CHROs today no longer want top talent attrition to be an unexpected and unpleasant surprise in their organizations. Thankfully, heavy deployment of tech in HR to the tune of $145 billion dollars in 2022 has enabled HR leaders to predict turnover and take action proactively before it's too late. Further, the HR tech sector is only continuing to grow in order to fight attrition, as 74% of companies are also planning on upping their investment in HR tech in the next few years beyond the average 310 dollars per employee they already spend.
One of the quickest growing sectors in the HR tech industry? AI and predictive people analytics. Industries notorious for high attrition have reported positive results from AI-driven initiatives in HR. Based on a report published by The Economic Times, HR chatbots like Amber have doubled average employee tenure in the banking, financial services and insurance (BFSI) sector.
Let's take a deep dive into how you can effectively use AI to make attrition predictable and preventable at your organization.
What is Attrition? How We See It
If we were to define attrition, it fundamentally means the departure of employees from your organization of their own volition. It differs from termination in that the employee leaving is choosing to do so, rather than being asked to leave by the organization.
For most organizations, attrition rate becomes a yardstick against which internal culture is measured. If your employees are leaving voluntarily, it affects your employer branding score besides adding to backfill costs. It is usually the HR function that stays on top of the organization's attrition rate.
Briefly, attrition rate is the percentage of employees who leave the organization each year. Let's say your organization has 1,000 employees and 50 choose to quit and find employment elsewhere. That would mean your attrition rate is 5%. This figure does not included terminated employees.
Let's dive in and understand a bit more about how attrition impacts your company, why it happens, and how you can use HR tech to make it predictable and preventable!
Key Takeaway: Attrition is when employees leave your organization by choice rather than being fired, and attrition rate is the percentage of your employee base that quits on a yearly basis.
What Are the Different Types of Attrition?
Broadly, there are 3 different types of attrition.
1. Voluntary attrition
Voluntary attrition happens when an employee chooses to leave their job. This could be because they're unhappy with their role or they've been offered a better position elsewhere. Voluntary employee departures aren't necessarily bad news - if you're happy for them to go and they're happy to go, then there's no reason why it shouldn't work out well for both parties.
2. Involuntary attrition
Involuntary attrition occurs when an employee is fired or forced to leave the company due to poor performance, misconduct, or just a poor culture fit. Involuntary attrition isn't always bad news either - if an employee is underperforming or threatening company culture, then it may be better for them and everyone else if they move on. Involuntary attrition is more likely if you're a large company, because it can be easier to hide poor performance in small teams.
However, involuntary attrition is often bad for the organisation. When an employee leaves, they take with them their knowledge, experience, and network. Moreover, the cost of backfilling key employees extends up to 6 months of their pay. It's important to ensure that the right steps are taken to avoid this type of attrition and an early warning system helps retain top talent before it's too late.
3. Demographic-specific attrition
Demographic-specific attrition happens when people leave a certain demographic group within a company. There are 5 key types of demographic-specific attrition to watch out for based on our people analytics data.
a) Top talent attrition
Top talent attrition happens when your highest performing people leave your organisation. The loss of this type of employee can have a devastating impact on team productivity, morale and performance of your organization.
b) First Year attrition / Infant attrition
First year attrition is a type of employee attrition that occurs when employees leave your company within the first year of employment. Infant attrition occurs when new hires don’t stay with your company for more than 6 months. Infant attrition typically happens because companies have not been able to onboard their new hires successfully or their culture does not align with what the new hire was expecting from their job. This is further amplified if the new hire was hired remotely, which is why it's imperative to measure the effectiveness of your onboarding plan by collecting feedback at every stage of the employee journey.
c) Engineering/sales/niche attrition
Attrition of employees with niche talent can occur due to multiple reasons such as your organisation not having a use of the niche skill anymore, high demand for that skill in the job market leading to competitive poaching, or simple job burnout due to over-reliance on niche talent in the organisation. This type of attrition is especially difficult to curb due to many external market forces at play.
d) Remote employee attrition
Remote employee attrition can happen for many reasons such as feeling isolated from the rest of the team, feeling like they don’t have a place in your company culture, or being unable to manage their time effectively. To combat this type of attrition, it is important to invest in creating a remote-first organisation with tools that allow employees to work together seamlessly while still feeling connected to the team.
e) 2+ year tenured attrition
This type of attrition is particularly difficult to manage because it can be hard to predict and even harder to prevent. In some cases, employees may feel like they have outgrown their current role or have the opportunity to make more money elsewhere. When this happens, it’s important to continuously listen to your team to understand what drives their engagement levels. Is it Pay, Work-life-balance, Peers, or Managers?
