2010 Attrition – Where will it go?

"Round and round it goes, where it stops nobody knows…" the carnival barker would shout, throwing a whiffle ball into a net above a colorful spinning disk. It was a favorite carnival game when I was a kid; trying to guess/anticipate where the ball would land. But where the carnival game has a limited number of options, the business endeavor of predicting organizational attrition is more complex.

At the recent i4cp Annual Conference, a luncheon roundtable discussion I was sitting in on got into a dynamic debate regarding what attrition assumptions to use for 2010. Participants wanted to know how to benchmark how their organizations were doing. The current reality is, no one knows.

Many organizations said they were using their 2008 attrition numbers as both an assumption and a benchmark, since 2009 was such an "odd" year. In truth, there may have been some stronger language used to describe 2009. But as one i4cp member said, "What if 2009 is the new norm?" To hedge for that uncertainty, my recommendation was to use a three year average rate for 2007 - 2009. Hedging is an effective strategy in uncertain times.

That discussion stuck with me beyond the roundtable conversation. There are so many factors that could influence attrition in 2010, including economic improvements, lifted hiring freezes and employee quality of life issues.

My bet: attrition rates for 2010 will be highly similar to levels experienced in 2003-2004. This wager may seem counterintuitive, given that the Obama administration is forecasting that unemployment will only improve slightly in 2010 and, from industries as varied as Transportation and Health Care, organizations are experiencing all-time low attrition rates. But while the phrase is often over-used, I predict there is a "perfect storm" brewing in the American workforce that will cause attrition to surge in the coming year. What factors lead me to this conclusion?

1. Workers are tired! As the March 1, 2010 BusinessWeek Numbers point out, "The productivity of nonfarm US business has increased 6% since the end of 2007. That's because there are fewer workers, but those that remain are producing more per hour." To which anyone who is currently employed will say "duh!" This is the "dark side" of productivity. Prolonged overwork and burnout will take its toll on those who, so far, have been willing and able to tough it out.
2. Workers may start to reassess their quality of life. While there has been much written about curtailing executive compensation and bonuses, what about the average worker? For all of that extra work, for most, bonuses will be modest and salary increases minimal (if at all). According to Hewett, 48% of US companies are reporting salary freezes in 2010, compared to only 13% in 2009. In particular, top-talent with children and some financial options may start to re-evaluate their home economics and temporarily drop out of the workforce until it becomes "worth their time."
3. Workers may be irritated. Many organizations implemented hiring freezes in 2009 to hold the line on costs. The result is that some managers held on to poor/low performing employees, using the short-term logic that a half-performing employee is better than no employee. How can you tell if this is a problem in your workforce? If your organization is in a hiring freeze, compare your involuntary or organization-initiated terminations to the prior three years to see if it fell in 2009. In prosperous times, the result of holding on to lower-performing employees is resentment in other employees. But, given the current climate, there is an exponential increase in workload for the average and high-performing employee. That would motivate me to look for a new job in a new organization.
4. Many of the 2009 hiring freezes have been lifted, capital spending is starting to increase and continued (temporary) government stimulus - including the 2010 Census - is starting to awaken the job boards. This translates into increased employment options and opportunities, which may be just enough to trigger the "daisy chain" effect that will send organization attrition rates rising. That is, a situation in which top employees move on first, starting a cascade effect through the remaining tiers of workers.

So what if I am right? What should organizations do?

Know your organizations needs. Know which roles drive value. Know which talent is critical.

Now more than ever, it's important to target your human capital management practices where they will reap the most benefit! Rather than fixating on the overall separation rate, understand the "Quality of Separation." If you have not already, implement retention strategies for key roles and critical talent. The organizations that execute well will have a true competitive advantage in 2012 and beyond.

If you are interested in learning more about "Quality of Separation" and other Talent Management effectiveness metrics, contact your i4cp member representative for more information on our Talent Management Accelerator group.

What are your attrition predictions for 2010? What factors do you think will influence employee's decisions?