Canadian Marketing Blog

Current Economy and Attrition…is there a link?

I’m certain every situation is unique to its own circumstances, hence, my commentary speaks to the majority only. What makes people leave their job in the first place? Who has the biggest influence over this decision? Is it the direct boss? Is it the organization as a whole? Is it money? Is it co-workers, culture, motivation, etc? There are many reasons why people pursue alternate careers.

Which begs the question, what makes people stay? In recent months, the trend has been a lot heavier weighted to companies reducing their workforce versus the workforce attrite on their own. The reduction in workforce is clearly linked to the economic situation North America is in. However, a positive for organizations is the economic situation has dramatically slowed down voluntary attrition. One can Google the cost of attrition and come up with varying degrees of hard dollar cost. Regardless of the different amounts companies attach to attrition cost, all organizations agree it is a large cost.

The situation deepens further. As companies downsize in large numbers, it puts more pressure on the staff that stay. Workers are taking on more and Leaders are managing considerably larger groups of people. This forces organizations to ensure they keep the “right staff” and “highest performing leaders”. I have personally spoken to several companies (no names mentioned due to confidentiality) that tell me their attrition ratio’s have gone from high 60’s % to under 20’s % since the economy went south. And some that were in the high teens are now seeing next to no attrition. This has resulted without any additional spending on retention programs, no major changes to routines, basically, no efforts required.

One survey (Execuserve Corp) suggests the most negative impact of turn-over is felt in the Customer Service department. Downsizing is a vicious circle. As companies down size, generating revenue becomes a tougher challenge. When revenue is not coming in, organizations downsize further.

A personal opinion as to why voluntary attrition has reduced considerably in our down-turn economy is this: Hiring in all organizations regardless of industry has reduced considerably, making it extremely difficult for employees to move from company to company. The sheer fear of not knowing if a job will be available at another organization further solidifies employees to their current organization.

What is the right answer? Execuserve states unequivocally, “economy is directly linked to attrition”. Now what? Smart organizations should (and are) retain their top talent, knowing that the economy will come back. When the economy improves, finding and hiring top talent will be a daunting task.

Conclusion: Doing nothing to retain top talent is a critical mistake any company can make, during a strong or poor economy. Corporate values should not change simply because employees don’t have as many choices. Those who work at building their workforce now will definitely come out stronger once the economic situation turns around.

I think the biggest problem with CS positions is they pay pretty poorly. High turn over would exist regardless. And this unfortunately is the reason many people move around. Poor pay coupled with a poor work/corporate culture only increases this. I, for one am tired of being asked to take on more and more, with no compensation and no guarantees about where I will be in 6 months time. Well if corporations expect loyalty from their workers, they are going to have to factor in things such as competitive salaries, opportunities for advancement (not just for friends and relatives of management) and consider things such as benefits. These things never seem to be examined at their long term value. Retaining people in the long run is entirely possible if people were compensated fairly, and valued at their place of work. When your treated as being readily expendable, your certainly not going to go the extra mile. One thing that is never readily stated is how high turn over is a sign of poor management practices. I stay far away from corporations that have high turn over. I need to work like everyone else but I've learned that if people are leaving (or being fired in droves) its certainly not the place to be.

Great article Amar. I agree it is the companies that plan now (with employee engagement building programs) who will succeed when the economy starts growing again. People may not be leaving companies right now, but leaders should not mistake this for higher employee engagement. Companies that focus on keeping their employees motivated and loyal will get the most out of them in any economy,