Taming Attrition through numbers – A relook at its calculation

There is a discussion in CiteHR http://www.citehr.com/281690-hr-attrition-rate-formula.html seeking the standard formula to calculate attrition.

We start with a view to understand the basis of the calculation. Every organization requires measuring the number of employees leaving in a month. This data is used to take decision on manpower planning and resourcing talent in different roles. The calculation primarily shares the percentage of total number of employees leaving the company to the total number of employee’s including the new joinees.

As per the report, Calculating employee attrition in Financial Times, Aug 15, 2005, the measures may vary in every company. Companies may divide the number of employees leaving in few categories to make sure the calculation does not include the non-productive employees. The report shared that a company may not consider a fresher working less than three months in a company as an attrite. Certain business decisions that required the below average performers to leave are excluded.
The primary logic to calculate attrition is drawn to zero down on the cost of acquiring and managing talent. It is true that the intellectual capital of a company is lost when the employees leave. Companies build agile structures where the knowhow is decoded, stored and disseminated. But certain factors such as employees joining the competition and sharing the expertise of the company cannot be totally negated. Hence the company takes a high level view to the loss through the attrition number.

A CIPD paper on employee turnover and retention, July 2010, shares the formula for calculating
Attrition = (No. of employees who left in the year / average employees in the year) x 100

According to this paper, the cost has been clubbed under different categories including management, administrative and direct costs. An interesting method of costing the employee turnover have been noted as the relative productivity of the new employee during the learning curve to the productivity of the employee who have resigned and is serving the notice period . The insight that one would gain from this calculation would help in planning the billability of the talent.

Finally the numbers are guiding light to draw an inference. The attrition analysis is complete with the exit interviews data. But as the later can be subjective the data from the former is trusted for business decision. In certain environment the depiction of the data may not be very grave. It all depends on the job done. Such as, if a job cannot be easily trained and be shifted to any other place far from the place of delivery even a minor change in the employee strength may be in red letter. Whereas the jobs which require minimum knowledge transfer and be staffed with any talent may not show even a bigger digit in green!

In the search of the standard formula for calculating attrition we conclude with the words of Ralph Waldo Emerson, “The value of a principle is the number of things it will explain. “

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