Attrition: Definition, Working, Types, Pros and Cons

As a workforce, talent, or human resource management process, attrition revolves around the deliberate downsizing of the workforce or employees via retirement, resignation, sickness, or death.

When attrition occurs, business owners or employers lose a lot of their investments in selection, recruitment, employee training, onboarding, engagement, etc.  It is understood as a cordial departure from an organization which can be useful in case a company is facing financial issues.

Vacancies caused by the former employees are also not filled by employers in attrition practices. But attrition can also have negative impacts in the form of a reduction in the strength and size of the workforce that ultimately increases the workload for the remaining workforce.

This post will take you deep into the world of employee attrition, and help you understand why it occurs, and how businesses can prevent it. So, without any further ado, let us get started right away-

What is Attrition?

Attrition is a crucial concept which implies reducing the number of staff members. This reduction happens continuously and is deliberate.

In attrition, a considerable number of staff members resign or retire. New employees do not replace them. Their vacancies are not filled, and hence, the workforce gets depleted.

This depletion of the workforce is also termed as ‘hiring freeze.’

It is because hiring new employees is frozen, and the older employees leave the company either by resigning or by retiring.

Attrition happens due to various reasons like depletion in the customer base or cost-cutting. Employee attrition talks about the rate at which employees are voluntarily leaving a company. Let us have a look upon how the process of employee attrition occurs-

Working of Attrition

Attrition works in a less devastative manner than any other form of workforce reduction.

Since there is a hiring freeze, there are lesser job openings and almost no new recruitment. This process has been devised to ensure the least damage to the company’s existing employees.

Hence, it is not done drastically. The employees resign on their own, or they retire due to the age constraint, and therefore, there is natural and gradual reduction.

It arrests the scope of promotions in the hierarchy of designations. It might harm the interest and sincerity of the staff present. They might lose interest as they might feel that they are not being rewarded accordingly.

Every company has a rate of attrition fixed, which they need to follow as it is healthy and beneficial for the company. If more employees lose interest in their jobs, more employees will quit the job.

It will increase the rate of attrition, and the company will lose more staff members. It will not be right for the working of the business. Hence, the plan of action for attrition should be designed correctly and appropriately.

Types of Attrition

There are two basic types of attrition based on the nature of the members whose number is reduced. Let us go through them here and now-

Employee Attrition

Here, the staff members are reduced, and this is a deliberate and gradual action. It is for the benefit and betterment of the business, as it helps a company in decreasing its expenses at the times of financial crisis.

Customer Attrition

In this type of attrition, the customer base shrinks. It is not a deliberate process, and it is a worrisome situation for the business. Companies need to come up with powerful strategies to prevent customer attrition.

Pros and Cons of Attrition

Attrition has many pros and cons. To focus on the pros, the management team needs to study attrition well and make correct decisions.

Pros

1. It reduces organizational costs and cuts the expenses down if the company is facing any financial distress.
2. The process of attrition is more considerate, amicable, and cordial.

Cons

1. There might be a radical reduction in the strength of the workforce. The employees might lose interest and sincerity.
2. The remaining employees might face an increase in the workload and feel stressed about it.

Common Reasons for Employee Attrition

Some of the most common reasons for the attrition of the workforce are-

1. The occurrence of unfair payment system
2. Not offering enough opportunities to grow and develop careers
3. Not providing the right work-life balance
4. Not having employee recognition and awards sorts of the system for motivating employees
5. Having poor employee and business management
6. Letting employees work in poor work conditions
7. Not offering the common benefits that employees are getting with other employers
8. Other personal and specific reasons

Now, companies that are not on the cost-cutting drive and wanting to keep their best employees with them need to comprise some of the effective strategies for preventing attrition. Some of the tips that are quite effective in impeding staff and customer attrition are-

Here is a video by Marketing91 on Attrition.

Tips to Prevent Attrition

1. Always hire the right people in your company
2. Show your workforce the opportunities
3. Offer your employees benefits like health benefits, retirement funds, wellness programs, etc.
4. Manage your workforce with the trust
5. Provide a great working environment
6. Ensure the right work-life balance
7. Channelize a system of two-way feedback
8. Let your employees or workforce feel valued
9. Never try to micromanage, and opt for delegation

Final Thoughts!

Now, on the concluding note, we hope you would have understood what attrition is and when it can be beneficial and when it can cause severe loss to your investments.

For running a successful business model, you need to have full knowledge about the attrition causes, advantages, disadvantages and working, so you can plan its line of action in favor of your company.

Keeping your best employees with you is always better, and opting for the right strategies for preventing attrition by engaging and motivate the workforce will, for sure, be productive and profitable for you.

What your thoughts about the higher attrition rate in a company? What strategies do you consider best for preventing the attrition of the best employees? Share with us in the comment section below.