There are a number of different key performance indicators and metrics that you can use in business to determine how your company is doing. One of them is the calculation of your company’s attrition rate.
As a business owner, you have to be very careful about these metrics because they indicate how employees and other stakeholders perceive your business. A common definition of the attrition rate is the staff turnover in your company.
However, this is a generally myopic definition. In a greater sense of the word, the attrition rate is simply the calculation of a number of people who move out of your company over a specified period of time.
It’s also referred to as the churn rate. It’s a term that’s used by most HR executives to determine the ability of a business to keep its main employees. But, what does it signify? More importantly, how to calculate your company’s attrition rate? Here’s what you need to know.
The Importance of Your Company’s Attrition Rate
The attrition rate shows how frequently employees leave your company or retire. As an employer, you will obviously want to keep the attrition rate low. It signifies higher satisfaction among your workers, and also makes it easy for you to maintain profitability.
If your company’s attrition rate is high, it shows that employees are leaving much faster than you would like. Ultimately, this increases costs. You have to negotiate severance packages, spend on training new employees, and you also have to worry about the gaps in which you are unable to hire a new employee.
A higher attrition rate shows that employees are not satisfied, or that your workforce is ageing. You will want to consider changing a few policies to keep them on board.
Why Track Your Attrition Rate?
Tracking your attrition rate is also important. By tracking this rate on a yearly basis, you will know exactly what’s affecting employee retention. For instance, if the attrition rate is high, it indicates a serious problem.
There is also a very close correlation between your company’s attrition rate and staff turnover. But, you should know that turnover has to do with different factors. Attrition is more focused about the big picture and the changes in your workforce.
How to Calculate the Attrition Rate
The formula for calculating the attrition rate of your company is actually quite simple. It is as follows:
Attrition Percentage = (Number of leaves / number of employees) x 100
As you can see, the attrition rate is depicted as a percentage of the total number of employees working in the company. As you track these percentages from one year to another, you will be able to figure out whether employees are more motivated to work with you or not.
How to Bring Down the Attrition Rate
Now that you understand the importance of your company’s attrition rate and why it plays such a key role, it’s important that we talk about how to bring it down.
Remember, having talented employees on board could make a huge difference to the growth of your company. It allows you to have a team of excellent individuals who can think outside the box and come up with unique strategies.
It’s one of the reasons why talent management plays such a key role in modern HR techniques. Now that you know the basics, let’s talk about how to bring down your company’s attrition rate.
Focus on Employee Satisfaction
One of the best ways to reduce your company’s attrition rate is to pay attention to the satisfaction of your employees. If you see employees leaving your office for new work opportunities, you might want to dig deeper into why that is happening.
Perhaps it’s because the culture of your company is poor? Maybe they feel they don’t get enough recognition for their work? Maybe they want to take on new responsibilities but are unable to do so?
A simple thing such as a satisfaction survey could help you determine whether your employees are satisfied or not. It will also give you insights on things that are going wrong and the ones that you can improve upon.
Offer Competitive Salaries
Money is the ultimate motivator at the end of the day. Your employees won’t mind bearing the brunt of a disgruntled boss’ antics as long as they know that they are getting a hefty amount of money.
You don’t have to pay them exorbitant sums of money either; you just have to make sure that you keep the pay as competitive as possible. Employees should know that if they look for opportunities, they won’t find many with a higher pay than yours.
One of the best things to do is to ask your employees where they see themselves in the future. By maintaining good hiring practices and focusing on the organization culture, you will be able to bring down the attrition rate by a considerable margin.
One of the best questions that you can ask is to see how long an employee sees themselves in a particular role. You can then give them incentives for growth by offering promotions and financial bonuses based on performance.
The aim is simple: you have to show your employees that you care about them. As long as you continue to do that, you will be able to succeed in bringing down your company’s attrition rate.
The Bottom Line
At the end of the day, keeping your attrition rate down is only going to benefit your company in the future. It’s going to improve operations and bring stability in your business. More importantly, it’ll help you attract top talent to your business as well.