Impact of outsourcer's attrition rate on your project
There are many things you have to keep in mind when choosing an outsourcer. The most unobvious one is the attrition rate. High attrition rate imposes such high costs as loss of valuable experience and knowledge, loss of morale, and belief in team’s competence and capability to outperform, which hit the outsourcer, and affect you as their client.
Why is it important to know your outsourcer’s attrition rate? Because your product will experience indirect costs of it like delayed deadlines, lower productivity, and quality of work, disruption of team dynamics, and of smooth communication. That is the reason why you need to learn how to spot a team with a high attrition rate before your product becomes affected.
The attrition rate is the rate at which people leave the company. Mathematically, it is the number of people who have left the company, divided by the average number of employees over a period of time, expressed as a percentage. There are four main types of attrition:
- Voluntary — when employees leave the job. It may be a few scenarios: an employee retirement or relocation, change of job, or job cuts.
- Involuntary — when employees are fired from the workplace. This usually happens as a result of disciplinary action or misconduct, as well as layoffs, when job cuts are forced on a workforce.
- Internal — when an employee is moving internally from one department to another in the company.
- Demographic — when an employee from a specific demographic group (age, gender, race, disability) leaves the job.
Voluntary and demographic attrition are the most concerning types of attrition, since they may be pointing out some structural problems in an outsourcer’s business. Voluntary attrition may highlight the flaws with which an outsourcer treats its employees, while demographic attrition could point out the toxicity of internal culture or issues in diversity management.
It is necessary to keep in mind that attrition rates vary widely across industries, countries, and job types. The average turnover rate is 18%. In the LinkedIn survey software businesses had an average attrition rate of 13.2%, while UX designers turned over at 23.3%.
Impact of outsourcer’s high attrition rate on you as a client
Attrition rate signals where you stand as a company with employee retention. A high attrition rate of an outsourcer can have an impact on your company's performance through the following channels:
- Delay in execution of projects due to time-consuming search for a replacement for an employee, which causes a delay in existing deadlines of project and higher cost.
- Lower productivity and quality of work of the team as they have to fill in for the missing employee, which results in higher stress levels and burnout chances.
- Loss of knowledge and less effective outsourcer’s performance may be the result of losing an experienced employee.
- Disruption of team dynamics - less effective work as a team due to a missing employee.
- Lack of smooth communication and trust.
Who has a higher attrition rate - in-house teams or outsourcing teams?
Attrition rate can be higher in in-house teams, where you have to save the best talent from competitors and recruiters by offering better benefits, or otherwise, you will lose them. Therefore, it turns out to be costly. In comparison, by cooperating with an outsourcer, you get access to a broader pool of talents and by engaging with the countries, where salaries are much lower with the same level of expertise, you gain an advantage in terms of cost and programmers loyalty, which translates into lower attrition rate.
COVID influence on attrition rate
A majority (78%) of employed U.S. adults ages 18 and older said they would not consider a job change during the COVID-19 pandemic. 69% of respondents didn’t feel that they would be able to find a job during the pandemic. 69% of 44 year olds and younger and 55% of 45 year olds and older said that they might consider job change if their current company was not doing enough to protect employees from the pandemic. Therefore, a significant decline in attrition numbers was identified. Employees choose to stay in one company rather than jump to another and some are even ready to take a pay cut to stay in the same company.
How to avoid a team with a high attrition rate?
- Ask about the attrition rate directly and compare it with the industry’s average.
- Compare the company's salary level with the market average.
- Read through employee reviews on Glassdoor and other websites. Look for comments about workload, team dynamics, company culture, career growth opportunities, and employee-manager relationships.
To conclude, a high attrition rate is an indicator of deep structural issues in an outsourcer's business and should be kept in mind by businesses, since it has various adverse effects on a product. There are some ways to check this information to avoid uninformed decisions. If you are looking for a team that puts honest and transparent communication at the core of its values and enjoys a low attrition rate, do not hesitate to contact us.