Research Paper Undergraduate 4,310 words

Employee Turnover Causes, Costs, and Control Strategies

~22 min read 8 sections Business · Employee Relation

Abstract

This paper investigates the causes, consequences, and control strategies associated with high employee turnover at a large financial services organization in Northeast Florida. Drawing on management literature, the study explores how psychological contracts between employees and employers shape satisfaction and retention, and how violations of those contracts drive turnover. The paper reviews methods for analyzing turnover costs — including screening, training, and orientation expenses — and contrasts turnover measurement with retention-rate analysis. It further examines the organizational consequences of high turnover, such as loss of tacit knowledge and increased absenteeism, before presenting evidence-based strategies for reducing turnover, including realistic job previews and supervisory support programs.

Key Takeaways

Introduction and Problem Statement: Florida firm context and study purpose
Definition and Nature of Employee Turnover: Definitions and scope of worker turnover
Employee Satisfaction and Its Link to Turnover: How dissatisfaction drives customer and staff loss
Causes and Psychological Contracts: Contract breaches and equity theory in turnover
Analyzing and Measuring Employee Turnover: Cost components and retention-rate methods
Consequences of High Employee Turnover: Productivity loss, tacit knowledge, and absenteeism
Controlling Employee Turnover: Reduction programs, fairness, and job previews
Conclusion: Summary of findings and managerial takeaways

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What makes this paper effective

The paper integrates a wide range of peer-reviewed sources to build a coherent, multi-dimensional analysis of employee turnover rather than relying on a single theoretical framework.
It moves logically from definition to causes to consequences to solutions, giving the argument a clear practical trajectory useful for managers and HR professionals.
The use of concrete cost estimates — such as the $12,000–$14,000 savings from realistic job previews and the $40 billion absenteeism drain on the U.S. economy — grounds abstract concepts in measurable organizational impact.

Key academic technique demonstrated

The paper demonstrates effective synthesis of literature: rather than summarizing sources in sequence, it weaves multiple authors together around central concepts such as the psychological contract, social capital loss, and retention measurement. This allows competing or complementary perspectives to reinforce a unified argument about why turnover is costly and how it can be controlled.

Structure breakdown

The paper opens with an organizational context and problem statement, then moves through a literature review divided into thematic subsections: definition and nature of turnover, the satisfaction–turnover link, causes tied to psychological contracts, analytical methods, organizational consequences, and control strategies. It closes with a brief synthesis conclusion. This thematic-subsection structure within a literature review is a strong model for applied management research papers at the undergraduate level.

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Essay 4,310 words

Introduction and Problem Statement

In recent years, organizational knowledge and employee turnover have been the focus of increasing attention from management experts seeking to identify improved methods of providing effective human resource services to help companies recruit and retain qualified employees (Droege & Hoobler, 2003). The purpose of this study is to determine the relationship between high employee turnover and personal factors as they relate to preferences for compensation. This evaluation was conducted on a comprehensive services organization located in Northeast Florida that employs more than 12,000 people — one of the largest billing and customer service organizations in its county.

Today, the subject financial services company is experiencing a high level of employee turnover. The problem can be alternatively attributed to an increase in hiring, automated self-paced CD-ROM training technology, outsourced new-hire agreements, and increased competition from similar industries in the local area, as indicated by computer-generated reports, exit interviews, weekly employee surveys, and feedback from trainees. Despite the overwhelming research and focus on employee turnover, few studies have been able to link turnover to a specific personal or intrinsic characteristic. The significance of this study, therefore, is that it creates an opportunity to investigate employee behavior as it relates to the factors that motivate and retain valuable human capital. In addition, this investigation aims to uncover what factors drive employees to select a pay method or compensation structure that would motivate them toward increased performance and reduced turnover.

Definition and Nature of Employee Turnover

"In-house engineering," "revolving door policy," and "management by turnover" may sound better, but these euphemisms are being used to describe employee turnover today (Burgess, 1998, p. 55). In their essay "Turnover: The Real Bottom Line," Sami M. Abbasi and Kenneth W. Hollman (2000) report that "Turnover is the rotation of workers around the labor market; between firms, jobs, and occupations; and between the states of employment and unemployment" (p. 333). By whatever name or form, employee turnover represents one of the most significant causes of declining productivity and sagging morale in both the public and private sectors (Farrell & Whidbee, 2002; Akpotu & Nwadiani, 2002). Management theorists suggest that high rates of employee turnover are responsible for the failure of U.S. employee productivity to maintain pace with foreign competition (Abbasi et al., 2000).

According to Simon Burgess, "Worker turnover generally refers to the movement of workers around the labor market, between firms, and among the states of employment, unemployment, and inactivity. It has been known for some time that worker turnover and job turnover are 'large'" (p. 55). Likewise, Frederic D. Frank points out that employee retention and employee engagement are completely integrated concepts that represent two fundamental human resources challenges in the 21st century. "How do we keep our talent, given unprecedented shortages and erosion of loyalty," he asks, "and how do we keep them engaged, and even passionate about the work they do?" (p. 11).

Given the growing severity of these problems, it has become increasingly important for managers to better understand what employee turnover means, how it can be measured and analyzed, and what steps can be taken to mitigate its adverse impact on organizational goals. As employee mobility increases by virtue of Internet-based human resources recruiting and a volatile job market (Grossberg & Sicilian, 2004), companies are faced with the need not only to define and understand the nature of employee turnover, but to recognize its impact on their bottom line as well.

