Investor's wiki



What Is Attrition?

The term attrition alludes to a continuous yet deliberate reduction in staff numbers that happens as employees retire or leave and are not replaced.

It is generally used to portray downsizing in a firm's employee pool by human resources (HR) experts. In this case, downsizing is voluntary, where employees either leave or retire and aren't replaced by the company.

Figuring out Attrition

Attrition occurs because of multiple factors, including pay, lack of growth, and poor workplace conditions. The term is likewise some of the time used to portray the loss of customers or clients as they mature past a product or company's target market without being replaced by a more youthful generation.

Attrition is regularly used to portray the deliberate downsizing of a company's labor force. Downsizing happens when employees leave or retire. This type of reduction in staff is called a hiring freeze. It is one way a company can diminish labor costs without the disruption that layoffs. There are a number of motivations behind why this sort of attrition, which is likewise called employee attrition, happens. They include:

  • Poor pay or potentially benefits
  • Lack of growth
  • Poor workplace conditions
  • Poor balance between serious and fun activities
  • Illness and passing
  • Retirement
  • Movement

Attrition can be either voluntary or involuntary. Voluntary attrition happens when employees leave all alone. Involuntary attrition, then again, happens when the company chooses to reduce the labor force by cutting positions. Voluntary attrition is less pulverizing to company confidence. Be that as it may, it can in any case negatively impact any leftover employees assuming their responsibilities increase. It likewise can limit promotional opportunities and movement, coming about in an unhappier workplace or even more attrition than was planned.

Companies might need to think about expanding training, opening exchange with employees, and expanding benefits and different advantages to assist with diminishing attrition.

Customer Attrition

As mentioned over, the term attrition is ordinarily used to portray downsizing in a firm's labor force. However, it is likewise used to mean customer attrition, which happens when a company's customer base starts to drop. This is called the churn rate. Like employee attrition, customer attrition might be deliberate or not. In any case, it typically means that a company is in a difficult situation and necessities to play it safe as it can mean a loss of revenue.

Customer attrition can occur for various reasons. For example:

  • Faithful customers might abandon to products of another company
  • Aging customers aren't being replaced by more youthful ones
  • Terrible customer service
  • Changes in product lines or product quality

Companies may likewise experience customer attrition when they don't adjust their offerings to their customers. For example, products offered via Sears and Oldsmobile are instances of products that failed to capture a more youthful generation of customers.

Attrition versus Layoffs

Changes in management, company structure, or different parts of a company's operations can make employees leave willfully, bringing about a higher attrition rate. The employee might take a new position, retire, or move to another new city. An attrition policy exploits this unavoidable changeover to reduce overall staff. Layoffs are an alternate story.

Laying off employees brings about attrition as long as the company doesn't quickly hire however many new employees as it laid off. For instance, a company could reduce its administrative staff by six to make another internet team of six.

At the point when a company is confronted with a financial crisis, it must settle on difficult decisions and cut back its labor force to remain above water. In these cases, the company could execute a layoff without really any goal of filling those positions once more.

In less uncommon cases, for example, changes in the company structure or business model or a merger, certain divisions are trimmed or killed. This normally requires layoffs instead of attrition.

Attrition versus Turnover

Turnover happens in a company's labor force when individuals leave their job and are replaced by new employees. Employee turnover is generally counted inside a one-year period. This loss of ability happens in a company for some reasons. Similarly as with attrition, employees might retire, migrate, get a better line of work, or change their career.

Turnover can be both voluntary and involuntary, just like employee attrition. Voluntary turnover happens when employees decide to leave their jobs. Involuntary turnover, then again, happens when a company chooses to let workers go.

Companies can study turnover to make changes to their labor force. For example, numerous employees who leave inside a short period of time might signal there are issues inside a company's labor force. Management can utilize this to roll out any improvements it feels important to make the workplace a more amiable place for fresher employees, as well as existing ones, to need to remain with the company.

How Does Employee Attrition Differ from Customer Attrition?

Employee attrition is utilized to portray what happens when a firm's ability pool drops. Customer attrition, then again, is utilized to mean when a company's customer base shrinks.

What Is Churn Rate?

The churn rate is one more term used to portray customer attrition. This happens when a company starts to lose its customer base. This occurs in light of multiple factors, for example, when a customer has a terrible customer service experience, or when a company neglects to refresh its products and services.

Is Employee Attrition Good or Bad?

The loss of employees can be a problem for corporations since it prompts the reduction of ability in the labor force. Be that as it may, it can likewise be great. That is on the grounds that it permits the firm to recognize any issues inside the workplace and fix them. It additionally assists companies with cutting down labor costs and draw in new employees who accompany new thoughts.

How Might I Stop Customer Attrition?

You can prevent customer attrition from occurring by ensuring your company offers the products and services your customers need, furnishing them with phenomenal customer service, remaining current with market trends, and address any problems that emerge because of customer grievances.


  • Attrition is not quite the same as layoffs, which happen when a company lets individuals do without supplanting them.
  • A reduction in staff due to attrition is much of the time called a hiring freeze and is viewed as a less disruptive method for managing the labor force and reduce payroll than layoffs.
  • Turnover happens when individuals leave their jobs intentionally or automatically inside a short span of time and are generally replaced with new ability.
  • Attrition happens when the labor force decreases at a company, following a period in which a number of individuals retire or leave, and are not replaced.
  • Attrition can likewise allude to a company losing its customer base, frequently because of more seasoned customers aging or moving on and less fresher customers picking in.