Employee turnover rates: causes and organizational impacts

¶ … Employee Turnover Rates

Letter of Transittal

The availability of human assets is best expressed by the turnover. The issue on turnover has extensively become one of the renowned research areas in the field of human resource management. There are two different types of research interest, namely turnover intention and voluntary turnover. Though a significant number of studies on turnover have shown that turnover intention is highly correlated to voluntary turnover with a positive relationship (Price, 2001), however, this turnover intention does not necessarily lead to actual turnover. Since the relationship between turnover intention and actual turnover has been well-established in literature, it can be concluded that turnover intention is the best immediate predictor and strongest precursor of voluntary turnover.

Literature conveys various definitions of turnover intention. Most researchers define it as a conscious or planned willfulness to permanently withdraw from an organization, normally measured along a specific time dimension, while others refer to turnover intention as an individual's perceived probability of staying or leaving an employing organization. Besides high possibility of withdrawal, researchers concurrently include the intention to search for alternative employment in their definition. Factors that contribute toward turnover intention can be categorized as personal, job-related, organizational, contextual, and attitudinal variables. Much has been written about individual demographics or personal variables as factors influencing turnover intentions. Those personal variables receiving much attention include age, gender, organizational tenure, education level, and marital status. Studies on age and turnover intentions have reported mixed results. This paper researches what other organizations are doing to hire and retain good employees in order to combat the high employee turnover rate. Thereafter this paper uses this research to make recommendations to the management of my organization.

Executive Summary

In the era of knowledge economy, knowledge workers play a dominant role in positioning any business organizations in their competitive advantage. A lot of countries have move toward improving their practices to retain these intellectuals in their organizations. Their high mobility depends on so many factors. This particular paper will discuss thoroughly on the roles of HR policies in a number of organizations, with respect to its employee retention and reduction of employee turnover rates. Similarly, this paper uses this research to make recommendations to the management of my organization.

Introduction

To understand human assets, the best way to see this is by turnover. Turnover is something that has been researched over and over again so that people can understand it that are in the human resource field. Research on this subject is done for two main reasons: turnover and turnover that is voluntary. Breaugh discusses in this research that studies done on employee turnover show that most turnover is voluntary (Breaugh, 1985). Price discusses in his study and research that this is not necessarily the rate of turnover though (Price, 2001). Lum and Allen show in research that the relationships between actual turnover and turnover are talked about in a ton of literature and can be assumed that turnover is a great predictor and it is mainly voluntary (Allen et al., 2001; Lum et al., 1998).

The writings out there talk about different definitions of what a turnover is. Researchers like Tett & Meyer and Hom & Griffeth will generally define this as a planned or conscious effort to leave an organization on a permanent basis; this generally is done with a certain time frame in mind (Tett & Meyer, 1993; Hom & Griffeth, 1991). Other researchers like Cotton and Tuttle talk about turnover being the actual probability that this individual will stay or leave the organization that they are employed at (Cotton and Tuttle, 1986). Hom and Griffeth have been researching both the possibility that someone leaves their job and their search for employment in place of this. There are many factors that will lead towards the turnover and these can be placed in categories. Some factors that you are going to contribute to this are job-related, organizational, attitudinal, contextual, and personal. There is a lot of information that is out there about these demographics and the factors that have influenced people turning over from their jobs. The personal variables are going to include things like age, time at the organization, education level, if they are married, and their gender.

Effectively Managing Retention of Employees and Turnover

With retention, it is a big focus for the human resource departments at organizations. If a company has made the investment to find, hire, and train someone, they want to keep them and they want to make them better at what they do so that they are able to provide the organization with a value. What needs to be understood by employers is that they need to understand what is best for their employees to keep them. If a company isn't focusing on that, they are going to have turnover and the turnover will be high. If an organization is having a high amount of turnover, it is probably because their employees are not happy. This will look at how retention and turnover are different, why people stay at a company, why they leave, and how organizations can save them from leaving. This paper will also discuss external factors that affect employee retention and how to reduce turnover with the human resource departments.

With retention of employees, this is a measurement that is done by how long someone has been with the company. A lot of organizations will find that is not only profitable, but more productive of they are able to use the resources that they would use for hiring and recruiting and use that to keeping the employees that they want to work there. They need to have programs in place that are going to show who the good performers are that may leave and help to keep them there. There is no 100% guaranteed answer for this, but to retain good employees there are a few factors that have been considered and that seemed to have a positive impact.

Employee and Supervisor Relationship: Jamrog states that the direct supervisors that are the leaders of the company are the most important people that you can find in the workplace (Jamrog, 2004). A good supervisor today should be a mentor, a trainer, and a coach. They also have to be able to communicate well throughout the organization. When employees have open relationships and can be honest with their supervisors they are going to be more committed to them.

