Why Employees Leave (Turnover)

Organizations want to retain their employees in order to benefit from their talent and skills. While working in an organization, employees come across some problems both inside and outside the organization (Hunjra et al, 2010). 

 

Employees’ turnover is a much studied phenomenon (Shaw et al., 1998). But there is no standard reason why people leave organization. Employee turnover is the rotation of workers around the labour market; jobs and occupations, between firms; and the states of employment and unemployment (Abbasi & Hollman, 2000). The term “turnover” is defined by (Price, 1977) as: the ratio of the number of organizational members who have left during the period being considered divided by the average number of people in that organization during the period.

Frequently, managers refer to turnover as the entire process associated with filling a vacancy: Each time a position is vacated, either voluntarily or involuntarily, a new employee must be hired and trained and this replacement cycle is known as turnover (Woods, 1995). This term is also often utilized in efforts to measure relationships of employees in an organization as they leave, regardless of reason (Henry, 2007).

 

There are some factors that are, in part, beyond the control of management, such as the death or incapacity of a member of staff. Other factors have been classed as involuntary turnover in the past such as the need to provide care for children or aged relatives (Simon et al., 2007). If jobs provide adequate financial incentives the more likely employees remain with organization and vice versa (Griffeth, Hom, & Gaertner, 2000). Today such factors should not be seen as involuntary turnover as both government regulation and company policies create the chance for such staff to come back to work, or to continue to work on a more flexible basis (Simon et al., 2007).

 

Employee turnover is expensive from the view of the organization. Voluntary quits which represents an exodus of human capital investment from organizations (Fair, 1992) and the subsequent replacement process entails manifold costs to the organizations. These replacement costs include for example, search of the external labour market for a possible substitute, selection between competing substitutes, induction of the chosen substitute, and formal and informal training of the substitute until he or she attains performance levels equivalent to the individual who quit (John, 2000).

 

Research estimates indicate that hiring and training a replacement worker for a lost employee costs approximately 50 percent of the worker’s annual salary (Johnson et al., 2000) – but the costs do not stop there. Each time an employee leaves the firm, we presume that productivity drops due to the learning curve involved in understanding the job and the organization. Furthermore, the Ongori 051 loss of intellectual capital adds to this cost, since not only do organizations lose the human capital and relational capital of the departing employee, but also competitors are potentially gaining these assets (Meaghan et al., 2002).

 

Therefore, if employee turnover is not managed properly it would affect the organization adversely in terms of personnel costs and in the long run it would affect its liquidity position (Ongori, 2007). However, voluntary turnover incurs significant cost, both in terms of direct costs (replacement, recruitment and selection, temporary staff, management time), and also (and perhaps more significantly) in terms of indirect costs (morale, pressure on remaining staff, costs of learning, product/service quality, organizational memory) and the loss of social capital (Dess et al., 2001).

 

Extensive research has shown that Employee engagement, Knowledge accessibility, Workforce optimization, Job involvement, Organizational commitment and Empowerment of employees are categories of human capital management factors that provides a core set of measures that senior management can use to increase the effectiveness of their investment in people and improve overall corporate performance of business (Ongori, 2007).

 

 

List of References:

 

Abbasi, S. M., & Hollman, K. W. (2000). Turnover: the real bottom line. Public Personal Management, 29(3), 333-42.

 

Dess GD, Shaw JD (2001). “Voluntary turnover, social capital, and organizational performance", Acad. Manage. Rev. 26 (3): pp 446-56.

 

Griffeth, R., Hom, P., & Gaertner, S. (2000). A meta-analysis of the antecedents and correlates of employee turnover: Update, moderator tests, and research implications for the next millennium. Journal of Management, 26(3), 563–88.

 

Hunjra, A.I., Ali, M.A., Chani, D., Irfan, M., Khan, H. and Rehman, K.U., 2010. Employee voice and intent to leave: An empirical evidence of Pakistani banking sector. African Journal of Business Management, 4(14), pp.3056-3061.

John Sutherland (2000). “Job-to-job turnover and job to-non- employment movement” Personnel Rev. 31(6): 710-21.

 

Johnson J, Griffeth RW, Griffin M (2000). "Factors discrimination functional and dysfunctional sales force turnover", J. Bus. Ind. Mark. 15 (6): 399-415.

 

Meaghan Stovel, Nick Bontis (2002), Voluntary turnover: knowledge management-friend or foe? J. intellect. Cap. 3 (3): 303-22.

 

Ongori, H., 2007. A review of the literature on employee turnover.

 

Shaw, J.D., Delery, J.E., Jenkins Jr, G.D. and Gupta, N., 1998. An organization-level analysis of voluntary and involuntary turnover. Academy of management journal, 41(5), pp.511-525.