What Attrition Really Costs

In this era of low unemployment and high quit rates, employers are increasingly interested in ways to reduce attrition. However, employers may face significant, and often unexpected, obstacles:

  • They don’t track or measure attrition
  • They don’t trust their attrition tracking
  • Their tracking lacks key components (i.e., they can’t tell who quit vs. who was fired)
  • They don’t track the reasons why people leave
  • They don’t measure often enough to see patterns or capture trends
  • They don’t know what “good” retention rates look like

Without a well-defined and consistent process for analyzing attrition, employers find themselves lacking data to inform fundamental staffing decisions. Worst of all, they have no idea how much attrition is costing them.

Focus on true cost. It can be likened to mortgage interest — homeowners get so focused on how much the monthly payment is that they aren’t really aware of the ‘hidden’ costs. If they ever take a look at how much interest they pay over the life of the mortgage, it’s staggering how high that amount is.

Without a structured attrition strategy, it can be difficult for employers to quantify the costs, including productivity, time lost and missed revenue opportunities.

Replacing a lost worker costs about 33% of that role’s salary, including loss of intellectual property knowledge and retraining the replacement worker, as well as the negative impact on getting the work done. These are huge expenses that are often overlooked.

Commoditizing the recruitment process can lead to an emphasis on salary or staffing costs at the expense of scrutiny on the real, total costs. Tracking attrition offers insight into the proportion of attrition and the underlying reasons.

Short- and long-term data. There are useful data points that can be gleaned from tracking attrition month-to-month as well as on an annualized basis. If you’re only tracking a full year of activity, you’re missing crucial opportunities to react and make course-corrections to address issues in real time.

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It also helps keep retention top of mind. It’s critical from a cost standpoint to have consistent measurements.

Optimum attrition rates vary by industry, employment status (full- or part-time), tenure and skill set. Turnover tends to be highest in the first 30 or 60 days, which is even truer in this competitive hiring market. And yet even at that early point, companies have likely incurred significant onboarding and training costs.

Building up benchmarks can take some time, but they are invaluable in determining progress.

Why people quit. In addition to tracking the volume of quits relative to the total workforce headcount, a deeper dive into why people quit can reveal hidden pain points. It could indicate gaps in training, ineffective supervision, uncompetitive pay or a negative work environment.

At times, attrition issues can masquerade as other workplace challenges, such as increased overtime. In addition to significant costs, high turnover places an unnecessary burden on remaining workers who have to pick up the slack and continually support the replacement worker’s learning curve.

A failure to address high attrition rates can do serious harm to your business. It costs time and money, causes stress to your tenured employees and can even jeopardize your ability to get products out the door. Retention is mission critical, and it deserves to be at the forefront of your talent management strategy.

Ideally, organizations should implement a process that:

  • Tracks and measures attrition rates
  • Incorporates data on attrition causes
  • Supplies quantifiable results that can be tracked and compared
  • Provides insight into short- and long-term trends

These benchmarks can provide actionable data to support their workforce management strategies and drive results.

Companies can realize significant improvements to their bottom line just by implementing effective attrition tracking and measurement. They can cut their attrition costs and increase productivity that boosts revenue.

Luke Moran

Luke Moran
Luke Moran is director, strategic sales medical device, at Aerotek.

Luke Moran

Kimberly McHugh

Kimberly McHugh
Kimberly McHugh is strategic account executive, life sciences, at Aerotek.

Luke Moran

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