Updated: Jun 28, 2021
High employee turnover rates can harm the overall cost of a company. Attrition can be a detrimental vicious cycle for an organization. Much time and money are spent replacing lost talent and onboarding new ones. In addition, a high turnover rate contributes to lost productivity, existing employees’ burnout, low employee engagement, reduced time to market, customer impact, and increased competitive threats. In technical due diligence exercise, for example, elevated attrition can be a red flag for potential investors as it may impede the ability to execute.
The industry average for attrition hovers around 13% with some industries below and others much higher like Software which ranges from 15-23%. Most companies target a healthy percentage below 10% turnover rate.
There are different types of attrition which companies should take care of tracking separately to get better insights. Examples of those include involuntary, retirement, internal attrition, voluntary resignations, or demographic attrition. The latter two categories are considered to be negative attrition.
Some factors contribute to attrition that can be controlled such as company culture, benefits, or compensation model compared to other factors such as geography, competition, or industry norms that are difficult to control, but good to be conscious of. This article focuses on the former with strategies to minimize attrition.
The good news is there is enough research, data, and proven strategies employed by companies who enjoy lower attrition rates that can benefit any organization. Easier said than done, but aggregated data from surveys, research, interviews, and industry shows that more than 65% of the negative attrition (e.g. voluntary, demographic) can be prevented or significantly reduced using the top six strategies which include a positive work environment, recognition culture, excellent management, challenging work, competitive compensation, and flexible work measures.
21 Strategies To Limit Negative Employee Attrition
Over Communicate The Company Vision - The Story. Nothing ties people together better than a shared belief and a common vision. Ensure the leadership team is visible and regularly engaging with employees to share the vision regularly. In some instances, even conducting 1:1 meetings with as many employees as possible. Sharing the direction reduces waste, eliminates stress, motivates, and aligns teams. When employees are clear on the vision, it creates a culture of inclusion and a sense of purpose
Create A Positive Work Environment. This is an important factor that makes employees stick around. Create a program to identify areas of improvement and transform the culture over time with more openness, better communication, and collaboration to reduce attrition. A Harvard Business Review study calls out that “cut-throat environments are harmful to productivity over time, but that a positive environment will lead to dramatic benefits for employers, employees, and the bottom line”. As this is a large and conceptual bucket, it has been broken down into more actionable strategies below
Instill A Culture of Recognition, Giving, and Common Good. This is one of the largest factors for higher attrition rates as part of the positive work environment. Encourage recognition, generosity, thankfulness, and gratitude as a component of the culture. There is a positive impact and ripple effect of expressing appreciation (Forbes). Building the programs or tools is easy, but embedding these in the cultural DNA requires an effort. A culture of recognition and common good principles is very sticky and gives employees a sense of ownership of the company. Recognition is a magical force for employee retention, motivation, satisfaction, and engagement. It starts with the leadership and flows to all levels in the organization. Related to recognition are community giving programs which make it accessible and encourages people to feel more upbeat and motivated when they do good things - provide the opportunity for employees to be appreciated and get recognized
Emphasis Respect. Many discount inter-employee and company respect cultural principles for creating a healthy environment. In a recent study, respect was identified as a key factor directly impacting voluntary turnover. Some companies take proactive steps, have internal “Kudos” programs that are embedded in the Employee Performance System to emphasize how interactions and cultural norms should work. At Microsoft for example, the company used this as one of the strategies for transforming its’ culture under Satya
Invest In Excellent Management Competencies. Good management is not necessarily born competent but is a result of experience, growth, aptitude, and training. Many companies have an extensive training program for leaders as well as new employee orientation onboarding that is dedicated to new and advancing managers. Create incentives for management excellence, increasing competencies, and accountability to increase employee engagement
Evaluate And Evolve Compensations Packages And Benefits. Benchmark against similar organizations to explore potentially hidden issues and opportunities for improvements. Static compensations have to be regularly revised. Being creative about the benefits program and tailoring it to the workforce and geographies is critical to offering competitive benefits packages. It starts with asking the right questions about others and their needs. Some examples of programs that can add value to employees and their families include bonuses, insurance, health programs, investment opportunities, but successful benefit packages should be customized to each organization
Explore Work Flexibility Programs. Evaluate options and programs such as remote work, flexible work hours, or hybrid models as additional incentives. Flexibility is one of the top reasons for employee engagement and healthy tenure
Explore Agile Transformations. Agile execution can bring about a very healthy culture transformation; companies that have true agility from the top-down are likely to have more engaged and committed employees. Agile empowers teams, increases productivity, increases service/product quality, and saves costs
Create A Welcoming Office Environment. Evaluate the office space for comfort and revisit areas to make them more attractive to existing and potential employees. Continuously assess for modernity including small things (e.g. free food, coffee)
Implement A Career Ladder. Invest in a clear and elaborate dual-model career ladder program for both individual contributors and management path growth to accommodate employee interests and capabilities to help limit attrition, increase rewards, and a sense of ownership. The career ladder should take into account clear career stage profiles (CSPs) by discipline and map them to growth competencies
