There can be many issues that can totally ruing the company’s health. One of the biggest one is the departure of employees/customers in high numbers. It’s called attrition rate in the industry and can be problematic for many companies.

Losing employees is scary, especially if they do it voluntarily. High attrition rates can cause multiple issues for the company, like a tense work environment where everyone is stressed because of the potential layoffs. It can also affect customers who can leave due to the company’s inability to function correctly.

The most important aspect is to correctly calculate what caused the issue and keep an eye on the attrition rate indicators, as the snowball effect can seriously affect the company.

This article will review some of the most crucial attrition rate-related issues and explain them with potential solutions and templates showing you how to use them. If you want to calculate attrition rate and better understand the concept as a whole – be sure to stay with us for the ride!

The attrition rate, also known as churn rate, is, in essence, a measure of the rate at which customers or employees choose to leave or discontinue using a product or service over a given period. It is usually expressed as a percentage and is calculated by dividing the number of customers who had left by the total number of customers at the starting point when we decided to count the attrition rate.

For example, if a company had 1,000 customers at the start of a month and 50 customers left during that period, the attrition rate would be 5%. The attrition rate formula is pretty easy to calculate, then 1000/50=attrition rate in %.

A high attrition rate can be problematic for businesses, as it may indicate that customers are dissatisfied with the product. It may also mean some other underlying issues with the product or service. Many companies monitor and analyze their attrition rates to identify areas for improvement and take measures to keep the customers and employees.

Let’s talk briefly about the software best suited for this task. Microsoft Office. It’s one of the leading software packages available for multi-purpose utilization. It’s also one of the most office-related software on the planet, with millions of people using it for everyday work. Whether it’s something as simple as creating a well-structured Excel table or writing something in MS Word, there are a lot of different uses that can benefit you and your company as a whole.

Attrition Rate Template

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This attrition rate template can help you out in seeing what your attrition rate is monthly with all the functions already filled-in. By utilizing this spreadsheet, you will also be able to see not only what is your overall attrition rate, but also, what it was during each month and how can it be explained.

Maybe there was some seasonal work that you needed some additional people in your workforce? Maybe your product was released in January and there was an influx of customers that stopped a few months later? There is a lot of data you can gather by analyzing your attrition rate and this template is the best way that you can go about it.

As we have demonstrated, it’s pretty easy to calculate the internal attrition rate. You need to take the average number of employees and divide it by the number of employees who have left during a given time period. Here is the formula for calculating the attrition rate:

• Attrition Rate = (Number of Customers/Employees who left during the period / Total Number of Customers/Employees at the beginning of the period) x 100

For example, if a company had 100 employees at the beginning of a year and ten employees resigned during that year, the annual attrition rate would be 10%. This means the company lost 10% of its workforce that year. Similarly, if you had 1000 customers at the beginning of a month and 50 of them decided to drop your service within a month of buying, the attrition rate would be 5%.

It’s pretty easy to calculate it with some even numbers. The issue comes when you need to create something from a fluid set of data that is not that easy to decipher.

Let’s go over the different types of attrition rates, depending on the kind of customers or employees being measured and the period over which the attrition is measured. But first, here are some of the most well-known types of attrition rates.

Customer Attrition Rate

It’s a relatively self-explanatory type. It measures the rate at which customers stop using a product or service. It is commonly used by businesses that provide subscription-based services or sell products that require repeat purchases.

Employee Attrition Rate

It’s similar to the customer attrition rate but measures employee satisfaction. It’s the rate employees leave a company, whether voluntarily or involuntarily. Companies use it to calculate employee turnover, identify areas where they can improve, and add additional value.

Gross Attrition Rate

Gross Attrition Rate measures the total number of employees or customers who leave a company over a given period, regardless of the reason for their departure. It means you will see the overall statistic of how many people have left the company during the period.

Net Attrition Rate

Net Attrition Rate measures the number of employees or customers who leave a company over a given period, taking into account new employees or customers who have joined during that period. So it will show you the negative number of employees and how many have joined the company. It can be helpful when you are laying off many employees and need to hire some new ones.

