Understanding the impact of attrition on an organization

Gautam Mainkar

Posted On Jul 05, 2018   |   6 min

impact of attrition

Attrition is widely understood to be one of the major problems affecting organizations today. Losing employees has a many direct and indirect impacts across a company. Most companies today have understood the importance of reducing attrition and invest in reducing it. However, these methods do not always guarantee success, especially in organizations with a high level of maturity. However, one area where mature organizations can focus their efforts is minimizing the impact of attrition. Assuming a steady rate of attrition that cannot be reduced, organizations can try to measure the direct and indirect impacts of attrition, and discover opportunities for minimization. Processes can then be put into place to minimize these impacts of talent loss, and ensure that transition periods in the organization happen smoothly and reducing dependencies on critical personnel.

Impact of attrition

The direct impacts are relatively easy to measure: costs must be incurred to recruit and train new employees. During the recruitment process, other employees generally see an increase in their workload which can result overtime costs, but also affect their own productivity. In roles where employees maintain a close relationship with customers, employee attrition can also lead to reduced revenues from these customers and in the worst case, customer attrition.

However, there are also indirect impacts of employee attrition which, although they are not always immediately visible, can affect the organization’s processes and profitability. Principally, these indirect impacts fall into the following categories:

  1. Team dynamics: Most employees today work in teams and play a role in ensuring effective collaboration. Losing an employee can affect the smooth functioning of a team and lead to productivity losses. For example, losing a key engineering lead can have impacts across the whole team working under him.
  2. Acquired knowledge: Employees who stay with organizations for a long period of time often acquire skills and knowledge on the job. Losing an employee can lead to the loss of all this acquired knowledge, which is not easily replaceable. For example, an employee who has spent several years on a project will not be easily replaced by another person with the same years of experience, because the project knowledge acquired will be lost.
  3. Employee engagement and morale: Employees leaving an organization can have negative impacts on the morale and engagement of their colleagues. This impact often goes unnoticed, even though it can have tangible effects on productivity.
  4. Culture: Employees who stay with organizations for a long time tend to take on the culture of the organization. Losing such employees and having them replaced by others can lead to a culture clash within the organization, with impacts on effective collaboration and employee engagement.
  5. Extended productivity: Employee productivity increases over a period of time as they become more familiar with their role. Although employees who leave are replaced by others, it is often difficult for organizations to reach the same level of productivity. This is especially true of employees who have had long stints in the organization.

Mitigating the impacts of attrition

Mitigation of the above impacts across the organization can be done by understanding the ways in which they manifest, how they can be tracked, and what processes can be set in place to reduce their impact. Most mature organizations already have in place systems to track and measure employee engagement and performance. However, it is necessary to implement the right KPIs to track the various roles employees play in the organization. Some examples of this are:

  • Employees’ role in team dynamics, employee’s customer-facing impacts: This can be measured using network graphs which show the employees interaction with other team members as well as with people outside the organization. HR managers can make use of BI tools to leverage data from the HRIS as well as other organizational systems like e-mail, chat and collaborative tools. By tracking the employee’s communications across all platforms, HR managers can understand the quantitative and qualitative importance of employees in their team’s dynamics and with customers. HR managers can use this information to identify critical employees in the organization and, if not ensure they stay in the organization, can at least work to distribute their functions across the team to reduce their criticality.
  • Employees as repositories of knowledge: This is another area of impact that can be tracked by using network graphs: employees who are frequently called upon to train, tutor or advise on tasks in the organization are repositories of knowledge. BI tools can help to track these references and gain better insight into team behavior. Additionally, HR managers can hold regular interviews with employees to assess their areas of expertise. It is important to process and store this data in a centralized data warehouse to facilitate the process of gathering insights. By understanding the impact of employees on the organization’s knowledge base, organizations can take steps to ensure that employees share knowledge effectively and avoid the creation of ‘knowledge silos’ within the organization.
  • Employees as engaged collaborators: Typically, organizations hold exit interviews only for exiting employees themselves. However, this can give an incomplete picture of the impact of the employee’s exit. Exit interviews should also be conducted with the employee’s team and managers in order to assess the impact of their exit on other employees’ engagement and morale. Using AI techniques like text mining and Natural Language Processing, HR managers can understand the impact of attrition on engagement across the organization
  • Employees as productive workers: In order to assess employee productivity, organizations must implement effective and complete continuous performance management processes. This allows HR managers to understand employees’ productivity over time and ensure that replacements for exited employees are able to maintain the level of productivity expected of their role. HR managers can also use CPM systems to assess the impact of employees on their team’s performance. Such continuous performance management systems must be structured to evaluate the employee on objective results, and take into account feedback from the employee’s managers and peers.

By implementing these processes, HR managers can get holistic picture of the various roles the employee fulfills in the organization. This can be helpful not only in the recruitment process, but also to mitigate the impact of losing employees. Processes can be put into place in order to ensure that employees do not become critical points of failure in their teams, thereby reducing the negative impact of losing them. Transitions between exiting employees and new hires can also be smoothened out by ensuring that knowledge transfer and culture fitting happens effectively.

As the competition to attract talent becomes ever fiercer and the risk of losing talent increases, organizations will face the need to mitigate the impact of attrition as far as possible to ensure they stay productive and competitive. Strong HR processes can ensure that organizations are ready to face the threat of attrition and prosper in difficult times.