analysing attrition
TRANSCRIPT
Analysing Attrition
Date: 18/Oct/2012
Author: K. S. Alok Ranjan
About: Employee Turnover is one of the most volatile
aspects of an Organization. It consists of Attrition and
Hiring. This document talks about the Attrition part of
Turnover and Methodology to handle the same.
Analysing Attrition
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I. Attrition – Meaning and Perspective:
Attrition by definition means the exit of an employee from an organization, department or team. The perspective
has to be a team at least because the relative significance of attrition is understood in perspective of the Group;
the employee was working in/with. In our discussion below, we will use the term ‘Group’ as the collection of
employees from which Attrition has occurred. It may be a Team, Process, Unit, LOB, geographical location,
centre, complete organization or any combination thereof.
Treatment of individual attrition is also important, but only in qualitative sense. We will focus on the quantitative
sense of attrition below.
There are basically four different categories Attrition can be divided into, namely:
1. Resignation: Employee on her/his own accord decides to leave the Group, intimates and confirms the
intention of exit to the concerned authority and exits the system as per guidelines.
2. Absconding: Employee does not show up in scheduled or regular day/time without prior intimation or
permission and does not inform the cause for sufficient delay.
3. Termination: Employee is asked to leave the organization as per decision taken by authorities for
suitable reason.
4. Transfer: Employee leaves the current Group within the organization to join another Group. In this case
the Attrition is for the Group the employee is leaving.
II. Timeline driven Calculation:
Timeline driven analysis of Attrition is important to know the turnover of employee by factor of time. Here a unit
of time should be minimum a week and can be a year also. However, generally it is taken as a month. We can
term each unit of time as a Period.
Timeline driven analysis can fairly forecast the forthcoming attrition for subsequent years, if trended properly. It
also gives a scope of extrapolating the present trend to look at the possible future, within a year. Primarily, it
facilitates the Comparative Analysis of different Groups (Teams, LOBs or Departments) to have the
performance of Group Managers matched against each other. This comparison can be done Period on Period
to arrive at incremental performance of each Manager and one against the other.
Attrition can be calculated with a very simple formula. However, there are variants of attrition formulas that solve
different purposes or they also ensure the correctness in large data sets. They are outlined below:
1. Periodic Attrition:
Attrition calculated for each Period that can be a week, fortnight, month, quarter or a year. The result is
expressed in Per cent. The formula for a Periodic Attrition calculation is:
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Analysing Attrition
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This formula, translated to plain English states that Attrition for a Period is a Per cent calculation of exits
from its average headcount.
If calculated for a month, for more accurate results, headcount at beginning of each week can be taken.
This will increase accuracy if the turnover (Joining and Exits) is more than 5-7 each month.
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If Attrition calculation Period is a month:
A. Comparison can be done Month vs. Month to see increment/decrement
B. Comparison can be done Group vs. Group to see Manager Proportional Performance
C. Comparison of A and B can be mixed to see trend of Manager Proportional Performance
D. Stacked performance of each similar month of last year/s can be done for general forecasting
2. Annualized Attrition:
When the Periodic Attrition is visualized with a view of a year, or rather inflated to a year, it is called
Annualized Attrition. It is simply annualizing the Periodic attrition by multiplying it by a number.
For example, a Monthly attrition can be multiplied by 12 to know its Annualized effect. The result would
be a Per cent only, but inflated to an year from the data of a month. The formula is:
Where the Att% is what we calculated above. If the Att% is calculated every week, multiply the result
with 52.
3. Year to Date (YTD) Attrition:
Sometimes it is necessary to figure out the turnover from the beginning of the year until now. This would
entail the calculation to start from the beginning of the year. This depends on the year beginning as
defined by the Organization (April or January).
In this case the Opening HC would be the number at the beginning of the year (1st April or 1
st January).
Closing would be the last HC taken, of last month, week or day. The Number of Exits would be for the
complete Period, starting from beginning of the year.
Analysing Attrition
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For more accurate results, HC at beginning of each month can be taken to be averaged. This will give a
more accurate result of YTD Attrition.
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Here, n is the number of months until now from beginning of the year. It has to be divided by n + 1
because total variables in numerator become n + 1 after taking all opening and last closing headcount.
Apparently, n can go up to 13 maximum.
III. Market driven Analysis:
Attrition lies between the cause and effect of Market Dynamism with respect to the Organization. Market
changes makes it happens and it makes changes in Market also. What we would attempt at here is, to
understand the Quantitative Analysis clarifying the Attrition and its cause and effect on the Organization from
Market point of view.
To understand the same, let’s list down the different kind of attritions first. Please keep in mind that the above
Timeline driven Calculation are applied to each Market driven Analysis to arrive at Calculable Results.
1. Infant Mortality:
Infant Mortality refers to exit of individuals who are otherwise tenured in Market, but exit the
Organization within a year. This happens primarily due to adaptability issue in the Organization.
If the YTD Att% of Infant Mortality is steady under 10%, we can consider the reason to be external to
the Organization. It can be safely attributed to the individual exiting or market condition. However, there
is a need to investigate if YTD Att% crosses 10% at any time.
Analysing Attrition
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The sooner the YTD Att% crosses 10% in a Financial Year, the worse the situation is. Definition of
being worse is that the Group from which Infant Mortality is occurring needs investigation for its
Adaptability, Induction Approach and Behavioural pattern of existing members.
