Attrition is a number one problem for an organization to solve on the people side of business. Why? Well, when an employee leaves the organization it’s a severe loss. Let’s think about the casualties.
First, the employee goes through a notice period, where they are already disengaged and not performing close to productivity. Second, there is handover. Let’s hope there’s somebody whom you’ve already hired for the handover. If not, then maybe a temporary handover, following which you must go hire from the market.
This not only becomes expensive, but also involves a ramp time for the new employee to learn about the organization. Adding up all the factors – the cost of hiring, cost of productivity, the notice period as well as the ramp time for the new employee, means the loss for an organization is almost 6-8 months of salary of an employee. The loss is even higher if the resource is a sales professional. It’s a 10X target which translates to almost 50X in terms of an employee’s contribution. This is the severity of the loss due to attrition.
Solving this problem is critical. That is clear. What is even more critical is how are you solving this? Solving for attrition after the employee joins the organization is one step too late. Organisations must address this right at the top of the funnel – which is hiring.
Now, let’s look at the source for hiring. There are three broad sources for hiring
- Employee referrals
- Vendors
- Job portals
Job portals is what most recruiters prefer. However, an employee who comes through job portals is already actively seeking a job change and is likely to seek a job change later.
Vendors are also a significant source of hiring. While this is the least effort path for recruiters, this is the most dangerous path for attrition. Vendors are incentivized based on the monthly salary of an employee.
What’s stopping your vendor from poaching the employee; one they already have a relationship with to move to another organization for large pay packet within 6 months to a year?
Given that it is the least effort path, it is often adopted. This is bad from a longer term perspective and it is the maximum risk to topline in most of the organizations today.
Third and most important source is employee referrals. Referrals are known to drive great value in terms of retention and productivity. Employees who refer and who are referred to stay for longer. They love your organization. This channel is also very attractive, because there is always a friend inside the organization who helps the new hire get started and be more successful.
In summary, attrition is the number one problem in people side of business. Hiring through employee referrals is not an option but an imperative to solve for attrition. Improving referral contributions is a very tough and interesting problem to solve and that’s a topic for another day.
The best organization today focus on solving attrition at the top of the funnel. They focus on having a strong referral engine which helps them shortcut effort and fill top talent faster.
How are you solving for attrition today? Let me know your thoughts below in the comments.