Voluntary Attrition Rate

Voluntary Attrition Rate measures the rate at which employees or customers leave a company at their own will, such as through resignation or cancellation of a subscription. This is probably the most essential rate to calculate how many employees have left your company.

Involuntary Attrition Rate

Involuntary Attrition Rate measures the rate employees or customers are forced to leave a company because of layoffs or termination. This can show how many of them were forced to leave so that it may not affect the company’s health.

The worst attrition rate is the consistently high one. It means that the company is losing employees/customers at high rates, which is detrimental to the growth and sustainability of a company or organization. For example, a high employee attrition rate can increase recruitment and training costs and negatively impact remaining employees' productivity and morale.

Similarly, a high customer attrition rate can lead to decreased interest in the product and, subsequently, the loss of revenue and market share with the signalization of underlying problems with the product quality or customer service.

Nevertheless, there is no “worst” attrition rate. It can vary depending on the industry and the context. Some industries may have naturally higher attrition rates due to factors such as competition or a highly mobile workforce. Generally, a consistently high attrition rate the company does not address or improve upon is usually considered undesirable. It can have some pretty negative consequences for the company's overall performance and employee satisfaction.

Just imagine living in a company where everyone is always getting sacked. You will not be able to probably work properly with all that going on in the background.

So that is why attention rates are so crucial to look out for. Here are some of the critical indicators that high attrition rates can influence:

• Cost of running a business – high attrition rates can be costly for organizations, as they may need to invest time and resources in recruiting and training new employees or getting new customers to replace those who have left.

• Productivity can also negatively impact productivity, as new employees or customers may take time to understand the service/product and become as effective or profitable as their predecessors.

• Morale – no one likes to work at a company where everyone is constantly laid off. High attrition rates can lead to low employee or customer morale, as those who remain may feel demotivated or disillusioned by the high turnover rate.

• Competitive advantage – in highly competitive industries, attrition rate can indicate a company's ability to retain talent or customers and maintain a competitive advantage in the marketplace.

• Growth and sustainability –  high attrition rates can also influence the organization's ability to grow and sustain itself over time. It may struggle to retain its resources to achieve its goals and keep the employees/customers.

The most crucial aspect of attrition rate to keep in mind is that you can identify the areas where you may need to improve their employee or customer retention strategies to minimize the negative impacts of attrition. It will help you maintain a healthy and sustainable business that will grow and flourish rather than be crushed by the competition. Company culture is brutal, so everyone seems uneasy when employees leave the organization.

Attrition rate and turnover are similar concepts, but they differ significantly. When speaking about attrition rate, you cannot miss the turnover rate and vice versa. HR professionals use both those concepts to increase employee retention in the company or organization.

As we have stated before, the attrition rate refers to the natural loss of employees or customers over time. This may be due to factors such as retirement, relocation, or a change in personal circumstances. It is typically calculated as the percentage of employees or customers who leave an organization over a period without indicating whether those departures were voluntary or involuntary.

Turnover, however, refers to the rate employees voluntarily leave an organization to pursue other opportunities. It is typically calculated as the percentage of employees who voluntarily quit their jobs over a period.

While attrition rate can include voluntary and involuntary departures, turnover focuses explicitly on the voluntary departures most likely to be influenced by factors such as job satisfaction, compensation, and career advancement opportunities.

Both are essential metrics for organizations to remember, as they can provide insights into workforce stability, employee engagement, and talent management practices. Turnover is a much more critical metric, as it reflects how the employees are actively choosing to leave an organization and the potential impact of those departures on productivity, culture, and talent retention. It means that people are not going to the organization simply because they have to, but they actively want to, which can decrease the overall quality of the product/service.

There are no clear answers to what would constitute high attrition. Generally, a high attrition rate is when a significant percentage of employees or customers leave an organization over a relatively short period.

What is the significant amount in this circumstance? It may vary depending on industry, organization size, and other factors. Still, an attrition rate significantly above the industry average or historical norms could be considered high.

And – it can be a real problem after all. High attrition rates can have several negative consequences for organizations, such as increased recruitment and training costs, reduced productivity, decreased morale among remaining full time employees, and potential damage to the organization's reputation.