The situation in such cases is highly subjective and typical to the Organization. However, going by
trend, such situations can be handled by a methodical approach as outlined below. The decision of
steps taken or analysis done should solely depend on the Management, however, cue from the below
steps can be taken effectively.
In Infant Mortality, YTD Att% always would give the correct result. Periodic Attrition and annualizing the
same would not give proper result.
Infant Mortality Treatment
2. Launch Pad:
Launch Pad refers to a situation where Fresh individuals without experience in market exit the
organization within a year. These are the individuals who are using the organization to launch their
career without commitment to the current role. At any Period, the Launch Pad Periodic Att% should not
exceed 10 - 20%. This adds up to the Cost of Attrition to an extent that affects the Operating Margin
negatively and skews the Profitability in the negative direction very soon in a Financial Year.
Considering YTD Att% is not necessary as Periodic Att% gives accurate result and can propel action
from Management. Although, calculating such YTD Att% always gives insight. However, the below
methodology would definitely help to contain situation.
10%+ in 1st & 2nd Quarter
•Supervisor/Team under radar
•Team interaction monitoring
•HR Policies for the Group revisit
•Stud of Group's stability in Organization
10%+ in 3rd Quarter
•HR Policies for the Group revisit
•Stud of Group's stability in Organization
10%+ in 4th Quarter
•Warning for non-repeat in next FY.
•Supervisor Analysis on situation demand
Severity of Infant Mortality decreases as it occurs towards to end of the year
Analysing Attrition
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Launch Pad Treatment
3. Critical Exit:
The situation of Critical Exit refers to attrition of resources that are critical to the business of the
Organization. Usually these are the employees of higher cadre and are at Management or Leadership
level.
Cost of losing such an employee is very high, especially when s/he is efficient, reliable and has been a
part of system for a considerable time. These are kind of attritions that are to be investigated without
calculating Att% of any kind. And if at all Att% is calculated, should not exceed 1% as YTD Att%
occurring once every 3 year or more. The most an Organization can do to investigate the same are as
below.
Critical Exit Treatment
Since this is a critical attrition study, the out of box thinking would help to analyse situation. It requires
much deeper study and holistic approach and should not be limited to above Treatment.
<=
10
%
Recruitment scrutiny
Training scrutiny
Supervisor under radar
> 1
0%
to
<=
20
%
Recruitment scrutiny
Moderate Training scrutiny
Supervisor Warning
>=
20
%
Recruitment scrutiny
Training Overview
Supervisor consultation
Analysing Attrition
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4. Weak Link:
The exits occurring due to poor performance of individuals are not a bad situation, not always. Not until
the exits are occurring within 1-2 months of tenure post training, if applicable.
Since the individual had not been performing on expected level, means s/he was not contributing to
earn revenue for the Organization. Also, s/he was adding to the cost by being in the system. In case like
this, Periodic Att% calculations would not help, rather they should be treated as outliers while
calculating the Periodic Att%.
They should be calculated by the average period of stay of the individual in the system, where a longer
period causing alarm.
Weak Link Treatment
IV. Standardization:
Standardizing the approach to Attrition throughout the Organization should almost definitely involve a vote from
all stakeholders who are into People Management. However, there can be a generic view to how to go about it,
giving the nature of how Absconding or Poor Performance would lead to Attrition or how the Attrition Cost is
treated in the Organization.
Giving due credit to all that we discussed until now, and keeping in view of the pointers that are significant,
although out of scope of this document, we can outline the Attrition Standard as below.
Under Performance during Training
•Alert Future Manager
•Mark as Possible Att.
Under Performance during Nesting
Treat as Outlier
Under Performance during Live Ops
•Treat as Outlier
•Ignore in Att Calc.
Termination
Analysing Attrition
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Unscheduled
Leave
Contact
and
Confirm
Date of
Return?
Report
Absconding
Emp.
returned
and re-
joined?
BAU
Attrition
Resignation
Retaining
successful?
(If
necessary)
No
Yes
No
Yes
Yes
No
Termination and Transfer case:
The Termination and Transfer cases
are also important. However, due to
limited scope and coverage of this
document, would be difficult to
showcase the same here. This is also
typical to each organization that
requires specialized approach.
Timeline and Approach:
It is very important that there
should be a Timeline attached to the
complete process. The time allowed
between Unscheduled Leave and
Absconding or between Resignation
and Attrition.
However, these are specific to the
Organization the Approach being
implemented on.
Analysing Attrition
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V. Foot Note:
Approaching the Attrition Data Maintenance and Analysis is of Primary importance as this deals with the most
valuable resource being deployed and utilized by an Organization, People.
Even if I am driven by, however generalizing certain aspects of Attrition, its Analysis and Interpretation is nearly
impossible, until looked at from specific angle of the Organization it is being analysed for.
There are pointers which are of Prime importance, for example Cost of Attrition. Since People involve cost and
what they earn for the Organization remains to be only a small Per cent to get into the Profit, assessing the cost
of attrition is Significant. However, this is one of the very specific goals of Attrition Management that can be
looked at from Organizational point of view.
Apart from the four types of Market Driven Analysis we discussed above, there are other types also, for
example Pre-meditated Exits, Clandestine Exits, etc. that I have experienced in my career and have noted and
analysed. Attrition is a fascinating concept to study, research and arrive at conclusions that can change the
course of Organization. I would be glad to assist interested individuals and Organizations in Analysing Attrition.
Please do not hesitate to contact me whenever you need.
K. S. Alok Ranjan | +91 9810 77 5457 | [email protected]