Employee Satisfaction and Its Link to Turnover

One of the most important components of making new customers happy and retaining loyal existing customers is ensuring that they receive quality customer service. A dissatisfied employee, whether new or tenured, is unlikely to provide this level of service on a reliable basis. The entire range of causes of employee satisfaction and dissatisfaction come into play, and these factors are by definition highly subjective and individualistic. Nevertheless, no customer wants to do business with an enterprise characterized by poor customer service and employees who are not motivated to deliver it.

According to Grant (1990), "it must be appreciated, however, that though the absolute level of employee satisfaction has little to do with motivation, it is an important determinant of the volume of employee turnover, employee gripes, absenteeism, alcoholism, and related variables. High employee satisfaction as well as high motivation must be developed for an organization to succeed" (p. 12). Given the make-or-break nature of ensuring that a company has satisfied employees providing reliable and quality products and services for both its internal and external customers, it becomes necessary to identify the specific causes and correlates of employee turnover within the organization.

5 Sections Hidden · 2,145 words

Causes and Psychological Contracts620 words

One of the most important components of this analysis is identifying sources of employee dissatisfaction so that appropriate remedies can be developed and implemented. One such component relates to how well an employee believes an…

Analyzing and Measuring Employee Turnover500 words

As noted above, the concept of the relationship between an employee and his or 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…

Consequences of High Employee Turnover430 words

High turnover rates impose significant personnel costs on any company (Gomez-Mejia, Horn, & Miller, 2001), and 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…

Controlling Employee Turnover490 words

Despite the inevitability of some employee turnover in any organization, a number of management experts have suggested methods by which managers can develop appropriate turnover-reduction programs and enhance job survival rates, because the vast majority of employee departures are based on common and avoidable reasons. According to Abbasi and Hollman, "Some organizations alleviate their vulnerability with…

Conclusion105 words

The research showed that employee turnover is an inevitable consequence of doing business, and that its impact on a company is almost always negative. The research also showed, however, that managers have a number of…

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References

Abbasi, S.M., & Hollman, K.W. (2000). Turnover: The real bottom line. Public Personnel Management, 29(3), 333.

Akpotu, N.E., & Nwadiani, M. (2002). Academic staff turnover in Nigerian universities. Education, 123(2), 305.

Arora, S., & Waldman, J.D. (2004). Measuring retention rather than turnover: A different and complementary HR calculus. Human Resource Planning, 27(3), 6.

Bamber, E.M., & Iyer, V.M. (2002). Big 5 auditors' professional and organizational identification: Consistency or conflict? Auditing: A Journal of Practice & Theory, 21(2), 21.

Beck, A., & Kalliath, T.J. (2001). Is the path to burnout and turnover paved by a lack of supervisory support? A structural equations test. New Zealand Journal of Psychology, 30(2), 72.

Burgess, S. (1998, July). Analyzing firms, jobs, and turnover. Monthly Labor Review, 55–58.

Clark, K.A., & Hyson, R. (2001). New tools for labor market analysis: JOLTS as a single, direct source for data on job openings, hires, and separations. Monthly Labor Review, 124(12), 32.

Dalton, D.R., & Mesch, D.J. (1990). The impact of flexible scheduling on employee attendance and turnover. Administrative Science Quarterly, 35(2), 370.

Dess, G.G., & Shaw, D.D. (2001). Voluntary turnover, social capital, and organizational performance. Academy of Management Review, 26, 496–524.

Droege, S.B., & Hoobler, J.M. (2003). Employee turnover and tacit knowledge diffusion: A network perspective. Journal of Managerial Issues, 15(1), 50.

Fahey, L., & Prusak, L. (1998). The eleven deadliest sins of knowledge management. California Management Review, 40, 265–277.

Farrell, K., & Whidbee, D.A. (2002). The impact of forced CEO turnover on committee structure. Journal of Managerial Issues, 14(1), 49.

Frank, F.D. (2004). Introduction to the special issue on employee retention and engagement. Human Resource Planning, 27(3), 11.

Gomez-Mejia, L.R., Horn, P.W., & Miller, J.S. (2001). The high cost of low wages: Does maquiladora compensation reduce turnover? Journal of International Business Studies, 32(3), 585.

Grant, P.C. (1990). The effort-net return model of employee motivation: Principles, propositions, and prescriptions. New York: Quorum Books.

Grossberg, A.J., & Sicilian, P. (2004). Legal minimum wages and employment duration. Southern Economic Journal, 70(3), 631.

Hillmer, B., Hillmer, S., & Mcroberts, G. (2004). The real costs of turnover: Lessons from a call center. Human Resource Planning, 27(3), 34.

Kickul, J. (2001). Promises made, promises broken: An exploration of employee attraction and retention practices in small business. Journal of Small Business Management, 39(4), 320.

Roth, P.G., & Roth, P.L. (1995). Reduce turnover with realistic job previews. The CPA Journal, 65(9), 68.

Key Concepts in This Paper

Psychological Contract Employee Retention Tacit Knowledge Realistic Job Previews Turnover Costs Job Satisfaction Social Capital Supervisory Support Compensation HR Measurement