About 70% of businesses fail within a decade of starting.
Running a business is no small task, and there are plenty of things you’ll need to keep an eye on. Two key areas of focus are employee retention and employee attrition. They’ll both have a sizable impact on how productive your business is and will directly affect how quickly you can reach your business goals.
So you may be wondering what these two concepts are, and how they compare. In this guide, we’ll look at retention vs. attrition so you can get a better understanding of both. Keep reading for more.
What Is Employee Attrition?
Employee attrition (also sometimes called worker attrition) is a term used to describe the natural reduction of a workforce. It includes reasons such as retirement, resignation, sickness, or death. In general, the role that a person vacates isn’t replaced for a long time – or sometimes ever.
People often think that employee attrition rate and employee turnover rate are the same thing, but that’s not the case. Employee turnover encompasses all terminations. Sometimes, these are positions that are refilled immediately or in a short time.
There are several key drivers of employee attrition. Poor job satisfaction and lack of growth opportunities are two of the biggest factors. If people aren’t happy at work or don’t see their job going anywhere, they’re less likely to stick around.
Poor organizational culture is also very important. They might not agree with company policies, practices, or strategies.
Another key driver is poor management. No one likes working at a company with poor leadership, so this causes a lot of people to leave their jobs.
You can calculate your employee attrition rate by dividing the number of terminations in a period by the number of employees you had at the start of that period.
What Is Employee Retention?
Employee retention relates to a business’s ability to keep employees. High employee retention results in low employee turnover. There are all kinds of things that will cause an employee to remain with a company, and some of the key drivers are the opposites of those mentioned above.
Quality management and good organizational culture are both things that will make people want to stay with their current employer. Job satisfaction is one of the most important drivers, and growth opportunities are incredibly important to a lot of people.
There are certain periods where business retention can be more important. For example, when a business is struggling (such as during the Great Resignation). Tracking your business’s employee retention rate will help you determine if you’re doing things right or not.
To work out your employee retention rate subtract the number of employees who have left from the total number of employees. Divide this by the number of employees, and times the value you get by 100 for a percentage value.
Retention vs. Attrition
You should monitor both your employee attrition and retention. Both serve as indicators of the quality of your business’s culture and health. They’ll give you a better idea of things like engagement and loyalty, showing you how stable your business is.
It’s important to bear in mind that while they both indicate your company’s health, they look at opposing outcomes. Attrition gives you information on employees leaving, while retention relates to employees staying.
You shouldn’t consider brand-new employees when looking at employee retention. Anyone hired within the last month doesn’t count toward your retention rate. Your attrition rate, however, does factor in these employees.
You may or may not include involuntary turnover in your retention rate calculations depending on your business. This is because these might be employees that your company doesn’t want to retain. Involuntary turnover is, however, always included in attrition calculations.
Period of Measurement
When calculating retention rates, it’s usually done over a fairly long period (eg. one to five years). This is because it relates to business changes in policies, practices, and strategies.
Attrition is different and is typically calculated on a month-by-month basis. This gives you more of a snapshot of what’s currently happening.
Why Measure Attrition?
One of the main reasons to measure attrition is to get a better idea of employee satisfaction levels. If you find a high attrition rate, it tells you that people aren’t happy with how things currently are. This will also affect things like engagement and productivity, so you’ll want to consider what changes you can make.
While employee attrition doesn’t relate to replacing employees, some costs can come with it. As skills are lost, you might need to pay to train other employees and upskill them. This can result in a loss in productivity, which will directly affect profits.
You always want to maintain an appealing brand. A high attrition rate can have a negative impact here. This will make it harder to attract new talent in the future.
Why Measure Retention?
Knowing your retention rates will show you how happy people are at your company. It can show if your hiring and training processes are having a good impact. Being able to make these kinds of assessments is one of the best ways to know how you can improve your business.
You can look at the retention rates of different departments and compare them. This will make it easier to prioritize resources for the best results.
Perhaps the main reason to measure retention is to save money. Recruitment is a very expensive process, so it’s always better to try to retain employees rather than hire new ones.
Achieving Better Attrition and Retention Rates
When looking at retention vs. attrition, you can see that they’re somewhat different. It’s important to track both if you want to make positive changes to your business.
Bradford Jacobs offers a range of services that can help with business operations. We can help you improve both your attrition and retention rates and may be able to help your business in various other ways. Contact us today to find out more about what we can do for you.