Attrition Rate: Challenge before the Organisation


By

Randhir Kumar Singh
Senior Lecturer
Dr. Gaur Hari Singhania Institute of Management & Research
Kamla Nagar, Kanpur-208005
 


1.  Introduction:

The attrition rate plays a significant role in an organisation. High attrition rate of employees in an organisation is a serious concern because the employees are the human capital. Some of the organisations have started searching the cause due to which the employees are leaving the organisation.

There are some organisations specially belonging to IT, Telecom, and various other sectors which are facing high attrition rate. Due to high attrition rate, cost of the organisation increases due to training, development, socialisation and other costs on the employees. Attrition rate is high basically in an organisation whose work is mostly dependent on knowledge workers like BPO, paramedical, aeronautics etc.

Attrition is defined as reduction in the number of employees through retirement, resignation or death. The rate of shrinkage in size or number of employees is known as attrition rate. Different organisations use different method to calculate the rate of attrition. The most common formula to calculate the rate of attrition used by many organisations is:

Attrition Rate = (Number of employees who left in the year / Average employees in the year) * 100

2.  Attrition rate in India:

Attrition rate is high basically in an organisation where work is mostly dependent on knowledge workers like BPO, paramedical, aeronautics etc. Attrition rate in India's business process outsourcing (BPO) industry are about 7.8 percentage points higher than in other industries, according to a report released by Hay Group, a global management consulting firm. The findings comes from a new report, BPO Special Sector Survey 2008, based on Hay Group's global online compensation and benefits database, PayNet. It showed that in general, staff turnover in India is 15.7%, but at BPO companies, attrition is the country's highest at 23.5%, followed by communications 22% and retail 18%.

The attrition rate has always been a sensitive issue for all the organisations. Calculating employee turnover rate is not as simple as it seems to be. No common formula can be used by all the organisations. A formula had to be devised keeping in view the nature of the business and different job functions. Moreover, calculating attrition rate is not only about devising a mathematical formula. It also has to take into account root of the problem by going back to the hiring stage.

3. Causes of attrition rate:

In most of the organisations, employees would love their jobs, like their co-workers, work hard for their employers, get paid well for their work, have ample chances for advancement and flexible schedules so they could attend to personal or family needs, when necessary and never leave. In the real word, employees leave either because they want more money, hate the working conditions, hate their co-workers, want a change or because their spouse gets a dream job at another place.

4. Significance of attrition rate:

Employee turnover is one of the four primary dependent variables in Organisational Behaviour (OB). This consistent with the view held by executives, HRD Manager, and researchers in OB that turnover has negative consequences for organisational performance. When employee quits and has to be replaced, the organisation incurs some very real and tangible costs. The organisation should retain their manpower for quite a long period. Attrition is a serious problem, that the organisations are facing today which affects their competitive advantage.

5. Conclusion:

The tangible cost of employees' attrition would be the cost of training new employees, recruitment and selection costs, adjustment time, possible product and/or service quality problems, cost of agency workers/ temporary staff. The cost of training, cost of less productivity, cost of lost knowledge and cost of position remaining vacant till a suitable replacement is found. The intangible costs which may be even more significant than the tangibles, involve the effect of turnover on organisational culture, employee morale, social capital or organisational memory. All these costs would significantly take away profitability and competitive advantage of the firm. The organisational costs associated with turnover in terms of hiring, training and productivity loss.
 


Randhir Kumar Singh
Senior Lecturer
Dr. Gaur Hari Singhania Institute of Management & Research
Kamla Nagar, Kanpur-208005
 

Source: E-mail April 6, 2010

          

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