Recently, a CEO posed this question to a colleague of mine who leads HR for a midsize organization: “How can we reduce the attrition occurring throughout the company?” At first blush, that seems like a pretty good question. But many of our views of attrition remain anchored in the past. Consider the following:
People are changing jobs more frequently. Most workers stay with their employers for just over four years, according to the Bureau of Labor Statistics, and that number is trending downward. For those between ages 25 and 34, the median tenure is just three years.
- Young employees are restless. Gallup reports that 60 percent of Millennials are open to new job opportunities.
- Employment relationships are changing. The Government Accountability Office reports that slightly more than 40 percent of the U.S. workforce is made up of contingent workers, including temps, the self-employed and part-timers. That’s up from about 31 percent in 2005, and it is expected to rise to perhaps 50 percent or more in the next decade.
- Talent is in charge. As of August, unemployment stood at 4.4 percent. The tight U.S. labor market means that people have more career options and leverage.
In today’s world of employment, attrition just doesn’t matter as much as it used to.
Of Questionable Value
Historically, attrition—the overall reduction in the workforce, including vacancies that go unfilled and jobs that are eliminated—has been a key number to HR. For one reason, tenure used to be highly valued inside organizations and often equated with an employee’s readiness for promotion. That’s not necessarily the case anymore, as job-hopping has become the norm and many top employees have diverse skills gleaned from myriad employers. Attrition was also an easy number to calculate at a time when human resources teams were not yet data-oriented.
Most of you probably record this statistic on your executive HR dashboard, but the data can be misleading. Companies today commonly change their focus, laying off workers as business lines change and hiring new people, with new skills, to support revised goals. When this happens, a pure attrition number would show major losses, but the reality is that outgoing employees are replaced by new people with different skill sets.
Moreover, efforts to reduce attrition aren’t always effective. Many companies try to retain people who are ready to leave through counteroffers. But 80 percent of workers who accept such offers will leave or be let go six months later, according to the National Employment Association.
Finally, attrition is not a stand-alone number. A person may decide to leave an organization for many reasons, such as a spouse’s new job, family caregiving responsibilities or lower living costs—all of which have become commonplace.
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An Updated Approach
There is a new paradigm. Reallocate the time, money and effort you spend on reducing attrition, and instead leverage the following approach to maximize your workforce:
Accept that you will not retain all your employees. This is just not possible—and frankly, it’s not even preferable given that some turnover is healthy for organizations. Shooting for no attrition is very costly and sets you up for failure.
Focus your efforts on the employees who are most important to retain. Who are they? Well, that is up to you to determine, but typically they are people with knowledge of the intellectual property essential to your business, influencers who move things forward (conduct an organizational network analysis to pinpoint them) and individuals whose departure could bring your business to a standstill. Disneyland’s most critical workers include the staff members on the ground who sweep the floors and talk to customers. That might not be who you expected, so do your homework and pick the truly indispensable people.
Build an alumni network. This is a great way to stay connected to employees who leave. You can market to them, keep track of their growth and promotions, and recruit them back when your company needs their skills. But remember, you will need to nurture and develop this network and stay connected on a personal and professional level for it to be effective.
Revise HR policies that make it harder for former workers to return. Do your stock awards, tenure policies, vacation accruals or exit interviews discourage workers from coming back? If they do, it’s time to rethink them. We need to welcome back—not alienate—boomerang employees.
Establish shared accountability. This new approach cannot, and should not, fall on HR alone. Managers need to know your new paradigm and support it. You’ll also need buy-in from your executives. When employees leave, consider giving them a tentative job-offer letter good for two years in the future. This type of open-return policy shows others in the organization how serious you are about welcoming people back. This should become part of your culture.
Devise a workforce-composition strategy. If half of your workforce will be contingent labor in the future, the entire conversation will change and the scope of managing attrition will become much narrower indeed. Begin by tracking this stat for only the 50 percent of your workforce that are W-2 employees and those you deem to be critical to your business. The other half will flow in and out of the organization—and that’s OK. You may also want to bring some contingent workers on board as regular staff and move some full-time people to contingent status based on their personal needs or the needs of the company.
Are you ready to manage this new fluid workforce? Do you have the data to assess when you will need the right talent in each country, business unit or product line?
Now is the time to get in front of the new attrition and employment realities. Waiting longer will only ensure that you fall further behind.
Daniel Sonsino is a former HR executive and founder of Guia Consulting in the San Francisco Bay area.
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