Attrition

In business, attrition happens when employees are dismissed or leave a company, for any reason, and are not replaced by another employee. While some definitions of attrition refer to a deliberate but gradual reduction in employees by the company, the term can also be used to indicate other causes of a reduced number of employees. In some cases, attrition results in a permanent shift in the size of an organization’s workforce. 

Attrition is different from employee turnover. Turnover measures all terminations, including positions that are eventually refilled with new workers. Attrition is a term used to refer to position eliminations or long-term vacancies. 

Attrition Examples

There are five primary types of attrition:

• Voluntary attrition
• Involuntary attrition
• Internal attrition
• Demographic-related attrition
• Customer attrition

Voluntary Attrition

occurs when an employee decides to leave an organization of their own volition. When an employee voluntarily leaves, it can indicate that the company has problems. Employees leave a company for a variety of reasons, including lack of growth opportunities, unsatisfactory benefits or pay, and poor work-life balance. Alternatively, people leave for reasons that are unrelated to the company, including personal reasons or career changes. An employee may also leave a company to retire or move to another locale. 

Involuntary Attrition

occurs when an organization dismisses an employee. Generally, involuntary attrition happens because of poor performance or an employee’s conduct. However, in some cases, job positions may be eliminated. Economic conditions can also force changes. 

Internal Attrition

Is a term referring to the movement of an employee out of one division or department and into another. In this scenario, the employee is staying with the company but moving within it. For example, an employee can receive a promotion or move laterally to another section if there is a more suitable position. Internal attrition is a good indication that the company offers opportunities for career growth. When a department or company has an unusually high internal attrition rate, it can be an indicator of problems within the organization that need to be addressed.  

Demographic-related attrition

refers to employees from a specific demographic group quickly and unexpectedly leaving a company. Examples might include ethnic minorities, women, people with disabilities, or older employees. When demographic-related attrition occurs, the company should take rapid action to determine the cause of these departures. To ensure the company is practicing solid DEI, issues causing this type of attrition should be immediately rectified. 

Customer Attrition

occurs when the organization’s customer base starts shrinking. When a company has a high rate of employee attrition, it can have a direct effect on customer attrition. Conversely, when customer attrition is high, a company could suffer a revenue loss that affects employee attrition.