HR data isn’t as hard to come by as it used to be. Applicant tracking systems, employee survey tools, and other software have given teams access to increasingly complex metrics across the entire employee lifecycle. While today’s People teams’ metrics are more sophisticated, two time-tested metrics from “HR 101” remain as relevant as ever: turnover and attrition.
Both identify whether employees are leaving your organization — and that powerful simplicity makes them among the go-to HR metrics for the C-suite. Given that the cost of losing an employee can range from tens of thousands of dollars to twice their annual salary, it's easy to see why.
“Turnover and attrition are still so valuable because of their power to show how the organization transforms over time. They seem similar, but each of them shows a different perspective on the organization. Businesses need to approach the topic of employee lifecycles differently depending on those metrics,” said Jessica Lim, HR Manager at LiveCareer.
We’ll go through how turnover and attrition differ, why one is more important than the other, and how to use both to drive your company forward.
Turnover measures the rate at which employees that you intend to replace leave your company over a period of time. These departures can be voluntary or involuntary. To calculate turnover, divide your look-back period’s employee departures by average headcount. Then, multiply the result by 100 to get a percentage. See below for the equation.
Turnover Rate = (Total Departures ÷ Average Headcount) x 100
Easy enough, right? If you averaged 100 employees over twelve months and 15 employees left, your annual turnover rate is 15%. If you’re looking for a baseline, note that turnover varies widely by industry, from 10% in the energy sector to 60% in retail. Tech company turnover tends to average around 13%.
Attrition, on the other hand, occurs when an employee leaves voluntarily and you opt not to fill their role. In cases like these, employees might be retiring, leaving for a new company, or going back to school. In all of these cases, the employee departed on their own volition and won’t be replaced. Layoffs and restructuring events aren’t voluntary, so they can’t be considered attrition.
“The difference lies in why. If the turnover is high, it means that a lot of people are leaving the organization voluntarily or involuntary,” Lim said. High turnover rates may be indicative of a disengaged workforce, inadequate growth opportunities, or bad hiring decisions. “On the other hand, attrition means that people are retiring or resigning, but are not replaced. Looking at the broader perspective, it might mean that your company is getting older or you need to worry about knowledge transfer.”
Turnover and attrition metrics both have value. Still, if your HR team only had time to track one, experts agreed that turnover should take priority.
“Attrition is easier to track, but turnover is the bigger challenge with the greater reward,” said David Cusick, Chief Strategy Officer at House Method. Turnover usually catches teams off guard, especially when employees leave on their own. It also requires hiring managers and recruiting teams to invest time and money in seeking replacements.
“A host of factors influence turnover. Voluntary turnover happens when employees unexpectedly find a better opportunity elsewhere. This may mean fewer hours, greater pay, better work-life balance, or even closer proximity to their house. It's up to you to start sorting through the data to see how to reduce it,” Cusick said. High turnover can reflect any number of problems — poor onboarding, disengagement, and mismanagement being just a few. For this reason, turnover is a must-have datapoint for HR teams.
Turnover and attrition are both lagging indicators, meaning the damage has already been done by the time they’re measured. That doesn’t mean they can’t be used to effect change, however. To use these metrics proactively, you need to look at cross-sections and engagement data.
When pulling turnover data, consider a few different angles. What departments or managers accounted for the most departures? What was the average tenure of those employees? Were there any demographic trends that might be indicative of issues with diversity, equity, and inclusion (DE&I)?
“Turnover metrics are valuable from a legal perspective because they can uncover unconscious bias, discriminatory practices, or reveal a workplace climate that deters women or persons of color from remaining at the company,” said Robert C. Bird, a professor at the Academy of Legal Studies in Business.
Once you’ve identified the most telling cross-sections, use engagement survey technology for more actionable insights. How did engagement scores compare on high-turnover teams? Were there specific criteria, like belonging, communication, or trust in leadership, where these teams tended to score lower? While turnover metrics are backward-looking, they can help HR teams identify issues, brainstorm solutions, keep tabs on engagement moving forward.
“Turnover is a complex issue that doesn't have a turn-key solution. But one of the best ways for HR to keep employees on board is keeping their finger on the pulse and get an accurate reading of employees' engagement,” said Jagoda Wieczorek, HR Manager at ResumeLab. “There are tools that HR professionals can use to stay in the loop about how employees are feeling across the board and can flag potential retention issues so you can react in time.”
Lattice’s people management software doesn’t measure turnover, it helps you get ahead of it. We bring employee engagement surveys, performance reviews, and employee career development together in one platform, giving your company an edge in retaining top talent. To learn how Lattice helps over 1,850 companies keep employee turnover at bay, watch a product tour.