The True Cost of Employee Attrition

The True Cost of Employee Attrition

According to Gallup, U.S. businesses are losing a trillion dollars a year due to voluntary turnover— “And the most astounding part is that most of the damage is self-inflicted.” Recruiting and retaining talent remains one of the most steadfast pillars of achieving scalable growth, but companies are struggling to get ahead of potential attrition, as well as mitigating follow-on attrition when a critical member of their team heads for greener pastures. 

What is Employee Attrition? 

Attrition is another word for “turnover.” The rate at which you have turnover can be indicative of the overall health of your company. If you are experiencing higher rates of attrition and turnover, you are going to fall into one of a few buckets: normal growing pains, management bad apples, or utter toxicity.  

While turnover can be split into two categories, voluntary and involuntary—this piece focuses on the voluntary side. Or in other words, when employees are choosing to leave your organization rather than sticking around.  

While it is normal for any company to have some turnover, particularly as they grow, and culture is forced to change, if you are falling into the latter two buckets (management bad apples and/or utter toxicity) it’s critical to take a proactive approach to reducing turnover.  

How Much Does Turnover Cost a Company? 

Turnover and attrition costs are extremely high. It is estimated that losing an employee can cost upwards of 1.5 to 2 times that employee’s salary to backfill. Costs typically depend on an individual’s level of knowledge, skillset, and seniority.  

The reason of the high costs? Well—you must factor in the time and resources dedicated to recruiting, onboarding, and training of a new employee, while also factoring in the amount of institutional knowledge a given employee had at the time of departure.  

A loss of a technical employee typically costs 100-150% of salary. While the costliest is an unexpected loss within the C-suite—which can cost 213% of salary. 

The most substantial cost to your company is rarely that one role, however, but the sometimes irreparable damage that can echo throughout the rest of your team. These far-reaching effects come in the form of a depleted team morale, a loss in productivity, a tarnished employer brand, and eventually more turnover as a result of domino effect, also known as follow-on attrition. 

It’s Rarely for a Bigger Paycheck 

While a departing team member may be heading for the door in pursuit of higher pay, it is very rarely the actual reason for a team member deciding to quit your company. In fact, “65% of Americans sat getting rid of their boss would make them happier than a salary increase.”  That’s right, the number one reason employees choose to leave is because of a lack luster relationship with their manager—and from the outside looking in, it is most commonly the manager’s fault. 

Unrealistic expectations, poor communication, unachievable goals, a lack of empathy and compassion—the list goes on and on. Well before attrition occurs, poor people management can result in a loss in performance and productivity, with team members taking on average 15 more sick days a year.  

Aside from poor people management, there are a few common threads seen within companies that have high rates of turnover. These often include a lack of employee recognition, a lack of two-way communication between employees and management, a lack of growth opportunities, and a poor company culture. 

How to Reduce Turnover and Employee Attrition 

Conduct Exit Interviews 

Often over-looked, a well-oiled exit interview process can help provide qualitative and quantitative data points to help you better understand where things may be falling short. These interviews could point to a specific person, process, or cultural rift that can allow you to focus in on a specific problem. Never ever miss the opportunity to ask a departing employee where things went wrong—as they are likely to be much more candid with you if they are headed for the exit. The most important part of any exit interview process is active listening coupled with action—take the time to listen to the feedback and make plans for improvements, do not just do the interview for the sake of doing it—learn from it.  

Iterate on and Implement Your Organizational Mission 

People, the most important asset you have as a company, want to feel like the work they are doing makes a difference. Having a purpose professionally can matter more than compensation. It’s critical that you develop a company mission that people can buy into—but we warned: you must work towards living and breathing this mission. It is critical to work towards a common goal that goes deeper than just revenue.  

Enhance Benefits 

Benefits do not have to come in the form of traditional ones like health insurance, retirement, and the like. There has been a growing trend (and now skyrocketed due to 2020) amongst individuals that would rather work for employees with flex scheduling and remote work opportunities. Treating your employees like adults, trusting them to get the job done in a way that meshes with their preferences, lifestyle, and family priorities will help earn trust, mutual respect, and lead to retaining more of your top performers.  

Establish a Feedback Loop 

Many management teams make the mistake of thinking their teams are equally happy, bought in, and engaged. It is important to provide a forum for employees to share feedback along the way. Feedback that is shared should be discussed and acted on where appropriate. However, if you fail to act on the concerns of your team, trust will continue to whittle away, and employees will leave in droves. Quite simply—people do not want to work for an employer unwilling to listen and change based on the feedback of their team. If the same complaints keep popping up—make a real effort to solve the problem, otherwise take a deep look at the potential toxic environment you are helping to maintain.  

Ensure Proper Employee Recognition 

Even the most modest of people like to be recognized for a job well done. While there are several programs that can be used in conjunction with employee recognition, the tenets remain the same. There needs to be a formal process in place that allows for employee spotlights, peer-to-peer recognition, and shoutouts for a job well done. 

Be Proactive with People Intelligence 

People Intelligence is the combination of strategies and technologies used by companies for statistical and data-driven analysis of performance, productivity, and business information. People Intelligence platforms can make sense of disparate people-generated data by transforming the information into actionable insights that impact a business’ operations—including attrition and follow-on attrition. helps companies grow faster by optimizing capacity planning, removing subjective biases from performance management, and preventing unplanned attrition. By using the data that your team is already generating, Peoplelogic can help you proactively get ahead of attrition using artificial intelligence and machine learning. Completely passive, the tool provides automated recommendations and insights that improve the employee experience, increase performance, and build stronger relationships between managers and their team members. We empower companies to better understand their people—so they can build a happy, engaged, and passionate teams that enable scalable growth.  


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