How Much Attrition is "Good" Attrition?

15 Dec 2014


Market Vista

Executive Summary

Managing attrition has always been a priority for business leaders in global services, and its importance continues to increase over time. Given increasing competitive intensity for talent, especially in mature markets, attrition continues to take up a significant mindshare of senior executives and HR managers. It is not surprising that most business leaders view attrition as a “canary in a coal mine” – an indicator of how effectively delivery centers are run and their ability to deliver on the desired value proposition for their employees. The key challenge has always been to quantify the actual impact of attrition on their operations and to put a “number” against it.

Everest Group has developed a quantitative framework to identify the financial impact of attrition, by evaluating both costs and benefits. While the analysis is reflective of a 500-FTE delivery center, it can be applied to most moderate to-large scale delivery operations. In addition, the analysis also reflects the net financial impact of attrition in leading delivery locations (Asia, Central and Eastern Europe, Latin America) across functions.

Cost-benefit Attrition

Based on this framework, we define “good” attrition as the average annual employee turnover rate at which an organization has a net financial gain for its operations. “Good” attrition is influenced by both market-specific and company-specific factors and varies by functions and locations.

This document would help senior executives and HR managers to adopt a quantitative approach for assessing the impact of attrition on their operations. To gain maximum benefit from this approach, business leaders need to institutionalize metrics to fully capture/estimate both costs and benefits associated with attrition. They would thus be able to identify the level of “good” attrition relevant for their operation and plan for this in their annual budgeting and financial planning activities.


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