Is attrition a boon in disguise?

A higher turnover rate is not always something to worry about. In fact, attrition often augurs well for the organisation, IF it is the low performers who are leaving.

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Looking at the common mindset of people, attrition is a word which has always carried a negative connotation. When you hear about a company having an attrition rate of 30 per cent, it usually makes the work culture of the company questionable. But that is not always true.

For instance, let us take the case of the HR personnel in the company. Their performance is measured on the basis of the attrition level. And, if people are leaving the company, that clearly means they were unfit for the company’s culture in the first place. So, does that mean the HR personnel underperformed by hiring misfits? No. There is another way to look at this.

Attrition actually gives the company an opportunity to build a better talent pool. Therefore, is it possible that a higher attrition can actually be a good sign for an organisation?

We posed the same question to some of the HR heads and leaders from the corporate world. This is what they had to say:

Ajay Tiwari

Ajay Tiwari, VP-HR, Lupin

I do not agree with the fact that higher attrition level is a positive sign for a company. What I have personally experienced and seen is that, when attrition level is at a higher side, the company loses the best of its talent. You must have heard a very common phrase in the corporate world—‘Employees do not leave a company but their managers.’ The same thing applies here as well. Even if we go by the books, attrition is always taken as a negative sign for a company.

Talking about building a better talent pool— well, you are not supposed to wait for a higher attrition situation to do that. Talent management is a continuous activity and there are other tools and methods to achieve the same. And here is how I justify my statement that attrition takes away the best of the talent— at the time of hiring, we analyse and hire only those people who make for the best culture fit for the organisation. Therefore, if a large number of people leave, it certainly indicates that there is something wrong with the culture.

Anant Garg

Anant Garg, director-HR, Eli Lilly

Attrition often has a negative connotation, but some attrition may be actually healthy for an organisation. Not every organisation may be the right fit for every individual, and there can be various aspects— such as career goals— that may be better fulfilled by pursuing another opportunity at a given point in time.

Some attrition may be desirable to keep raising the performance bar in the team, and create a culture of meritocracy. At the same time, it creates opportunities for more talent to grow, as one movement may open up opportunities downstream. Often, you see leaders boasting of zero attrition, which is not always something to be proud of.

Satyajit Mohanty

Satyajit Mohanty, CHRO, Crompton Greaves

The answer to this question is contextual, and depends on the cause and nature of attrition. Mostly, high attrition scenarios prevail in the following situations:

1. Toxic work environment

2. The overall ‘declining’ status of the business (the ‘sinking ship’ phenomenon), including uncertainty of the future

3. Entry of several competitors into the scenario — so they target established players for talent poaching

4. In industries such as insurance, high attrition in the frontline (sometimes ironically called ‘infant mortality’) is due to the fact that it takes frontline personnel time to bring in business. However, many managers do not have the patience to wait it out and as a result performance-related exits are very common.

5. When the organisation is undergoing a transformation, many people leave if they are not used to the new ‘ways’ of working or if they are not very open to change. This is especially true when organisations try to upgrade the performance level.

In situations of toxic work environment and overall business decline, it seriously dents the employer brand proposition and makes attraction of top-notch talent very difficult. Besides, when such a situation arises, the people who leave, more often than not, are high performers, for whom it is much easier to find jobs. Hence, in such situations, the overall talent quotient of the organisation declines. Even the phenomenon of top talent leaving is often witnessed in cases of stiff competition, though the trend is not so much marked.

However, in the case of business transformation, it helps organisations recruit the talent with the right skillset and mindset. In such situations, it is not uncommon for relative underperformers to leave as they often prove to be underequipped to adapt to the changes. It is also possible to retain the top talent by making them partners in the transformation process.

In the situation where the industry itself is in a ‘high-attrition zone’, the results can be mixed. Here, continuous strengthening of the quality of recruitment can ensure that a better talent quotient is built up, progressively.

Rishi Tiwari

Rishi Tiwari, cluster director-HR, Hilton

There are various reasons for attrition these days. You cannot simply blame the company culture for a higher turnover rate. There are, of course, internal reasons for high attrition level. However, there also exist external reasons, such as more competition due to growth in the overall market. In such situations, people have so many other opportunities to explore. Employees do not live with the fear or uncertainty of who will hire them if they leave their jobs. Just as we segregate our customer base in marketing, we should also segregate our employees in the same manner, on the basis of their potential and performance. I personally segregate my workforce into high and top talent, average performers, and low performers. When attrition happens, we should find out exactly which category of performers are leaving. If I have a low attrition percentage, but my top talent is leaving me, then it is certainly a serious issue. However, if I have a high turnover rate, but my low performers are leaving, then it gives me an opportunity to build a better talent pool.

7 COMMENTS

  1. Ya.. the only place where attrition is running close to 0 is probably in Japanese companies.
    In a company of 10,000 maybe 1-2 employees quit in a year. For Indian context, targeting such a low attrition rate is misleading. So you get to strive for a ‘healthy minimum ‘ which maximises organisational as well as people long term well-being. A wise man that I have the privilege to work with once said – “attrition is an onion that can be sliced in many ways”. Eager to hear others to share their cuts!

  2. My observation :
    1. Good attrition is the best way for existing employee to learn new process or ways .
    2. Employees learns how to work in team .
    3. I have seen company where their is very low attrition groupism is very high they eventually never grow .
    4. Low attrition organisation / team are generally stereotype.
    5. Low attrition organization slow become house of bureaucracts

  3. That sounds like Jack Welch’s bottom 10% way of looking at attrition and in that case it is firing not attrition. Would it not be more valuable to find where talent is squeezed, growth stunted, in wrong roles, with wrong leaders? Make attrition predictably worrisome than a fill it, refill it and shut it chore! Attrition is not mathematics.

  4. Reflection on the view points looks like a valuable insight at the same time…the results are different when rubber meets the road we have a different picture ! I don’t want to sound as some one does not value human as the important asset the organisation posses and the differentiation it makes in today’s world where product differentiation is wafer thin at the same it has been observed and as practising leader for 25 years with reasonable success (still a learner and with lot humility)that inspite of your best of your effort the attrition happens and to me it looks natural…HR practitioner generally finds difficult to accept but many time on the ground zero the story is different!!! Very personal opinion inlay be wrong

    • Ehsan Reza value your vast experience , true , finding the reasons for attrition is an after thought. What may work in favor of organisations is to identify, who you want not to quit and go and being aware of circumstances that may trigger attrition that damages a company. Moreover as you said, reasons for attrition are as many as the number of people. Some termination ; voluntary or forced are good. Keeps organization agile and thinking. Don’t allow people to fall prey to the Peter Principle or simply put be counted among office furniture.

      • Mrinal Krant this is a separate issue and no organisation would like to see that talent leaves and most of the companies have OD as one of the efficient team which lays down effective career planning and engagement …still these efforts may still go futile !!! It is like million of copies of “7 habits of effective people” being sold still not much people have changed hence these are labor intensive efforts sometimes but do agree we cannot remove our eye balls from the same thanks for your valuable insight

        Regards Ehsan

  5. Most of the time , good people leave the organisation. It has been said time and again that people change because of the boss. Unfortunately the owners / HR Heads keep a blind eye and do not care to find out the real reasons as to why an employee is leaving.

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