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All You Need to Know About Attrition Rate

Madhurjya Bhattacharyya Nov 1, 2018
Don't know what is attrition rate and how to calculate it? Read on for some useful information on how to calculate it and also the ways to reduce it.
Attrition rate is used by most organizations to signify either the number of customers who discontinue buying services or the number of employees who leave the organization in a particular period of time. It is also called churning rate.
If the rate is high, it becomes a matter of concern as it means there is something wrong in the working of the company which demoralizes employees. On the other hand, if customers leave the company, it means that there is something wrong with the services offered by the company.
The rate is directly dependent on the kind of relationship the organization builds with its customers and employees.

Advantages of Measuring Attrition Rate

Organizations who keep a track of it have a clear measure of their growth. In case, the rate of growth is higher compared to the rate of attrition, it means that the net growth of the company has increased.
On the other hand, if the attrition rate is higher than the growth rate, it signifies a negative growth, which would then mean that some changes in policies are required. Several companies use it as a measure of customer service. For a company in this world of cut throat competition, it is equally important to retain customers as it is to gain new ones.
There are several companies, especially the cell phone providers, satellite and cable television services, and automobile companies, which cite its rate of attrition as a tool to further market its products.
Other than measuring customer satisfaction, calculating attrition rate can also be used as a measure to see if employees are satisfied. Usually, it is quite high in several unskilled positions. Organizations keep a track of the number of employees leaving the company for numerous reasons.
Even though it's easy to replace unskilled positions, higher rates mean that the costs are going to rise. The whole process of hiring, starting from recruiting to the final selection, and then training requires a lot of time and money, and if an employee leaves the organization post training, it means a considerable loss for the company.
Moreover, the organization would need the services of highly skilled and paid employees to train the new recruits. If all the factors and costs are taken into consideration, the total money spent can run into thousands of dollars. Thus, attrition rate gives an idea to the top executives of the firm where they should spend more and how they should spend it.

How to Calculate it?

Attrition rate can be calculated with a simple mathematical calculation. Just keep a track of the total number of employees or customers who have left the organization in a month and divide that number by the remaining number of employees in that month. The number you get should be multiplied by 100 and this number would be the rate of attrition.
Let's take an example here. Say the total number of employees in an organization in a particular month is 100 of which 5 have left. So using the mentioned formula, it would mean 5/100 x 100 = 5. So the attrition rate is 5%.

How to Reduce it?

Today, it has reached at a higher level in many organizations and such organizations have taken several steps to retain people, whether it's customers or employees. As far as customers are concerned, service providers try and provide better services to them.
On the other hand, employees are given appropriate training so that they can enhance their skills and work for the growth of company. Measures are taken to award better performers so that others are motivated to scale new heights.
Support is provided by the management, whether it be in terms of listening to the grievances of the employees or some suggestions which would benefit the company.
Thus, calculating attrition rate plays a very important part in deciding the kind of policies which are needed to be framed. It gives a measure as to where the company stands in the eyes of its customers or employees.