The True Cost of Attrition
& How to Mitigate It
March 2023
While not unique to the BPO industry, attrition (aka ‘turnover’ or ‘churn’) can be the bane of a company’s existence. Contact centers in the U.S. have historically had a 30 – 45% average annual agent attrition rate, though a 2022 Cresta Insights Report shows that attrition has jumped to as high as ~80% since the pandemic. In fact, given some of the ongoing labor challenges in the U.S., this number could actually be much higher. This is significant when you consider the costs associated with replacing an employee, such as recruitment and training, lost productivity or revenue, and the knock-on effect on remaining staff by way of increased workloads and the potential for a decrease in morale. To better understand how to combat attrition, we must first look at some of the root causes, quantify the true cost, and, finally, outline some of the steps that can be taken to help mitigate attrition.
There are many factors that can lead to high rates of attrition. Poor candidate selection and ineffective training will create problems from the start. Mismanagement and limited opportunities for growth can lead to employees feeling as if they are not being challenged and are not able to reach their full potential. Burnout can easily occur due to the emotional dissonance required and the repetitive nature of an agent’s daily tasks. But a common and perhaps most easily solved reason is simply a mismatch of agent and program type. Different personality types fare better depending on the nature of their tasks, and it is for this reason that we see varying attrition rates by program, with lower rates on the customer service and back-office sides and a higher rate in sales and collections.
In the US, 52% of employees with tenures of 3 months or less are looking to leave. Nearly 60% of employees with 3-6 month tenures are trying to do the same. [Source: Lattice]
33% of new hires quit their jobs within the first 90 days of employment. [Source: Jobvite]
New team members typically take around 12 months to reach peak performance potential. [Source: Gallup]
The Cost of Attrition
To understand the true cost of attrition, we need to first look at administrative and operational costs that are incurred in acquiring a new hire. From sourcing to recruiting to interviewing to training, each step requires a different set of resources. Sourcing requires marketing; recruiting requires recruiters, screeners, and then human resources for onboarding. Finally comes the cost of training and nesting before an agent can enter production. While new client ramps usually incorporate training paid for by the client, in most cases, attrition is not. And it can take up to 12 months for a new agent to reach the performance level of a tenured agent. According to a recent study by Gallup, replacing exiting workers can take one-half to two times the employee’s annual salary.
Replacing exiting workers costs one-half to two times the employee's annual salary. Assuming an average salary of $50,000 that replacement cost translates to between $25,000 and $100,000 per employee.
But the true cost of attrition doesn’t end with that previous dollar amount. There are also high hidden costs. Productivity tends to diminish before an agent “attrits,” and, now faced with ramping up a new hire, the road back to productivity is a long one. In fact, it can take up to 12 months for a new hire to ramp to the full productivity of a tenured agent. That is a long time where everything from first contact resolutions to customer satisfaction is affected. And what of the knock-on effect? As agents attrit, their remaining team members are left to pick up the slack that can negatively impact performance. While the hiring process begins, remaining agents must increase their interactions which in turn can lead to a decrease in team morale. And finally, there is reputational risk. Departing agents can easily share negative comments about their former workplace among their peers, potentially tainting what is now a much-needed candidate pool.
How to Mitigate Attrition
The good news is that there are lots of things that can be done to help mitigate attrition. Let’s take a look at some of the remedies that can be put in place to counter the most common root causes of agent attrition.
Effective recruitment is the first opportunity to ensure you are hiring the right candidates and matching them to the right programs to suit their skillset and personality type. By using a combination of traditional assessments alongside behavioral & cognitive ones, we can effectively predict candidate performance, and talent decisions can be made based on data and scientific insights to ensure the right people are hired into the right roles to help reduce turnover.
A positive company culture is essential in reducing agent attrition. By creating a positive and productive environment with open communication, a sense of loyalty and trust can be achieved between management and staff, which in turn can lead to higher levels of engagement, productivity, and morale. It can also encourage agents to take more ownership of their work and strive for excellence. Naturally, this not only helps you retain talent but attract it too.
Gamification is an essential tool to help increase engagement, drive motivation, and to help boost agent morale while positively impacting the customer experience. It can be used to reward staff for reaching specific goals or milestones or encourage them to strive for higher performance. All of this helps create a more fun work environment as incentives and recognition fuel friendly competition and a healthy team mentality in the workplace.
There are a variety of perks and benefits that contact centers can offer to help improve work-life balance for agents. Transportation, free or assisted childcare, employee discount programs at local retailers and service providers, on-site medical services, and games rooms and cafeterias all lend themselves to improving the workplace experience while generating a sense of community and belonging among the agent population.
Who doesn’t like an extra pay bump as a reward for meeting targets or exceptional performance? Successful BPOs work with their clients to ensure incentives are put in place to help motivate agents to drive better performance. This, in turn, can result in higher customer satisfaction and increased revenues. It also improves job satisfaction as incentives make agents feel appreciated and valued, which leads to a more positive overall work experience.
Leadership development and career pathing are vital to staving off attrition. Agents feel more valued when they are given a chance to grow and develop within the company and are more likely to stay with a company that provides them with the opportunity to learn and advance. Similarly, companies that consistently promote from within are viewed more favorably by potential candidates, helping to attract and retain the best talent available in the marketplace.
Contrary to popular belief, innovative technologies such as AI, rather than replacing the human element in a contact center, are actually helping augment their workflow, taking care of some of the more mundane tasks an agent traditionally performed and allowing them to focus on the more high-value, complex tasks. Deploying these technologies can make a significant difference in agent retention rates as repetitive tasks are automated, creating more meaningful interactions with customers.
Finally, implementing strong managerial leadership is key to combatting attrition. Just as we would expect agents to act with empathy when dealing with our client’s customers, management from the top down must exercise similar empathy towards its agent population. A successful outsourcing operation is only as good as the sum of all its parts, and when management communicates effectively and works closely with the individuals, can a sense of true belonging be achieved.
At KM2 Solutions, we strive to be an employer of choice and a great place to work in all our countries of operation. In recognizing that our people are our greatest resource and strength, KM2 invests heavily in all the above measures and more to ensure we attract the best possible talent and continually develop their skills while offering growth opportunities within the organization. While inversely, these also represent retention initiatives, the cost of attrition far outweighs the implementation of the remedies. As a rule, KM2 doesn’t just offer jobs, we offer lifelong careers from the start, and while you will never be able to eradicate attrition completely, KM2 has made huge strides in mitigating this risk while maximizing performance for our clients.
About KM² Solutions
KM² Solutions ( KM2 Solutions ) operates contact centers throughout the Caribbean and Latin America, providing outsourced inbound and outbound customer service contact services for voice, chat, email, and mobile. KM² Solutions provides these services to clients in financial services, multi-unit healthcare, insurance services, travel & hospitality, eCommerce, technology & telecommunications, home services, and other sectors. The company provides clients with a host of solutions, including customer support and care, telesales & retention, claims management & processing, appointment setting & schedule management, loan origination & verifications, back-office processing, and technical support. KM² Solutions maintains PCI DSS compliance, completes a SOC 2 audit annually, and has a Compliance Management System that meets the FDIC standards.