3 Main Regrettable Attrition Costs
Just to make sure we’re on the same page, let’s talk a bit more about how losing employees costs heavily on your organization. If you want to see how much you're losing due to attrition, take a look at our nifty ROI calculator.
1. Wasted HRBP Hours, Wasted Dollars
First and foremost, backfilling any role in an organization requires a large amount of HRBP bandwidth. Instead of spending their time aggressively pursuing new candidates for expansion, developing policies that can help drive key business levers, monitoring employee well-being or working to build a positive company culture, HRBPs are forced to take a step back and fill a role that shouldn’t have needed to be filled in the first place. We know how hard our HRBP readers have to grind every day to get things done, especially during work from home, when you have to backfill atrophied roles.
2. The Ripple Effect of Vacant Seats
Second, the tasks that exited employee no longer perform adversely impact everyday operations in your organization. Their work splits amongst their team members, bogging down employees who may already have their own tasks to process and in turn lowering their employee satisfaction. Managers, captains of such teams feel additional pressure trying to allocate their resources efficiently, and end up focusing on downstream work instead of high level, strategic areas that can help the company grow. Worst case scenario is the employee who leaves was filling a specialized role that will not be easy to cover internally and will bring the project or function to a screeching halt.
3. Onboarding Costs Pile Up
Finally, even when you bring a new employee onboard to fill this role lost due to attrition, you’ll still incur additional costs due to reduced efficiency of the newest member. They may be the top of the line in their industry or even potentially an upgrade over their predecessor, but there are still financial ramifications of bringing them on board. The onboarding process, cultural indoctrination, introduction to a new work environment and tools, and just the general aspect of “learning the ropes” means your new hire won’t be able to come in Day One and start performing. It could be six months or even a year before they’re performing as well as the person they replaced!
Key Takeaway: Being blindsided by attrition strains HRBPs, demoralizes employees, and costs up to 35% of an employees CTC in backfill costs.
Primary Reasons Why Attrition Happens and How to Fix It
In this piece, we’ll tackle three factors we've gleaned from our research that cause attrition at organizations both big and small. This includes lack of internal growth opportunities, immediate workplace causes for concern, and fundamental disconnect with the organization that motivates employees to exit.
These factors, on a macro and micro level, are all key drivers of employee experience and play central roles in whether or not employees remain at organizations or leave them. While there are myriad factors that result in unexpected departures, we're focusing on the major ones that can be easily fixed.
The first thing that you need to do is understand why people leave. You can start by asking your employees about their reasons for leaving and then follow up with them through surveys or interviews. Or you can onboard a solution like Amber to continuously listen to your employees at scale. Once you have this feedback, you will be able to see if there are any patterns or commonalities among them. This will help you identify what goes wrong at your organisation and how to fix it.
There are some common reasons why people leave jobs:
- They didn't like their bosses and/or colleagues
- They were unhappy with the work environment (e.g., poor office management)
- They were not satisfied with their pay and benefits
1. Lack of Growth Opportunities- to try something new or change careers
Imagine if you didn’t see a path for growth at your organization. You see people being hired above you, a boss who doesn’t acknowledge your efforts, a company that isn’t scaling. Will you stick around out of loyalty, or will you look for a place that would help you grow as a person and employee?
Whether through lack of learning and development programs, no clear paths for career advancement, or poor recognition strategies, employees may feel that they have no future at the organization, motivating them to quit. Our desire to be validated for the effort we put into the workplace is one of the main reasons we work! The money is important, of course, but if you don’t see yourself growing in an organization it can be incredibly demoralizing. If you are not reaching out to your employees to understand how they are feeling at certain moments in their journey across the organization, chances are your employee recognition program might be dated and your attrition rates high.