Therefore, organizations must monitor their attrition rates closely. If you have a high attrition level, you should address any underlying issues contributing to high turnover. And – do it fast, as the snowball effect can be a real issue for the company.

There are a couple of factors that can influence the attrition rate within an organization. Of course, it would depend on the specific kind of organization you are running, but these are some of the most important factors to consider.

• Job satisfaction – if employees are dissatisfied with their job or working conditions, then they are more likely to leave an organization and look for luck elsewhere.

• Compensation and benefits – if employees feel that they are not fairly compensated or receive adequate benefits, they may be more likely to seek employment elsewhere.

• Career development opportunities – if the company is not giving the employees opportunities for growth or advancement within the organization, they may be more likely to leave in search of better prospects.

• Management and leadership – same scenario; poor management or leadership can create a hostile work environment that may contribute to employee turnover.

• Organizational culture – toxic or unhealthy work culture may cause higher levels of turnover as employees seek a more positive work environment.

• Work-life balance –  employees who feel that their work-life balance is not being adequately addressed may be more likely to leave in search of a work environment where their time is being appreciated more.

• Personal factors – personal circumstances such as illness, family responsibilities, or relocation can also contribute to attrition rates.

A short answer is – always. Longer-lasting employee attrition levels should always be a concern for organizations. Still, it is essential to focus on periods when the employee turnover rate is high and exceeds the industry average or the organization's historical data.

Suppose the rate of employee attrition is high. In that case, it can indicate some problems within the organization, such as poor management, low employee engagement, issues with the work-life balance of employees, inadequate compensation or benefits, or just a lack of opportunities for career advancement.

It’s important to focus on employee attrition during periods of growth or change within the organization, such as during a merger, acquisition, or rapid expansion. Employees may be more likely to leave if they feel uncertain about the future of the organization or their role within it.

Focusing on employee attrition, you can identify the root causes of turnover and take some steps in order to address these issues. It can help to improve employee retention, reduce recruitment and training costs, and create a more stable and engaged workforce. And that is something that all companies should aspire to for sure.

Similarly to the last point – no. It is generally not considered good for organizations. As we have mentioned before, it can be a sign of underlying problems within the organization. The results of high attrition, such as increased recruitment and training costs, decreased productivity, and reduced organizational stability, can create a problematic workplace culture.

Although, there is some level of attrition that is normal and even expected in any organization, in most cases it’s around 18%, a higher level is a cause for some investigation. High attrition rates almost always have negative consequences. You should strive to keep attrition rates within reasonable levels and take steps to address the underlying issues that may be causing employees to leave.

You can do it by improving employee engagement, providing competitive compensation and benefits packages, and offering opportunities for career advancement and development. In some places, there will be higher turnover rates than in others. Still, the general understanding in the literature is that it will almost always negatively impact the company.

And here we are, at the end of our road. Thank you so much for checking out our article on high attrition rates. We hope that you were able to learn something about this and that some of the institutional knowledge was just the right fit for you.

In conclusion, employee attrition is a major concern for most organizations, and it is important to track and manage attrition rates to maintain a stable and engaged workforce. High attrition rates can be a sign of underlying problems within the organization and can have negative consequences that we have mentioned many times throughout this article.

The best way to go about the attrition levels is to constantly manage it and create a stable and engaged workforce, which can lead to improved productivity, increased employee morale, and better business outcomes. In the end, no one wants to be in a place where their future is not provided, so it’s best to always look on the side of caution when thinking of attrition levels.

The important thing to remember is that the workload is always divided unfairly. When people leave their positions open, other workers get more work for some time, so the recruiters need to get some new hires for the department. There is always a risk that some potential issues can come up, an employer is only a human, and you will never really be able to find out if the employees are leaving because the managers told them something or they are having some rough time.

The most important thing to do is to leave the door open, employers should pay their employees their fair share, and you will quickly see a low rate of attrition almost immediately. Whether you are hiring for a current position or the future one, you are always looking for the best employees on the market, but sometimes it means that you need to invest more money in that project. And sometimes, the best thing you can do is to create an inclusive environment where top talent feels safe and everyone can give candid feedback on many different topics.