The attrition rate is one of the most under-discussed terms in business. Does this makes it (ir)relevant or a very important but hard to understand topic? Anyhow, it’s serious as it points out multiple problems under your organization’s roof. The attrition rate is a controlling valve, often signaling something is very wrong.
What is an attrition rate?
With the global phenomenon such as the Great Resignation tracking attrition and turnover rates has never been more important. As resignation rates have been high and new job openings even higher, continuous understanding of turbulence is of the utmost importance for HR professionals.
This can be achieved by understanding what the attrition rate is. It’s a measure that represents the percentage of employees who leave an organization over a specific period, voluntarily or involuntarily. You can calculate it using the following formula:
Attrition rate = Number of separations/Average number of employees X 10
The result defines four types of attrition:
- Voluntary attrition - When an employee chooses to leave
- Involuntary attrition - When an employee is dismissed
- Internal attrition - When employees move internally
- Demographic-specific attrition - When the specific group leaves
As a usual misconception HR professionals use attrition and turnover rates as synonyms, but they are different indicators.
What makes the difference between attrition & turnover rates?
The turnover rate describes the percentage of hired people to fill the gaps as quickly as possible. While attrition rate shows why and how fast people abandon your organization. That being said, turnover helps to cure the wound, while attrition signals how to treat it. Comparing these two terms showcases if the vacancies left by attrition are immediately filled up or not.
Attrition rates: the good, bad, and ugly
First of all, we have to say that there are no zero cases of attrition and that companies usually aim for a rate of around 10% or lower.
Attrition rates may vary from country to country, and the same goes for industries. But according to Gartner, IT industry turnover rates will stay around 20% or even higher for the foreseeable future.
A good attrition rate is relative to the size and type of your company, but it’s pretty possible to be precise with the reasons that are causing high attrition rates.
Insufficient recognition
People want to be recognized inside their organizations and largely by their superiors. For 26% of survey respondents, leadership and peer-to-peer recognition are ideal ways to acknowledge their work. When employees feel they aren’t contributing to the company, they lose their motivation and put in the bare minimum required. It’s a point when they will probably start looking for another job.
Stagnant career
When employees don’t see any career advancement opportunities, they will look elsewhere for a place that appreciates their talent. IT companies usually offer different mentoring programs helping to upskill or internally relocate to preserve retention levels.
Inadequate compensation
If your employees are working more, but with the same salary levels, sooner or later, you will start feeling complaints. Depending on the sensitivity of your company leadership, it must define a distribution curve internally to see what is realistic and consistent to them. As in any other industry, there is no right answer to how much you should pay software engineers.
Lack of company culture
Company values, mission, and vision aren’t just a nice decoration in the IT industry. They form one of the most important aspects of retention for software engineers - company culture. If you want your employees to trust you in what you preach, they need to see that in practice.
How to start improving attrition rates
There are many ways to improve, but no such powerful organization can treat them all at once. Assessing where are the most urgent problems is the usual way to start, and that is only possible with open leadership and professional management. Attrition rates are just an indicator that something is wrong and not the guiding line to pinpoint the problem.
Once you are positive about what ground zero is causing high attrition rates, these are the ways to improve it.
Recruitment methods
Hiring promising candidates is one of the many steps toward success. Recent Dev Survey 2022 reveals that more than 50% of software engineers start looking for another job in less than 2 months. They started the following reasons why they changed their last job:
- Salary
- Toxic working environment
- Stressful working conditions
- Change in job expectations
By implementing a strategic hiring process supported by rock-solid company culture, concerns about the mental health of your employees can help you hire better talent for your company.
Developing an onboarding program
It became pretty obvious during the recent remote work era, as with limitations to getting in touch with new employees, it had to be done using video calls. It showed us how hard it’s to provide new candidates with all important aspects of their day-to-day activities or to get introduced to their teams. As with any other employee, software engineers have grown all sorts of fears. Thankfully most companies responded very well to the challenge, according to our survey. However, HR teams can always review the onboarding process effectiveness using onboarding surveys internally.
Pay transparency
Employees in the IT industry are quite vocal about pay transparency. Companies with pay ranges and benchmarks for raises and bonuses allow employees to know what to expect with their compensation, making them stay longer.
Diversity and inclusion
When employees don’t feel comfortable in the workplace, they consider looking for another job. Especially in the IT industry, diversity and inclusion policies are topics with the deepest concerns. Developing policies is just half of the process. The next steps are more important as they focus on implementing and building an inclusive workspace. Workshops and other types of training become increasingly important as inter-organizational awareness starts from the employees themselves.
The post-pandemic world demands constant tracking
Employee attrition rates still are a great indicator if your company shows signs of weakening. Without it, it would be very hard to know what are the reasons why employees are abandoning your organization and what you can do to keep them. And just to know, low attrition rates aren’t always good for a company. People who spend long periods in a company can come up to a stall and general lack of ideas helping to push the business forward.
