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How to Reduce or Increase Employee Attrition Rates

written by: N Nayab•edited by: Jean Scheid•updated: 7/22/2011

The value that human resources brings to an enterprise prompts most employers to reduce employee turnover. The dynamics and fluid external environment may at times, prompt organizations to increase employee turnover. Good organizations set employee turnover goals to cater to such requirements.

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    Better Hiring Practices Employee turnover is the ratio of the number of workers replaced in a given period to the average number of workers. Most organizations strive to reduce employee turnover, as regardless of the skill transfer programs in place, a departing employee takes with them much of the organization’s intellectual capital and experience. Organizations would have to spend considerable time and effort training new employees and suffer losses of productivity during the period a new employee learns the ropes and starts performing at their optimal best. Further, turnover causes the company to accrue additional hiring costs.

    As the new knowledge-based economy brings the value of human resources to the organization center-stage, organizations try to retain their skilled employees. Although organizations may ideally want zero attrition, some level of attrition is normal. Proactive organizations analyze their historical patterns and industry trends to set what it considers as a normal attrition rate. Attrition below this rate would construe as success of the employee retention strategies, and attrition above these levels would signal a cause for concern and requires strong interventions to stem the tide of employees leaving for greener pastures.

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    Overhauling Rewards and Work Systems

    People work for different motivators. Some employees are primarily motivated by monetary rewards, others look for a good work-life balance, an still others, prefer a sense of achievement. Maslow’s Needs Hierarchy Theory, Aldefer’s ERG theory and many other behavioral theories expound what motivates people. People quit organizations because the benefits they enjoy may not align with what motivates them. For instance, a salary hike would hardly entice a skilled employee looking at self-actualization to stay, if the work offered does not challenge him. Redesigning job duties to make them more challenging may entice such employees to stay even if salary remains constant. Similarly, people with family may not quit a job that offers flextime or telecommuting options even with fewer benefits compared to a full-time nine to five job.

    Organizations looking to meet their employee turnover goals would do well to understand what motivates each employee, and devise integrated retention strategies that include a flexible rewards and compensation system, a work allocation system, work timings and more, to align with the motivation of key employees.

    Generally, few employees will leave an organization that offers challenging work assignments or significant job allocations that allow the employee to develop and grow. Specific strategies include maintaining healthy workloads without overburdening the employee, taking steps to establish a stress free workplace, involving the employee in decision making and allowing them to take ownership of work, recognition for accomplishments, flexible work schedules, opportunities for career advancements, and an opportunity to further interpersonal relationships at work, all backed by decent wages and benefits. A cafeteria system where the employee opts for the benefits they value most also helps reduce turnover.

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    Better Hiring Practices

    Employee Turnover Controlling employee turnover has to start at the time of recruitment itself. Organizations developing a culture, articulating the same to the employees, and then hiring employees who fit into such culture will see such employees remaining longer owing to their sense of association and belonging.

    The hiring process is the best opportunity to determine the employees’ key motivators, to determine if the organization can match it. For employees with previous work experience, HR would do well to ascertain why the employee left their previous jobs and determine if a similar situation would repeat after the organization invests time and resources to train the employee.

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    Strategies to Increase Turnover

    Organizations generally try to retain their workforce, but at times, strategic considerations may require encouraging high turnover. The business owner may look to exit the business and start something new, for which the existing employees may not be needed or suitable. The nature of work may be basic or mundane, ideally suited for out of college graduates as their first job. Over time, people in such jobs may become frustrated owing to lack of growth opportunities, and the best approach might be to encourage employees to leave and take in new and fresh out of college employees.

    The following are some effective strategies toward this end:

    • Institute succession planning to make explicit the few employees who would secure promotions and a better deal, thereby sending out message for others to look elsewhere.
    • Have a flat reward and compensation system, so the only option for those seeking growth is to look elsewhere.
    • Sign employment contracts for a limited period, say one year, and do not renew the contract.
    • Terminate non-performers.
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    A Proactive Approach

    Research suggests the various strategies and interventions to control employee turnover invariably ends in failure, and on average, companies lose about 30 percent of their human capital a year regardless of turnover strategies. Such trends make researchers Deepak Somaya and Ian O. Williamson at Sloan Michigan Institute of Technology suggest a proactive approach of seeking potential opportunities that emerge from the increased employee turnover by maintaining positive relationships with departing employees as they transition into their new jobs, and live with the retention as an unavoidable reality.

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    References

    Somaya, Deepak & Williamson, Ian O. "Rethinking the War for Talent." http://cb.hbsp.harvard.edu/cb/product/SMR284-PDF-ENG. Retrieved July 18, 2011.

    Image Credit:

    1. freedigitalphotos.net/ambro
    2. freedigitalphotos.net/ambro