Is Employee Turnover a big Issue?

Employee turnover is a great loss for a company as the resources has been spent to perfect the skills of the employees is very high so leaving the company and render their service to competitors is much more critical. A company who is continuing with high employee turnover rate faces greater risks of failed performance in the long run (Tracy and Hinkin, 2008).

By the other hand it remains a crucial issue for the organization due to cost associated with recruiting, selecting and training new employees (Allen, Bryant and Vardaman, 2010).

There are much more indirect impacts of high employee turnover such as reduction of interaction possible between co-workers makes outcome of inhibition of friendship bounds and discontinue the interpersonal links which cause to reduce staff morale and loyalty. That is highly effective of overall productivity and performance. (Kunu and Mahama, 2017).

Positive impact of Employee Turnover

Employee Voluntary turnover may not always be a big problem for an organization as if the exit of poor performers would create some few effects to the organization than depart of high performers (Abelson, 1987; Campion, 1991).

Anyway, the conditions for an ideal matching may change over time, leading to continuous reallocation of labor. Organizations warmly welcome the new entrants who have acquired higher qualifications by education, training or learning by doing then looking for a better career opportunity. They believe that new ideas with new blood may provide fresh enthusiasm. Regular employee turnover with skill employees helps both employer and employee to stop being locked in sub optimal matches forever (Kunu and Mahama, 2017).

References

Abelson, M. A. (1987) Examination of avoidable and unavoidable turnover. Journal of Applied Psychology, 72, pp.382-386.

Allen, D., Bryant, P and Vardaman, M. (2010) Retaining Talent: Replacing Misconceptions with Evidence-Based Strategies. Academy of Management Perspectives, pp: 48-64.

Campion, M. A. (1991) Meaning and measurement of turnover: Comparison of alternative measures and recommendations for research. Journal of Applied Psychology, 76, pp.199-212.

Tracey, J. B. and Hinkin, T. R. (2008) Contextual factors and cost profiles associated with employee turnover. Cornell Hospitality Quarterly, 49(1), pp.12-27.

Kunu, E. and Mahama, F. (2017) The Effect of Employee Turnover on the Performance of Zoomlion Ghana Limited. Journal of Business and Economic Development. 2, pp.116-122. 

Impact of Job satisfaction on Employee Turnover

Nowadays Retain employee for a longer time period and decrease the turnover rate is a huge challenge for Human resource managers and organizations. Regular high turnover will create significant impact on the organizations efficiency and productivity (Anwar and Shukur, 2015).

According to DeConinck and Stilwell (2004) employee turnover and job satisfaction are negatively associated. This link between employee turnover and job satisfaction could be also correlated by many factors such as Compensation, training, environment, stress and so on.

As defined by Sowmaya and Panchanatham (2011) the Job satisfaction is the feeling and emotion of employee regarding the present job. Also the satisfied employees are recognized to maintain high level of efficiency and productivity for the sake of organization. By exhibiting positive consequences of job satisfaction will decrease the employee turnover rate in the organization.

Job Dissatisfaction concerns the unpleasant feelings of employees about the job and environment resulting from negative feelings and lack of enjoyment on the job. Due to continuously job dissatisfaction exhibit low commitment of employees, high absenteeism, low productivity then finally the turnover intention (Brasher, white and Chelariu, 2003). 

References:

Anwar, G. and Shukur, I. (2015) Job Satisfaction and Employee Turnover Intention: A Case Study of Private Hospital in Erbil. International Journal of Social Sciences & Educational Studies, 2(1), pp.73-80.

Brasher T. G., White E. L. and Chelariu C. (2003) An empirical test of antecedents and consequences of salesperson job satisfaction among Polish retail salespeople. Journal of Business Research, 56, pp. 971 – 978.

DeConinck, J. B., and Stilwell, C. D. (2004) Incorporating organizational justice, role states, pay satisfaction and supervisor in a model of turnover intention. Journal Business Reviews, 57, pp. 225- 231.

Sowmaya, R. K., and Panchanatham, N. (2011) Factors influencing job satisfaction of banking sectors employees in Chennai, India. Journal of Law and Conflict Resolution, 3(5), pp.76-79.

The Importance of Employee in the Business

The most important asset of business or organization is its workforce.  Obviously, the success or failure of an organization or business depends on effectiveness of its Workforce (Samuel and Chipunza, 2009).  In fact, a business may invest a lot of resources to the core operation but without a highly effective human resource, the long run success is never achievable (Ton and Huckman, 2008).

What is Employee Turnover?

Armstrong (2012) defines the employee turnover as the rate at which people leave an organization. He states further more that it can be disruptive and costly for the organization. According to Price (1977) Employee turnover means the ratio of number of employees who have left the organization during the period being considered divided by the average number of employees of the organization during the same period.

Employee turnover can be occurred in any organization as Voluntary, Involuntary or Dysfunction. Termination initiated by the employee itself called as Voluntary turnover while termination initiated by employer due to an employee’s poor performance or organization restructuring. Dysfunction turnover occurs when high performers or employees who are hard to replace leaves the organization. It can be harmful to the organization (Griffeth and Hom, 2001).