2. Low Employee Satisfaction
Everyone knows there is nothing worse than a bad manager. We’ve all had one, and we all hope we never have one again! As a primary touchpoint for employees and gatekeeper to higher positions within the organization, an unsatisfactory manager is a quick way to drive employees out the door. You may want to keep a close eye on team leaders who are responsible for work delegation and should ideally be building their teams up, not bogging them down.
Quality of work is another key factor to consider.
Ask yourself; do you enjoy doing what you’re doing? If the answer is no, would you stay where you are? Without a sense of purpose within their organization, employees will look elsewhere for opportunities that may pay more, recognize their contributions better, and/or even have better perks and policies in place.
Finally, there’s the team. Do your employees feel that their peers motivate them and produces the quality of work that they expect? While healthy competition is encouraged, most often new team members feel like they’re being dragged down by their teammates. This negatively impacts day to day experience, and in turn push employees to look for other opportunities.
3. Disconnect with Organization Values & Lack of Respect
Lack of belief in an organization’s culture, leadership, or direction can drive employees to quit their jobs. Put yourself in an employee’s shoes. Is the culture of the entire organization something that motivates employees to perform well? If it’s a workplace where positive recognition is the norm, employees are challenged in a positive manner, and accountability is the norm than employees will be more likely to stay.
In terms of leadership, communication gaps and a lack of trust in the company’s most important figures can alienate employees. If C-Suite level roles fail to adhere to the values of the company, or fail to communicate decisions in a manner that makes employees feel considered then employees won’t feel respected within the organization. No one wants to work at a place where they feel like a number, or that their voice isn’t heard.
Once an employee has been with you for a few months, they begin to sense the general well-being and direction of the company. Once they’ve had time to assess the direction of the company, they’ll decide whether or not to stay. This is a key reason employees are most likely to leave in the first 6 months of their tenure, as 31% quit in the first 6 months, with 68% of those leaving within 3 months.
Key Takeaway: If an employee leaves it's imperative to establish if it's day to day issues (lack of growth or poor structure), or systemic (cultural issues) to prevent the cycle from repeating.
Common Methods to Reduce Attrition Rate
Every organisation is unique and would have their own underlying reasons driving attrition. Once you understand what's driving attrition at your org, here are a few common methods you can use to reduce it.
1. Communicate Effectively
Communication is one of the most important aspects of any organisation. An effective communication system helps employees feel more connected with each other and with their managers. This leads to increased job satisfaction among employees and reduces employee turnover rates.
2. Promote Employee Engagement
It is also important for HR leaders to promote employee engagement among their staff members. This helps in improving retention rates as well as productivity levels in organisations as employees feel more motivated and engaged after joining an organisation where they are provided with opportunities for growth and development. If you’ve got access to an employee engagement platform that uses an eX framework you can even analyse what drives employee engagement at your organisation, for eg. Peers, Managers, Salary etc. and focus fixing gaps, along with doubling down on what’s working well.
3. Benchmark salaries externally
When you benchmark salaries externally, it helps you stay competitive with other employers in your industry. It also helps you understand how much your employees should be earning based on market data and average salary information.
4. Build a continuous listening culture
A continuous listening culture is one that encourages feedback from both employees and managers. This way, if there are any issues or problems that need resolving, they can be addressed before they become too big of an issue for you or your team members.
5. Empower your middle managers
Middle managers make up the backbone of most organisations, so it's important that they're empowered by their superiors so that they can retain their best talent within their teams without having to rely on senior management or HR for help. The more empowered middle managers feel, the better chances you have of retaining them within your organisation for longer periods of time.
How You Can Make Your Attrition Strategy "Predictable" & "Preventable"
1. Predictable: Sourcing Actionable HR Data for Informed Decision-Making
User sourced salary information and company deep dives on review sites like Glassdoor give HRBPs and employees more insight into market conditions. This in turn allows HRBPs to make more competitive offers, understand hiring trends, and create a brand for the company. Further, it allows them to assess potential risks for departure within their own organization by empirically evaluating their organization’s own pay structures and reading internal reviews. From here, an HRBP can work to make actionable changes through data aggregation. More importantly, an integrated HR chatbot like Amber can actually nudge your happy employees to share reviews on external review platforms like Glassdoor that further helps you correlate your internal employee happiness index with the aggregated scores on such platforms.