Engagement of Employees: Motivated employees are the best employees that are out there, they are going to be stimulated and they are going to want to work. You need to provide them with challenges so that they can do their part to contribute. A poll done by the Gallup Organization showed that those employees that had a positive attitude at work were going to get better results on customer service scores and they were going to be far more productive.

Training for Employees: People that work don't want to stay in the same job forever, they want to get better at what they do and they want to grow. So, to keep employees entertained and remaining in their roles or the organization, you need to provide training. Business Week had an article that discussed a workforce study that was done in 1999. This study showed that people that have workplaces with poor training had an attrition rate of 41% (Business Week, March 1, 1999).

Giving Good Employees Recognition: Roger Herman who is a CEO at The Herman Group, tells you that you need to show employees that you truly appreciate them, you need to respect and value any opinions that they give you and suggest that they provide those opinions. When you care about your employees and are genuinely concerned about them, some employees want that more than they care about getting that raise.

Providing a Balance in the Workplace: A study done by America @ Work shows that employees value having that work-life balance and employers need to work hard to provide that (America @ Work 1999, Aon Consulting, Chicago, Illinois; 312.701.4844). Employers that allowed their employees to have that great balance were far more successfully at keeping their employees for a long period of time.

In the past, management has always used compensation and bonuses to try to fix the retention problems that they may have, but today, you will find that just paying someone a lot will not keep them there. A survey completed by The Society for Human Resource Management showed that things like reimbursement of tuition and options that allowed holiday and vacation time were two initiative that should be in place to promote employee retention. Other great ideas were bonuses that are spot bonuses that would reward someone doing something great when it happens. Having programs like this help show employees how important they are instead of just an annual review. Ceridian Employer Services did a study in 2004 that showed that many employees allow things like telecommuting and virtual positions. Things like this are very innovative ways that employees are excited to stay and work for organizations for.

When we talk about turnover for employees it can either be voluntary or it can be involuntary. When a company fires someone because they haven't performed, they violated a policy within the company, or they have done something bad like broke a law, they are considered an involuntary turnover, this also goes for layovers too. But, a lot of times we discuss a turnover as more voluntary or something that is unplanned as people want to leave. If these are people that the company wanted to keep, this is something that they do not want to happen. It doesn't matter what type of turnover it is though, it is all expensive, so you want to limit it. Costs that are associated with this are things like putting a temp in their position, having to pay a current employee overtime, losing productivity, losing training money that had been invested in that person, paying severance pay or benefits, and things like advertising, recruiting, the hiring process and the orientation they went through. The Tiburon Group Principal, Carl Kutsmode discusses how you can reduce staffing costs by 50% if you can reduce your turnover rate. An article done by the Journal of Business Strategy in 2003 shows that turnover costs are generally around $5 trillion in a year. There are other costs that you will find with turnover too, it can affect the morale of current employees, it can cause you to lose customers, and it can cause your company to provide poor service. Although this may be hard to measure, it does mess with profitability and productivity. Most employees really aren't going to tell you why they are leaving, they will use a reason that is common, so exit interviews aren't a great way to get the feedback that you need, although they may help get a few things out of the employee that they wouldn't have said otherwise.

Here are some questions to ask for your exit interviews:

What was enjoyable about your position? What wasn't?

Give a positive thing about the management style of the company

Give us a negative thing about management

If someone gave you the ability to change things here, what would you change?

What would have kept you at the company?

If you have a new role, what does it offer that isn't offered here?

With exit interviews, you can see if there are trends in why people are leaving that maybe have something to do with poor training, benefits or pay that are poor, and training that lacks. Use this information to make positive changes or correct something. You always want to keep your exit interviews positive so that the person will provide feedback. If you don't want to do an actual interview with them, you can send it to them in the mail or do it over the phone. If time passes, some people believe that they will provide more honest answers.

If you have core reasons that people have left a job, you can put strategies in place so that it can be limited. These are known more often as retention programs for employees. Here are 10 reasons that Christian & Timbers show that employees leave a position:

Not challenged or bored

No chances for growth or advancement

Feel unappreciated

The position has standard and expectations that are low

The compensation package is not competitive

Coworkers are ineffective

Management is poor or lacks supervision

It is a bureaucracy

The hours are crazy

The commute is too much

By understanding both the turnover and the retention, you will find that the company can determine what can be done to fix it. With the ten reasons above, you can help to limit people leaving the company and working on a retention program that will work. With these factors, you want to push certain factors and make sure that you have a workplace that promotes that. Having a profile of what will make an employee stay will help create these great retention programs that work.