What is The Difference Between Attrition And Retention?

Are your revenue projections for this quarter looking a little unrealistic? But you checked everything—company expenses, project costs, and you even cut down on corporate dinners. So, what exactly did you miss? 

Here’s what: You didn’t balance your organization’s attrition and retention rates. Studies show that the cost of replacing an employee can be twice the amount of their current salary. That means a person with an annual package of $80,000 could cost you $160,000 just by leaving.

Worried yet? There’s no need to be. This article will explain everything you need to know about balancing the difference between attrition and retention rates. Let’s dive right in!

What do attrition and retention mean? 

Attrition refers to the gradual reduction in an organization’s existing workforce. Often, it happens because employees retire once their tenure is over. Other times, it occurs due to internal rearrangement—personnel move to another department.

However, the most debilitating kind of workforce reduction comes from other factors. For example, employees may decide to leave if they:

• Receive poor monetary compensation
• Are given inconsistent and ineffective feedback on work
• Experience low morale due to a lack of recognition

On the other hand, retention is about making your employees stay right where they are. That doesn’t imply that you restrict people to their current positions for years. Instead, it’s about retaining the value that employees bring to a company.

Now, there can be several reasons why someone decides to stay with an organization, including: 

• Competitive salary packages and other incentives
• Inclusive company culture
• Valid possibility of a promotion 
• Multiple avenues of recognition

Incidentally, the highest retention rates come from candidates who have been referred to a position. While the subtleties behind that statement are too elaborate to explain, it essentially means this: referrals are quickly becoming the easiest way to ensure retention.

And, it’s apparent as to why that’s happening. With support from automated tools like Suitable AI, such recruitment methods become streamlined, engaging, and, more importantly, responsive.

Still, it’s essential to assess both concepts simultaneously while seeking to improve employee turnover. For example, company surveys asking workers if they are satisfied with their job will always portray an incomplete picture. Instead, there should also be an inquiry into what the workforce is dissatisfied with.

That alone will help you manage your organization significantly better.

Three powerful tips for better employee management

Effectively managing attrition and retention rates requires you to exercise balance and fairness in your judgments. It’d also be best if you were proactive in whatever you do.

Here’s how you put those ideas into practical use:

1. Be balanced in all that you do

Most companies make a fundamental mistake in recognizing and rewarding their workforce. It goes like this:

Employees join an organization and prove their worth over time. The higher-ups see that effort and reward them accordingly. However, that need for recognition starts to go unnoticed after a period. It’s this thought process of ‘There’s no need to repeatedly reward them for the same thing.

Meanwhile, the more recent employees receive recognition for their work. This tends to create a divide between the current workforce.

A simple way to deal with this is to start engaging current employees in the recruitment process. Simply put, you ask your existing workforce to refer you to potential candidates when you announce a new position. Then, you reward the employees who bring in applicants.

In doing so, you aren’t only making the culture more inclusive but also catering to employee appreciation. Suitable AI’s referral program works based on this exact principle. Better yet, the platform takes it a step further and lets you track everything, so you know who exactly you need to commend. 

2. Understand concerns and act on them 

There are several ways to make yourself approachable to your employees. Still, you can’t cater to every grievance or challenge personally. This is where surveys are going to be your friend.

So, here’s a general outline of what a quarterly survey should include:

• Former company policies that need re-evaluation
• The most recent workplace changes that the employees approve of
• Things that the management team needs to work towards

Remember, honest opinions will help you manage employee turnover significantly better. So, ensure that the submissions are anonymous.

In addition, you could start making any organizational programs or workshops a touch more casual. Let your employees see these events as a place to unwind and express themselves freely. 

3. Fair and frequent incentives

Money talks better than anything else. In fact, incentive programs improve employee performance by 44%. That’s not all. Over 60% of people decide to stay with a company— despite wanting to leave earlier—if the benefits are worth their time.

You don’t have to break the bank, so to speak. You only have to be fair and consistent with it. Even incremental increases in salary packages will do. Such additions tend to build gradually and make a significant difference in the end.

Another way is to offer incentives for employees to recommend qualified candidates. You achieve two different goals when you do that, namely:

• Rewarding employees appropriately
• Hiring qualified individuals

Suitable AI hosts a reward program along the same lines. Even better, it lets you create a tiered reward system focusing on employee engagement during recruitment rather than the outcome.

And as you well know, employee engagement will directly decrease attrition rates.

Simplify organizational management through Suitable AI

Let’s be honest: Bridging the difference between attrition and retention isn’t an easy task. Instead, it’s one of the most challenging things for any organization to do. However, mere difficulty should never limit you from taking your company to the next level. 

For instance, tools like Suitable AI can help you streamline the recruitment process, thereby ensuring a positive onboarding experience. That, by itself, can make a world of difference. You could also work towards implementing sweeping internal changes that seek to improve work-life balance. 

Simply put, you have everything you need at your disposal. The only thing you need to decide on is how to use them.