Dealing with high turnover (attrition) within your organization or department can be costly, leading to lost productivity (shrinkage). The challenge lies in finding a balance between reducing turnover and allocating more resources to address shrinkage, all while keeping current employees satisfied.
Contact centers have undergone significant changes over the past decade, accompanied by evolving employee expectations. While this is not necessarily a negative development, it does come at an additional cost. However, it might prove more cost-effective to focus on keeping current employees happy. This can be achieved by providing them with more scheduling flexibility, opportunities for up-training during offline hours, or involvement in different business areas. Frontline employees, who interact directly with customers, often possess valuable insights into customer satisfaction and demands. Allowing them to contribute ideas and opinions outside of their primary functions helps them feel more valued.
In 2021, the Bureau of Labor Statistics estimated that the average attrition rate was 57%, dropping to 25% when considering voluntary terminations alone. According to workinstitutue.com, a significant proportion of employees left due to a lack of opportunities for professional development and training. This segment accounted for approximately 20% of employees who departed from an organization, nearly twice as much as the second highest category. The Work Institute's report provides further insights. Additionally, the estimated cost of turnover per employee, based on annual salary and worker type, was outlined as follows:
$12,000 to replace an entry-level employee earning $36,000 per year.
$20,000 to replace a manager earning $60,000 per year.
$50,000 to replace an executive earning $150,000 per year.
It's important to note that these estimates are influenced by various factors, such as the time required for recruitment, hiring, training, and development. Therefore, these costs may vary across businesses and industries. If we consider the middle category of an employee earning $60,000 annually, it would cost approximately $20,000 to replace them. That's a considerable amount of financial resources being expended. However, it prompts the question: Is it more cost-effective to increase focus on shrinkage to enhance employee satisfaction?
Let's consider a scenario involving a contact center with 100 employees. Each employee's fully burdened cost, including salary and benefits, amounts to $80,000 per year. When an employee quits, it results in a loss of $20,000. Currently, the voluntary attrition rate stands at 25%, which means 25 employees are lost each month, totaling 300 employees per year. The shrinkage rate, representing time lost due to factors like breaks and non-productive activities, is currently at 32%. Employee surveys indicate that coaching and development are lacking, and employees feel micromanaged.
Based on the given scenario, the contact center experiences a monthly loss of $500,000 or $6 million annually due to voluntary employee attrition. While it may not be possible to prevent all attrition, focusing on employee satisfaction can help reduce it.
By analyzing the numbers and assuming that by increasing shrinkage to 45% from the current rate of 32%, attrition can be reduced by 33%, significant cost savings of $880,000 per year can be achieved. This reduction in attrition expenses opens up possibilities for allocating the savings to further increase shrinkage. This could involve hiring additional full-time employees to support the existing team or providing employee bonuses as incentives.
The potential cost savings demonstrate the importance of addressing employee satisfaction and investing in measures to reduce attrition, ultimately leading to financial benefits for the contact center.
Review of Shrinkage vs Attrition based on the above scenario:
If the shrinkage assumption goes from 32% to 45%, the annual cost becomes $3.6 million. Which is an increase of $1 million annually.
If the turnover drops by 33% as a result of more development opportunities and a better balance while working, about ~96 FTEs will stay with the company per year. This would save the company $1.9 million annually.
The difference between the two (increasing shrinkage and drop attrition) is $880k annually.
A break out by percentage of why employees voluntarily leave a company:
Image from the workinstitute.com report can be found here.
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