Attrition: What Is It? (With Examples)

By Chris Kolmar - Nov. 16, 2020

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It’s an inevitable reality that every company will face customer or staff attrition. Even though it’s a natural process, it can be a troubling situation for many unprepared businesses to be left with a vacant role or dealing with a poor retention rate.

Dealing with staff and customer attrition is a normal part of running an organization. Gaining skills for coping with it and learning more about the meaning of attrition can improve your team’s response when it happens.

What Is Staff Attrition?

Employee attrition refers to the common currents of employees exiting their position due to normal life circumstances.

Examples of circumstances that are categorized as attrition include:

  • Eliminating the position from the company

  • Retirement

  • Resigning

  • Family obligations

  • Relocation

In business, attrition specifically refers to when the company experiences a loss that a new hire has not replaced. While this may seem like it could cause holes in the organization’s workforce, some employers choose to use this as a method of cutting costs instead of implementing lay-offs. Taking advantage of attrition to reduce expenses on an employee’s salary is a positive way to tackle a loss in the workforce.

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While this can be a viable solution long-term for some companies, many will need to fill the position eventually. Utilizing an employee’s natural departure from the company to save money by not filling the role can land that person’s workload in the laps of your other team members. Unless they see some benefit from picking up the slack, this will likely lead to a tense work environment.

What Is Customer Attrition?

Perhaps a much more difficult situation to deal with, customer attrition describes when your client base is dwindling. It means you’re steadily losing your customers. This is another common occurrence in the business world.

Customers move on from becoming loyal purchasers at one point or another. Either they age out of the company’s target demographic, experience a change in financial situation, or other external life circumstances change their perspective.

The customer attrition rate keeps track of how your corporation is doing in terms of holding onto clients. This rate is reached by taking a start number of customers at the beginning of a period and dividing it by the number of customers at the end of the timeframe. This equation will result in a percentage that will describe your company’s growth or decline in the customer base.

There isn’t any definitive metric that determines what a good or bad attrition rate is. You know your business best and can decide if customer return has gone up or down.

Following your company’s customer attrition rate is critical for creating a strategy to improve or maintain your numbers.

What’s the Difference Between Staff Attrition and Turnover?

Staff turnover and attrition differ in the employer’s intent with what to do about the open position. During employee attrition, the employer does not intend to fill the position to save money, and turnover refers to when an employer does plan on finding a replacement for the position.

Employee attrition is often perceived as a situation with more positive outcomes for the employer because it allows them to reduce costs on an employee’s salary instead of laying-off a strong employee to make cuts.

On the other hand, staff turnover is commonly regarded as a negative situation because the company is tasked with finding and training a replacement, which can be a costly endeavor. Turnover is also more likely to result from less natural causes, like terminating an employee from their position for poor performance.

How to Deal with Staff Attrition

Staff attrition can often be the result of unhappy employees. Determining the root cause of employee dissatisfaction and reasoning for attrition can help deal with it long-term.

Consider the following tips for handling staff attrition and how to improve employee satisfaction in the future.

  1. Figure out the root cause. If you’re seeing spikes of staff attrition within your organization, it’s likely there’s a common cause of this movement towards departure. Figuring out what this root is can help you tackle it and retain your talented employees in the future.

    Maybe your compensation package isn’t able to compete with other major players in your field. Possibly, there’s a particular coworker who is creating a hostile work environment and making better employees seek alternative job options.

    Find the root cause of your company’s attrition, and then focus on how to solve this.

  2. Look for signs of loyalty in the interview stage. When you’re looking to fill a position, it can be tempting to hire the first person who has credentials and is qualified. However, failing to consider a potential employee’s loyalty and retention in the future can lead to a complicated situation if they leave abruptly.

    While you’re interviewing candidates for a position, you should be asking strategic questions to assess their employee ethics and integrity. Soft skills can make for a much more dependable employee.

    Examples of Interview Questions that Evaluate an Employee’s Integrity Include:

    • Tell me about a time you faced an ethical dilemma at work and how you overcame it.

    • How do you earn the trust of your co-workers?

    • Have you ever had to admit a mistake?

    • Where do you see yourself in five years?

    • What’s the most difficult decision you’ve made in your career thus far? How did you handle it?

    Spend a fair amount of time dedicated to recruiting the right employee to reduce attrition.

  3. Ask for employee feedback. One way to effectively measure what employees in your company are happy and dissatisfied with is by asking them for employee feedback. This format of open discussion where the staff member’s opinions and experiences are put on the table can make them more comfortable and ultimately happier.

    This can be done in a few ways. You can set up meetings with your current staff on a rotating basis to discuss their feedback for their role and company. This will give you a good idea of the positives and negatives your current employees are facing at work.

    If you’re dealing with a situation where you want to learn more from a specific employee’s dismissal or resignation, you can arrange an exit interview. During an exit interview, you can establish a clear understanding of why the staff attrition occurred and what actions you should take to improve retention next time.

  4. Improve working conditions. Oftentimes, finding that your company is dealing with a high employee attrition rate can be traced back to poor working conditions and dissatisfaction with the job. One way to improve working conditions is by addressing the problems your staff has.

    Questions about working conditions to consider include:

    • Does your staff feel like they’re paid a fair salary based on market average and experience level?

    • Are they satisfied with the upward mobility their role offers?

    • Are your company’s benefits package and perks strong enough to incentivize your staff to stay with the organization?

    • Does the company culture promote collaboration and open discussion?

    To answer some of these questions, you may have to consult your current staff for their honest opinions and feedback. If you’re finding that your company isn’t providing satisfying working conditions, you may want to think about making some changes to improve attrition rates.

  5. Engage your employee’s specific skills. Every member of your company’s team is a unique individual with their own prominent skills and experience. Taking note of and utilizing your employee’s personal abilities can benefit your attrition rates in several ways.

    Firstly, it makes your employees feel seen. When you explain to a staff member that you choose them to work on a specific project because of their expertise in the subject matter, it verifies that you’re looking into opportunities for them to excel. It displays your consideration for their success.

    Additionally, playing to your employee’s strengths can benefit your organization because it allocates tasks to the people most fit to complete them. You may be surprised at how far your company can advance when you consider each employee’s specific skills. It leaves less room for error and gives your team the ability to showcase their capabilities.

  6. Add on to your organization’s benefits package. While many companies aren’t able to award their entire staff with raises to improve attrition rates, it may be possible to beef up the benefits package you’re offering. The great thing about providing a lot of benefits is that it improves employee morale while also possibly benefiting the company.

    For example, offering your employees a set number of remote work days per quarter can be very useful for them. It allows them to accommodate a hectic life schedule when needed while still accomplishing their work.

    Small gestures like this can make a big difference in an employee’s perspective on how much you value them and increase the likelihood that they’ll stay on board. At the same time, it doesn’t reduce any productivity or cost the company funds.

    Examples of benefits your company could offer employees include:

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Chris Kolmar

Author

Chris Kolmar

Chris Kolmar is a co-founder of Zippia and the editor-in-chief of the Zippia career advice blog. He has hired over 50 people in his career, been hired five times, and wants to help you land your next job. His research has been featured on the New York Times, Thrillist, VOX, The Atlantic, and a host of local news. More recently, he's been quoted on USA Today, BusinessInsider, and CNBC.

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