Attrition Rate

Attrition rate, a term used by most organizations to signify either the number of customers who discontinue buying services of a particular organization or the number of employees who leave the organization in a particular period of time, is also called the churning rate. If the attrition rate is high, it becomes a matter of concern as it means there is something 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 the rate has a clear measure of its 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 kind of 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, high attrition rates means 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 after training leaves the organization, it means a considerable loss for the company. Moreover, the organization would need the services of higher skilled and paid employees so as to train new recruits. If all the factors and costs are taken into consideration, the total money spent can run to thousands of dollars. Thus attrition rate gives an idea to the top executives of the company as to where they should spend more and how they should spend it.

How to Calculate Attrition Rate

Calculating attrition rate is not that tough, it just requires a simple mathematical calculation. You just need to 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 which you would 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 formula above it would mean 5/100 x 100 = 5. So the attrition rate is 5%.

How to Reduce Attrition Rate

Today, attrition rate has reached a serious proportion and as 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 their customers. On the other hand, employees are given appropriate training so that they can enhance their skills and work for the growth of the company. Measures are taken to award the better performers so that other 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 by the company. It gives a measure as to where the company stands in the eyes of its customers or employees.