Workers will come and go, and our most experienced employees will soon retire, but what can be done about turnover?
Employee turnover is costly, but hiring based on shared cultural beliefs and values leads to better results. The secret to improving churn rate is by rethinking your organizational culture.
What is Employee Attrition?
Employee attrition occurs when the workforce dwindles, typically slowly, at a company. Attrition follows after a number of people resign or retire and haven’t been replaced. The downsizing of a company’s workforce may be intentional or unintentional, but the results are the same.
As employees start to leave, a hiring freeze will occur to reduce turnover and hiring costs. This gives companies the chance to shift their priorities and change their organizational culture.
Employee attrition commonly occurs due to:
- Poor benefits or pay
- Lack of growth
- Poor work-life balance
- Poor workplace conditions
- Relocation
- Retirement
- Illness or death
Although attrition sounds similar to turnover and layoffs, the difference lies in the intent to rehire.
If a company lays off a department and doesn’t intend to rehire that department in the near future, that’s attrition. Turnover is also considered attrition if the employee is let go or quits and the employer doesn’t refill the position. In both instances, A reduction in the workforce results.
How to Bounce Back from Employee Attrition
Employers are finding that employees need a sense of purpose beyond making money. That doesn’t mean that making money isn’t important; it’s just that employers need to offer more to their employees if they want them to stay. So, why isn’t profit enough for employees?
There are several reasons. For one, employers see the biggest share of the profits despite employee labor being the key reason why any company functions. For another, employees commit their lives to a business's growth, but they don’t feel that they’re respected for it.
If your employees aren’t living meaningful lives, especially compared to their peers, they’ll leave.
Companies that struggle to answer the “purpose question” are likely to face a higher turnover rate, lower engagement, and an uninspiring culture. Employers can use employee attrition to examine their company culture and reinvent it for the next generation of employees.
For Long-Term Success: Put Employees First
According to a Deloitte survey, the vast majority of Millenials (87%) believe that the success of a business should be measured by more than financial performance. That same survey found that Millennials judge a business on how it treats its people, not by its age or scale.
Employers would do well to listen to Millennials (born 1981-1996) because they make up the largest share of the workforce. Gen Z shares similar values (born 1997-2012).
The Deloitte survey further discussed what Millennials mean by “employee treatment.” The survey found that 26% saw employee satisfaction/loyalty/fair treatment as necessary, 25% saw ethics/trust/honesty as important, and 19% wanted a company to focus more on its customers.
That equates to 70% of millennials seeing employee treatment, ethics, and customers as the recipe for long-term success. Most Millennials aren’t seeing this reflected in businesses.
Employers see providing a good income, company culture, skill improvement, supporting jobs as a low priority. What’s worse, employers are telling their new employees that they offer Millennial values but quickly tear the rug from underneath them once they’re onboarded.
Company Culture and Attrition: What We Can Learn
It’s important to hire employees who fit your company culture well, but if employers don’t focus on the Millennial idea of long-term success, they never will. The minute an employee realizes their employers don’t care about their needs, they’ll either quit or become unproductive.
Millennials hold different values than their often Boomer Generation bosses. Fighting against that won't do a business any favors, especially if they can’t offer a wage consistent with inflation.
Even before Millennials were the prime work demographic, experts found that organizational culture led to a decreased turnover rate and a shortened attrition. A 2005 study (when Gen X made up the bulk of the workforce) showed that shared values make a workplace strong.
To take purposeful action in your company:
- Start With Your Why: Ask yourself why your company exists. What mission are you fulfilling? How does your mission apply to the Millennial and Gen Z sensibility?
- Begin at the Top: Make sure all of your leaders are on board. Culture has a trickle-down effect, meaning everyone a part of your company must lead according to your values.
- Live Your Values: Your values can’t be “just a poster on the wall.” Company values should act as an anchor (stability) and compass (guidance) at all times.
Every business should be guided by a “North Star” that makes working in your team just as enjoyable as it is productive. There are truly no downsides to placing focus on your employees.