2. Preventable: Ensuring Smooth and Standardized On-Boarding
A uniform tool or platform ensures consistency in on-boarding and shared cultural values, and puts employees on the same page from Day One. This can help counter the cycle of early departure we’ve noted from our research. Getting employees quickly up to speed also allows them to contribute earlier, map out their own goals, and creates a sense of purpose at work versus a one-size-fits-all indoctrination process that leaves them confused and disengaged.
3. Predictable: Tracking Individual Employee Journey at Scale to Lower Attrition Rates
HR tech empowers HR to track macro and micro level trends when it comes to the workforce. It can help you identify key individuals within your organization that you can invest in terms of learning and development, online and offline skill building programs, then see how they respond to them through their feedback. If their feedback indicates that they’re gaining valuable insights, you know you’re on the right track with your L&D. If they don’t respond how you’d like, it’s an opportunity to go back to the drawing board and find strategies to keep your superstars happy.
4. Predictable: Addressing Problems Before they Emerge
Let's begin with a now cliched but equally true statement. Technology is leading the way in terms of preventing early attrition, lowering employee turnover, and boosting employee satisfaction at work. One huge part of this is predictive analytics. Real time data and AI can help HRBPs identify sentiment patterns of employees at risk of leaving. Once the areas of concerns are understood they can be proactively resolved to prevent early departure. Data aggregation tools, including AI chatbots, can help identify employee concerns in real time rather than HRBPs retroactive receiving feedback from employees who are already on their way out the door.
5. Preventable: Personalizing Experiences for Employee Satisfaction and Success
It's not just about solving high attrition with tech. An HR chatbot that practices empathy with customized questions can make employees feel like their voice is being heard during key moments in their organizational journey. Having an outlet can help mitigate burnout and give HRBPs a chance to solve this issue before it becomes a reason for your top talent to leave. AI driven recommendation engines and predictive analytics help HRBPs cut away the noise and target areas that require their bandwidth. Also, start looking for ways to build a simple reward and recognition culture at your organization.
Key Takeaway: AI and predictive analytics can both help you identify AND address key causes of attrition through predictability.
How Companies Are Using AI to Fight Attrition
1. Measuring NPS to Lower Employee Turnover
One crucial component of preventing attrition and retaining top talent is creating a sense of loyalty within the organization. This is where Net Promoter Score becomes pivotal in ensuring long term company health. Tata CLiQ uses an AI chatbot to drastically boost their net promoter score, both improving the work experience for current employees and making it easier to hire new talent through word of mouth. We don't mean to brag but Behram Sabawala, CHRO and CFO at Tata CLiQ did call Amber “the best thing that’s happened to us at Tata CLiQ this year.”
2. Monitoring At-Risk Employee Cases Up Close
Altimetrik saved 62% of at-risk employees using AI, which would've been near impossible considering their 400:1 HRBP ratio.
Without a proactive reach-out engine, like a chatbot, the concerns of their employees would most likely have gone unnoticed considering the massive discrepancy between HRBP and total employee headcount. AI and technology won’t ensure you save every high risk individual, but it’ll give you a head start in identifying them and taking proactive measures to lower employee turnover.
3. Automating Employee Feedback Collection for HRBPs
Our research indicates that at least 50% of an HRBPs work hours go towards collecting, tracking, and analyzing employee feedback. At the end of the day, it’s a repetitive task that does little to nothing for either employee or HRBP growth. In short, it’s data aggregation that could be more effectively done in real time with artificial intelligence. You’d be surprised how receptive employees are to chatbots! Just look at AXA Affin GI and how they achieved an 87% response rate using an AI bot, saving thousands of work hours for HRBPs who can now put their minds towards solving problems, not gathering the data needed to identify the issues.
Key Takeaway: If used properly, AI in HR can net over 30x ROI in tech spend.
Putting AI to Work for You
Want to know more about how AI can be implemented in your organization? Take a deep dive into Amber’s hire to retire EX framework, to get a better understanding of all the key business levers AI can move. So onboard an AI chatbot today to fight attrition because you can’t afford not to! Don’t just take my word for it; go check out our nifty new ROI calculator and see how much you could save!