Employee Turnover index

  (Source: Armstrong 2012)

References

Armstrong, M. (2012) Armstrongs Handbook of Human Resource Management Practice. 12th ed. London, Kogan Page.

Griffeth, W. and Hom, W. (2001) Retaining valued employees. Thousand Oaks, CA: Sage.

Price, J. (1977) The study of turnover, IA: Iowa State University Press.

Samuel, M. O. and Chipunza, C. (2009) Employee retention and turnover: Using motivational variables as a panacea. African Journal of Business Management, 3(8), pp.410-415.

Ton, Z. and Huckman, R. S. (2008) Managing the impact of employee turnover on performance: The role of process conformance. Organization Science, 19(1), pp.56-68.

Influence of Organization Culture on Intention of Employee Turnover

Organization culture involves of beliefs, Norms and Values that describe a particular organization. This organization culture can affect the behavior of employees and also employee’s turnover intention (Medina, 2012; Yeun and Han 2015). Employees tend to demonstrate the turnover intention if the organization culture doesn’t fit with their expectation. So, organization culture is significantly related with the turnover intention of employee either positively or negatively.

Having good organization culture will make satisfied employees so it is very critical and significant to decrease the turnover intention. The organizational culture playing a vital role as organization needs to ensure that the employees who add benefit to the bottom line are well satisfied. Then only they will contribute their maximum skill and hard work towards achieving assigned tasks which benefits to the organization (Brown and Leigh, 1996).

References

Brown, S. P. and Leigh, T. W.  (1996) A new look at psychological climate and its relationship to job involvement, effort, and performance. Journal of Applied Psychology, 81(4), p.358.

Medina, E. (2012) Job satisfaction and employee turnover intention: What does organizational culture have to do with it?. Masters of Arts Thesis, Submitted to Columbia University.

Yeun, Y. R. and Han, J. W. (2015) Effect of organisational culture on nurses turnover intention: The mediating effect of workplace bullying and work burnout. Advanced Sciences and Engineering Letters, 120, pp.125-128.

The Cost of Employee Turnover

According to Martin (2005) while employees leave the company, the employer has to bear with a considerable amount as direct and indirect expenses. The Cost of employee turnover can be a staggering ranging from consuming a considerable amount of Annual budget which could be shared with its workforce itself (Linda, 2002).

Basically the cost of employee turnover can be, Advertising and recruitment cost, Training and development cost, resource management expenses, loss of time and efficiency, Work imbalance etc.(Harrie, 2002).

As per the research of Phillips (1990) identified that the direct cost of recruitment accounted only 10-15%  of the total cost while  85-90% of total cost is associated with the inefficiencies occur due to post is vacant  either or inefficiency of new worker.   

According to Murphy (2009) companies take a deep interest by their employee turnover rate due to turnover badly affect to the smooth running of the business by developing disruptions which cause to minimize the output and profit of the company.

So if the company can identify the most common causes of the employee turnover, it would be obviously encourage to take the necessary actions to recruit and retain well qualified employees (Armstrong, 2006).

References

Armstrong, M. (2006) A Hand Book of Human Resource Management. Tenth Edition. London, Kogan Page.

Harrie,G. (2002). Career Development Interventions in the 21st Century. Fifth Edition. Columbus, OH: Merrill Prentice Hall.

Linda, H. (2002) Aligning Human Resources and Business Strategy. First edition. Butterworth, Heineman Oxford.

Phillips, J. D. (1990) The price tag of turnover, Personnel Journal, pp.58–61.

Theoretical Background of Employee Turnover

The Push-Pull Model of Turnover

The Push-Pull model of turnover declares that a curvilinear relationship existed between job performance and turnover (Jackofsky, 1984).

Low performers would be pushed out by poor future prospects and reduced job security while high performers would be pulled out from the organization by external employment alternatives with influencing from unsolicited offers (T. H. Lee et al., 2008). So, average performers most likely remain with the organization.

The Unfolding Model of Turnover

As a supporting of push-pull method and also developing the image theory, Lee & Mitchell (1991) Decided and developed a theory which is more comprehensive and realistic representation of causes which influence for employees to make their decision of exit.

The Unfolding Theory of Turnover discuss about five cognitive pathways which are the employees follow one of them while making the decision of exit the organization. Those five different pathways are as below (Lee & Mitchell, 1991; 1994).

(Source: https://scholarworks.sjsu.edu/etd_theses/4440)

References

Jackofsky, E. F. (1984) Turnover and job performance: An integrated process model. Academy of Management Review, 9, pp.74-83.

Lee, T. H., Garthart, B., Weller, I., and Trevor, C. O. (2008) Understanding voluntary turnover: path-specific job satisfaction effects and the importance of unsolicited job offers. Academy of Management Journal, 51, pp.651-671.

Lee, T. W., and Mitchell, T. R. (1991) The unfolding effects of organizational commitment and anticipated job satisfaction on voluntary employee turnover. Motivation and Emotion, 15, pp.99-121.

Lee, T. W., and Mitchell, T. R. (1994) An alternative approach: The unfolding model of voluntary employee turnover. The Academy of Management Review, 19, pp.51-89.