Finally, this author suggests that the nature of the relationship and the type of psychological contract that emerges between workers and management is highly subjective and will naturally involve individual perceptions that may not be completely discernible without further investigation. In this regard, Kikul adds that employee perceptions of contract breach "represents a cognitive assessment of contract fulfillment that is based on an individual perception of what each party has promised and provided to the other" (Kikul, 2001, p. 321). Just as an individual's perceptions of their own self-worth and self-esteem are unique, the manner in which these psychological contracts can be breached or violated can also be unique as a result of individual differences in how people view the world around them.
There is a common theme that runs throughout the analysis, though, and people inherently appear to have a fine-tuned sense of justice that alerts them to when this psychological contract has been violated by their employer. Inevitably, this breach of faith will result in a dissatisfied and unproductive employee or yet another job announcement in the want ads. According to Kikul, "When employees perceive that their psychological contract has been breached, they feel deceived and mistreated, and these feelings can have a pervasive impact on the relationship between the individual and his/her employer" (Kikul, 2001, p. 321). In his book, the Effort-Net Return Model of Employee Motivation: Principles, Propositions, and Prescriptions, Phillip C. Grant (1990) reports that, "Enriched jobs, with high salaries, status, good working conditions, fringe benefits, and so on, will not motivate unless the enrichment is granted (or experienced) as a result of higher employee effort expenditure rather than irrespective of it" (p. 12). Past research into the nature of employee turnover has investigated the relationship between employees' perception of a "psychological contract" between themselves and their employers (Kickul, 2001). The growing body of evidence suggests that "the psychological contract is conceptually different from both a formal and an implied contract in that it considers an individual's beliefs about the terms and conditions of an agreement between the individual and his/her employer" (Kickul, 2001, p. 320). Given these shifts in the perception of the relationship between the employed and the employer, analyzing employee turnover assumes some new challenges, but there are some useful techniques available to managers today that can help this in this regard; these are discussed further below.
Analyzing Employee Turnover. As noted above, the concept of the relationship between an employee and his/her organization has been widely accepted and reported in many different forums, including academic journals, practitioner journals, and management textbooks following the adage that in order to manage something, it must first be measured. In their essay, "The Real Costs of Turnover: Lessons from a Call Center," Barbara Hillmer, Steve Hillmer, and Gale Mcroberts (2004) point out that, "Replacing employees involves more than just advertising for positions, interviewing candidates, and providing initial training. But obtaining quantitative data to determine the true cost of turnover is often difficult" (p. 34). To help overcome these constraints to analyzing employee turnover and its associated costs, managers require some method by which they can capture and consistently calculate the cost of turnover. "These data are critical for making the right decisions to commit resources and change organizations to reduce employee turnover," Hillmer et al. add (p. 34). To help quantify these costs in a modern call center setting, Hillmer et al. (2004) investigated the typical costs associated with recruiting and training new hires and report the following common costs involved in almost case:
1. Screening. This component relates to the costs required to screen potential candidates who will eventually be interviewed by other managers in a company. These costs should take into consideration the fact that some of the candidates will fail to meet the minimum qualifications for an interview, some of those invited for an interview will subsequently decline the interview, some candidates interviewed will not be offered a job, and some of those who are offered a job will not complete the training and will ultimately work for the company for less than six months, thereby requiring the process to begin anew;
2. Interviewing. This component relates to the costs of the time actually required for a company's personnel to interview potential replacements;
3. Testing. This factor relates to the costs required to administer routine tests that are required for all candidates as part of the interview process;
4. Wages. There is a cost involved in terms of the salary paid...
(2004) included the cost of training replacements who were hired and began training but did not complete the training or the first six months of full-time work;
5. Training. This component relates to the costs associated with training a single replacement working at least six months after completing training; this component also includes the cost of the trainer's salary and the cost of a training facility or comparable space to administer the training;
6. Orientation. The penultimate component involved in the costs associated with replacing an employee relate to the initial orientation period required for new hires. "This would include employee pay while participating in the orientation, cost to provide the orientation, and the cost to initialize the benefits for a new employee," Hillmer et al. note (p. 35).
7. Technology. The final component relates to the costs required to make any technological changes to a company's equipment when a new employee begins work (Hillmer et al., 2004).
Other management experts suggest that there is a superior method of analyzing employee turnover. According to Deane Waldman and Sanjeev Arora essay, "Measuring Retention Rather Than Turnover: A Different and Complementary HR Calculus" (2004), while many companies seek to improve their human resources function by analyzing their turnover rates, they should instead be reviewing their retention rates, but these two concepts are not necessarily inversely related:
Retention rate is not simply the inverse of turnover. Retention rate measures what is wanted rather than what is undesirable. It is easy to calculate. For the line manager or workforce planner, retention rate complements the determination of turnover, particularly for highly skilled employees. Additionally, the combination of retention rate and turnover offers a more complete view of worker movement that either does alone. It can tell us exactly who leaves, and from that we learn more about why they leave, what it really costs the organization, and what to do about it. (p. 6)
Having established that employee turnover is something that can be measured and analyzed, it is important to understand its consequences to the organization if high levels of turnover are left unresolved; these issues are discussed further below.
Consequences of Employee Turnover.
High turnover rates impose significant personnel costs on any company (Gomez-Mejia, Horn, & Miller, 2001), but there are also a wide range of consequences - virtually all of them negative - typically associated with employee turnover (Clark & Hyson, 2001). At some point, everyone becomes a liability rather than an asset for a company, and there may in fact be the occasional case where the departure of an employee will help an organization more than harm it by virtue of personality conflicts, distracting other employees with idle chat and so forth. Nevertheless, most instances of employee turnover will cause more harm than good, and these damages can assume some unexpected forms for the unwary manager today.
According to Hillmer, Hillmer and Mcroberts (2004), "Human resource managers know first-hand the benefits of committing the resources and activities necessary to reduce employee turnover. Not only do they understand the direct costs of replacing employees, they are also aware that less-visible costs are associated with the replacement of an experienced employee with an inexperienced new hire" (p. 34). While most casual observers might believe that these consequences are related almost solely to the costs associated with recruitment and training, these costs are actually much more profound and potentially devastating for a company, depending on its need for and use of intellectual properties.
For example, Dess and Shaw (2001) suggested that employee turnover can adversely affect a company's performance through loss of social capital. In this regard, social capital refers both to the tacit knowledge of a company's employees. According to Droege and Hoobler, "Organizational knowledge is comprised of two broad categories: knowledge that is explicit codified knowledge -- and knowledge that is not codified but exists primarily within the minds of employees -- tacit knowledge" (p. 50). In contrast to tacit knowledge, codified knowledge is not in jeopardy when employees leave a company; while the most efficient use of such codified knowledge may continue to reside within the mind of the departing employee, any codified knowledge is retained simultaneously within the employee's mind and within the organization in explicit formats such as employee handbooks and company databases.
This view is also supported by Fahey and Prusak, but these authors suggest there is another…
