Employee attrition is basically the loss of employees gradually over time without hiring replacements. It is the reduction of workers and staff in an organization using natural/normal means such as resignation and retirement but can also be accompanied by mass layoffs and dismissals without replacements. It may lead to loss of skilled labor but it also leads to a reduction in labor costs.
Attrition can also refer to the loss of customers and clients. Attrition is generally considered to be bad for an organization, especially if it is happening at a high rate. Attrition by the loss of customers leads to loss of sales, profits and by extension organization growth.
Employee attrition vs. employee turnover
Employee attrition is often confused and compared with employee turnover. Although they have major similarities, they are quite different. Whereas in attrition an employee leaves his job mostly due to voluntary reasons, turnover may have an employee leaving due to either voluntary or involuntary reasons.
The major difference between them though, is that, for attrition, an employee is not replaced when he/she leaves while immediate replacements are sought in employee turnover. In the former, an employee’s job is either given to another employee or the job description is completely eliminated.
Causes of attrition
A company can be the cause of attrition in various ways. When there is a change in management style or structure, some employees might be dissatisfied and leave on their own will, leading to high attrition rates. Getting rid of a whole job description also leads to attrition. This may be due to the company losing out customers or entire market segments and therefore not needing a certain department anymore.
Why a company may need attrition
A company wishing to achieve lower labor costs may initiate attrition by letting employees leave naturally and not hire replacements. This method is preferred because it is better for company morale. There is, however, a downside to this. When employees leave without being replaced, their duties are divided among the remaining staff. These may cause discontent among the remaining employees if these extra duties aren’t accompanied by an increase in remuneration, and it may lead to more attrition and employee turnover.
In cases where companies are merging or there is a takeover, entire departments may need to be eliminated in a bid to adopt the new structure.
A company that is downsizing or moving to a new country may choose attrition as a way out. This also applies to companies that are faced with intense debt and facing closure. Such companies may decide to follow the more intense attrition form of mass layoffs, which usually leads to bad publicity.