More Social. Host regular social events for employees and their families to create loyalty and allow better cohesion. While some may belittle these as unnecessary investments, the effectiveness of social is directly linked to loyalty, team cohesion, good morale, and lower attrition
Create Innovation Challenges: Many employees would like to be part of great innovations and challenging non-mundane work - this talent needs to be preserved and encourage as they help move the needle forward. Employee Performance management should help employees explore new opportunities within the company for their growing skills. Investing in hackathons for example encourages exploration of new internal and external ideas and helps boost creativity and innovation
Invest In Onboarding, Training, And Mentoring Programs. Growth and challenging work are large motivating incentives for most employees. Investing in training programs is not just a perk, but helps execution efficiency, collaboration, and a decision to stay with an employer. An onboarding program has immediate productivity benefits and helps employee engagement and commitment. A mentoring program is a natural extension of onboarding and helps solidify the learning. In a 70/20/10 model, 10% is learned from training, 20% from others, and 70% on the job. Mentoring programs are typically divided into peer mentoring who may be assigned to a new employee to help post the formal onboarding. A career mentor is match-making facilitation which helps the mentor share their experiences and the mentee to connect with someone they may look up to, explore new areas of interest, or get exposed to different points of view
Stay Current To Pulse And Employee Mood. Conduct a regular employee pulse survey (e.g. twice per year) and ensure to address the pain points and give the necessary visibility to the actions taken. Running a skeleton survey once a year for formality without action is not impactful
Get An Independent Neutral View. Conduct an internal organizational assessment via a third party to identify hidden concerns and create a plan to mitigate them. This is a best practice and an investment used by companies globally to help them explore areas hidden from their sight and benchmark
Hire Well. Structured and intentional hiring is important. Hiring the right skill set and the right culture match will minimize attrition. This begins by defining clear job roles, establishing a clear interview process, clear competencies, and making sure to treat everyone well - even the candidates that are not hired, maybe customers and it is important to preserve the brand reputation
Embrace Positive Attrition. Positive attrition is also beneficial. Firing people who do not fit the culture or possess the right skills can improve the execution as well as the morale. In transformations, it is a must to part with some of the employees. Invest in becoming a company with minimal culture debt and conscience
Prioritize Employee Happiness. Employee happiness is a key indicator of job satisfaction and has a direct impact on retention (explore strategies). But more importantly, happier employees create happier customers
Use Performance Reviews Strategically: While mostly a standard in most organizations and at times just a mundane formality, successful companies leverage the process to engage deeper with their employees, track the mood, increase trust, and fortify improve the relationships with each employee
Explore How To Leverage Decision Making For Your Organization. One can compare a company to a country with citizens who have needs, opinions, ideas, and a shared vision. There is no right or wrong here, but at the speed of business, it’s tough to standardize on a blanket democratic consensus decision-making style or the market share will quickly shrink by the time decisions are made. By the same token, it limits innovation if it is run like a military unit with a strict hierarchy and decisions made in a blanket authoritarian style in peace times. There is a balance where various decision-making styles that should work together in a company and not be confused with roles and responsibilities. Employees want to feel like their voices matter, that they have a hand in moving the company toward its vision. Explore the decision-making styles and the RACI matrix. Seek to educate about how to leverage the various styles, where each is appropriate, and where they are not
Increase Engagement With Good Psychology. Maslow’s hierarchy of needs is basic psychology 101 and is always a good reference to understand the broad fit of an individual and small groups helping to structure better strategies and motivation
6 Strategies For Attracting Talent
Limiting attrition and retention strategies are super important, but also the ability to attract new talent is the flip side of the coin in the employee journey. The journey also includes keeping the culture dynamic and the diversity intact. A comprehensive talent acquisition strategy should be in place. Here are a few ideas to explore
Expand the recruiting program by participating in events, fairs, or even hosting public hackathons
Tap into the employee’s connections for referrals and offer referral incentives to have better access to trusted talent
Create a buzz and focus on brand building with local networking events, career fairs, and groups for maximum exposure to potential employees
Invest in social media heavily to capture mind share and company reputation for maximum exposure to new potential employees
Consider alternative hiring strategies using nearshore and outsourcing, but take caution in how they are setup
Consider evaluating how a distributed development setup may work in your organization and whether a potential secondary development site can be beneficial
Limit Attrition and Get Good At Hiring
Minimizing employee attrition has a direct impact on cost savings, product quality, and speed to revenue. Gradually adapting, revising, and deploying various strategies in the organization provide the edge for having a great workforce and a healthy tenure.
About the Author
Hazem has been in the software and M&A industry for more than 26 years. As a managing partner at RingStone, he works with private equity firms globally in an advisory capacity. Before RingStone, Hazem built and managed a global consultancy, coaching high-profile executives, conducted technical due diligence in hundreds of deals and transformation strategies. He spent 18 years at Microsoft in software development, incubations, M&A, and cross-company transformation initiatives. Before Microsoft, Hazem built several businesses with successful exits namely in e-commerce, software, hospitality, and manufacturing. A multidisciplinary background in computer engineering, biological sciences, and business with a career spanning a global stage in the US, UK, broadly across Europe, Russia, and Africa. He is a sought-after public speaker and mentor in software, M&A, innovation, and transformations. Contact Hazem at email@example.com