job talent yet be incompetent.

People can have skills and knowledge in areas where their talents do not lie.

Yes, and all too often people are in jobs that do not require their talent--these are bad hires.

STEPHEN COVEY says if people have jobs that require their skills but not their talent, their organizations can never tap into their passion or voice.

I agree but then again that is my business.

So, fire and motivation must come from within to get out the best.

I agree, and when a person has the fire and motivation for the job, he may have the talent for the job.

An employee may have the KSAs, but if the actual application doesn't take place to carry out the assigned task, then it surely amounts to incompetence, isn't it?

We can be competent yet perform poorly due to our lack of talent.

There is a mismatch here in terms of job, person, as well as competencies. Do you agree?

Yes.

This is where a good number of managers falter in Recruitment and Selection and end up selecting employees to perform tasks that do not suit their competencies, resulting in dissatisfaction leading to high attrition rates.

Managers do a good job of screening out incompetent job applicants, so they do hire competent employees. What they don't do is differentiate between competent applicants who have job talent and those that don't have job talent. They hire both types and then complain that many new hires are less than successful.

Dear Sir,

Excellent discussion.

Regards,

Asha Manjunath 🤔

Hello RGS:

"I am not suggesting competence and effectiveness are one and the same, but I surely would like to say that generally with competence comes effectiveness."

Competence with talent brings effectiveness.
Competence is required for job success, but it is not sufficient.

"I do understand there's a common misconception that a person's skill is his talent."

I agree.

"Skills, however, are not talents."

I agree.

"Talents, on the other hand, require skills, I believe."

I disagree since a person can have excellent job talent yet be incompetent.
People can have skills and knowledge in areas where their talents do not lie.
Yes, and all too often people are in jobs that do not require their talent—these are bad hires.

"STEPHEN COVEY says if people have jobs that require their skills but not their talent, their organizations can never tap into their passion or voice."

I agree, but then again, that is my business.

"So, fire and motivation must come from within to bring out the best."

I agree, and when a person has the fire and motivation for the job, he may have the talent for the job.

"An employee may have the KSA's, but if the actual application doesn't take place to carry out the assigned task, then it surely amounts to incompetence, isn't it?"

We can be competent yet perform poorly due to our lack of talent.

"There is a mismatch here in terms of the job, person, as well as competencies. Do you agree?"

Yes.

"This is where a good number of managers falter in Recruitment and Selection and end up selecting employees to perform tasks that do not suit their competencies, resulting in dissatisfaction leading to high attrition rates."

Managers do a good job of screening out incompetent job applicants so they hire competent employees. What they don't do is differentiate between competent applicants who have job talent and those that don't have job talent. They hire both types and then complain that many new hires are less than successful.