Your business attrition rate is the rate that employees leave your organisation voluntarily. This is sometimes referred to as the churn rate. Ideally, businesses want to keep their rates low - but why is it important?
Well, there are plenty of negatives to a business having a high churn rate. Not only can it be expensive for the company, but it doesn’t do your brand image any favours either. If you’re not sure of the impact that high rates can have on your business, this post will outline everything you need to know.
- What is the attrition rate in your staff? And why is it important?
- How to calculate your attrition rate
- What are the causes of high attrition rate?
- How to Decrease Attrition Rate
Attrition rate is the metric that helps you to understand how well you’re keeping hold of your talented workforce. A high churn rate means that staff are coming and going frequently, whilst a low one indicates that your staff members are longstanding.
Some people think the key to retaining your staff is keeping them happy with their benefits. To a certain degree, this statement is correct. However, just because your benefits are amazing won’t compensate for a poor working environment or terrible working relations between team members.
Think about it, just because you introduce a 3pm finish on a Friday or put a beer tap in the break room, will that make employees want to stay if the majority of other areas are struggling? We think not. It’s all about finding that right balance to retaining employees and making them want to come to work every day.
If you think your attrition rate isn’t important - think again.
If your rate is high it’s clearly an indicator that you’re not doing enough to keep your employees happy. Whether that be because your team morale is poor, team members are overloaded with work or they may feel that they’re not receiving the right benefits and salary that reflects their worth.
You should always aim for your churn rate to be as low as possible. Although bear in mind that different industries will have varying rates - so what’s high in one, may be low in another. For example, the rate of bar jobs will be much higher than in NHS jobs.
Calculating your basic churn rate couldn’t be easier. All you have to do is take the number of people that have left your company and divide it by a specific number of employees over a certain time period.
If we say that a business starts the calendar year with 80 employees and finished with 100 employees. Although they’ve grown in stature, over the year 20 employees have left the business. So to work out the churn rate you do:
Annual attrition rate
= 20 / ((80+100) / 2
= 20 / 90
= 22.2 percent
The number of employees that left the company is 20. So, that then gets divided by the average number of employees over the year, which is 90 (180 / 2).
That’s the easiest way to work out your staff churn rate, but it doesn’t always have to be done on an annual basis. If you want a more accurate indication of your attrition rate, you can work it out quarterly or monthly.
An annual figure may not be a true reflection of how good or poor your staff churn rate is. Having an understanding of the overall rate is one thing, but understanding the constant trends that occur is taking it to a further advanced level.
For example, you may have an overall rate of 22 percent like above. But that doesn’t show at which stage of the year the most employees left your business. It also doesn’t show through which quarter you retained your staff more effectively.
Once you’ve taken a deeper look into your rate, you may find that it’s slowly increasing - which is a worrying sign. You want this figure to slowly decrease over time so that it’s the lowest that it can be. To reduce your rate, you need to first be aware of the different factors that can affect it.
High attrition is expensive. It’s thought that it could cost a business six to nine months of an employee’s salary trying to replace them. So, you’re looking at a big cost if you have to re-hire and train after an employee has left.
And that’s not just fully-skilled employees. Workers who are further down the business hierarchy are still expensive to replace. You should always aim to keep your churn rate as low as possible - for the sake of your wallet and the foundation of a solid workforce that you can rely upon.
The main causes of staff turnover in your business are:
If an employee is under a lot of pressure and is highly stressed, they’re more likely to quit their jobs. Previous studies have shown that there’s a direct correlation between increased stress levels within the staff to them quitting and leaving the company.
A common problem in the workplace is that employees start feeling overwhelmed by their workload. Having somebody that can coordinate their workload and help share the jobs around to people who have more capacity will help to deal with stress levels. There’s nothing worse than feeling snowed under with work and that you’re not getting anywhere in trying to move it.
A lot of people are motivated by money. So, if an employee feels like they’re not being paid enough for their efforts, it’s likely to demotivate them. From there, they may start to look elsewhere for a business that is willing to give them more in their pockets at the end of the month.
Obviously, you can’t just increase everybody's salary to hang onto them. But what you could do is include an annual salary review in their contracts to keep them working hard towards that goal every year. It also shows that you’re willing to invest in the right staff, provided that they give the time and effort across the year.
Room for progression
Nobody wants to feel like they’re just treading water in a dead-end job, do they? A lack of progression is a main cause of frustration, demotivation and ultimately staff turnover. If an employee feels like they can’t go anywhere within your organisation, they’re going to look elsewhere for a company that will offer them a clear path of personal development.
People are chasing careers, not just a job to get from payday to payday. A lot of people consider room for progression just as important as being paid the right salary, if not more so. Nobody wants to stagnate and plateau.
Offering clear routes of progression is the clear way to combat this. But don’t make promises you can’t keep. If there’s a roadblock on progression, training and further qualifications are also recognised as progressing in a career. It doesn’t always have to be about promotions.
Who you work with has a massive effect on your attitude to work. If you work amongst a team of positive, motivated and determined individuals that are all striving for the same goal then there’s going to be great chemistry around the place. Morale will be high and your team will more than likely be smashing it.
However, on the flip side, if the culture is sour and it’s not a particularly nice working environment then your workforce isn’t going to enjoy being at work. And if they’re not enjoying being there, the chances are that they’re not putting everything into their work either.
People want to enjoy where they work, not dread going in every day. A way of improving the working environment is fostering more positive traits and trying recognition tactics with your team. If they’re being told that they’re doing well, or receiving more constructive feedback then they’re going to feel naturally more motivated.
The first way to start decreasing your staff turnover is by understanding the reasons that they’re leaving. As you’ve just seen, there are various reasons why employees leave businesses, but each one is different so it’s important to outline the ones that are unique to your company.
The easiest way to find out why employees are leaving your business is to quite simply ask them. We understand that this isn’t an easy chat to have, but any feedback that you receive here you can focus on putting right and hopefully decreasing your staff churn rate.
The best time to have this chat is in an exit interview with the leaving employee. At this point, they’re already going so they won’t hold back with what they have to say, which makes for good, honest feedback.
If you don’t know what’s making them leave, how will you know what’ll make them stay?
Of course, you don’t have to wait for an employee to leave to find out. Just talk to your employees, ask them if they’re happy and if they’re not, find out what it is that’s hampering them at work. It’s one thing asking, but you need to be sure that you act on it too.
Reduce attrition by focusing on your company culture
As you’ve just read, your company culture has a big effect on everybody's working life. If your employees are going to work unhappy and unmotivated, then that’s likely to reflect on their work too.
Does this sound like your team? If it does, then you need to make some changes immediately. Working relationships should never be far from the forefront of your business mind. Luckily for you, at Red-Fern it’s something we prioritise in everything that we do.
For some handy tips and useful guidance, download our free partner guidebook below and take the first step to reducing your company attrition rate.