HRM: Minimizing Employee Turnover & Improving Retention - Research Paper

Introduction

Minimizing and even stopping employee turnover is one of the biggest challenges that plague human resource personnel and their organizational leaders. Employee turnover can be defined as the gradual loss of talent from an organization. The loss of expertise is, as a result of departure either through resignations, layoffs, location transfers, retirements, and in some cases, death. There is no definite reason why employees leave organizations, but there is significant evidence to indicate that it has some negative consequences on the overall operation of a business or an organization (Ampomah & Cudjor, 2015). Companies spend time and monetary resources in the hiring, training, and retaining workers. Therefore, employee turnover means the loss of investments and funds. Companies are forced to hire and train new personnel every time a position goes empty either voluntarily or involuntarily. That is why organizations are pondering on the best ways to reduce employee turnover. Globalization has led to increased competition in all sectors of human societies. Companies are always trying to attract the best talent, and that means companies must offer both tangible and intangible benefits to their employees as a way to lure and maintain them. Companies that can attract and retain the best talent have the best chance of producing high productivity for a prolonged period. Those that can’t replicate the same will struggle to keep up because of loss of resources. Employee turnover, which is mainly caused by work dissatisfaction, and creates additional costs for the organization in terms of hiring and training, can be reduced through increased social responsibility.

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Research Questions

In a bid to understand employee turnover, its causes, measuring, and improving employee retention, this study has developed four research questions.

• What are the causes of employee turnover?
• What effects does employee turnover have on the operation of an organization?
• How can employee turnover be measured?
• What are the ways of reducing employee turnover?

Literature Review

Causes of Employee Turnover

The average turnover rate varies according to industry. Table 1.1. indicates the 2019 industry turnover rates in the United States. Employee turnover is a product of various factors that are both within and outside the organization’s control. They can be categorized into three:

Job-Related Factors

There have been studies that have attempted to identify the determinants of an employee’s intention to quit unsuccessfully (Ongori, 2007). The reason being that the science of human behavior is still a work in progress. To answer the question of the determinants of employee’s intention, one would need to identify the motivation or purpose behind human actions. That is something that varies from one person to another, and there is no ‘one size fits all’ answer for that. Therefore, there are several reasons why an employee would quit or move from one organization to another. Ongori (2007) highlights the experience of job-related stress, inadequate commitment to the organization, and job dissatisfaction as some of the job-related factors that create employee turnover.

Job-related stress is something that concerns employees and employers alike. Job-related stress possesses various health risks to the individual employee, which, if not addressed, could lead to death in severe cases. It can also reduce an employee’s productivity. Inadequate commitment or lack of engagement can also emanate from job-related stress. But it can also be a product of other factors such as job dissatisfaction.

Job dissatisfaction is where an employee is not contented with his or her job. Economic reasons could create job dissatisfaction. In such a case, pay satisfaction can be sighted as the reason or one of the reasons for the employee’s decision to leave. According to Thomas (2015), pay plays a vital role in the maintenance and gratification of prime quality workers; however, at the expense of labor prices for any organization. There are two types of pay satisfaction. The first one is the satisfaction that comes from the salary in itself. The second one is the prospects of economic rewards in the future for work well done (Thomas, 2015). The latter is usually used to retain high-level employees mostly in the managerial positions. Startup companies use the prospect of future economic reward to reward their CEO’s who are given a specific target to achieve.

Ongori (2007) also identifies matters of personal agency as one of the job-related factors. They consist of factors such as locus of control, powerlessness, and own control. The extent to which individuals believe in powerful forces and chance are in control of events that influence their lives is what is known as locus of control.

Some tasks or job positions seem to lack clear defines roles and responsibilities, which leads to role ambiguity. Role ambiguity can be a source of role stressors, which in turn leads to employee turnover. Uncertainty develops as a result of a difference between what a person feels they should be doing and what the others, especially their superiors, expect them to be doing on the job. It creates uncertainty on the job, and if not addressed, it could be a source of conflict. Lack of proper communication during the initial stages of employment or promotion could lead to miscommunication on what the superiors expect from the employee and what the employee expects to be doing in the position. These factors could cause the employee to feel less involved or less satisfied in their job position.

Voluntarily vs. Involuntary Turnover

Voluntary turnover involves those actions by the management that are aimed at creating a turnover. Companies can choose fire employees for various reasons, and that is why a case can be made on some types of layoffs that can qualify as involuntary. For example, when a company decides to lay off some of its employees due to bad economic times, the decision can be instinctive because, without it, the company may not survive. The choice of whether a source falls under voluntary or involuntary can be resolved using sociological tradition, which identifies the “why” instead of “how” employee turnover happens (Lee et al., 2017). Figure 1, indicates that the hospitality industry has the highest turnover rate in the U.S. The reason for that could because tourism and hospitality is a seasonal industry which peaks during Summer. Hence organizations in this industry have to lay off some of their workers. Therefore, if one decides to focus on the “why” rather than the “how,” retrenchments can be seen as an involuntary cause of employee turnover. However, if the “how” is prioritizes rather than the “why,” then they are considered as voluntary causes.

Involuntary factors are those beyond the control of the management. Employee turnover that involves death or incapacitation is unprecedented. They are unusual events that could not be foreseen. When the sociological tradition is applied to categorizing the sudden death of an employee, the “why” isn’t present because the company wasn’t involved in the action. They don’t have a choice in the matter. The “how” shows that have happened in a way that follows the laws of nature. Therefore, the death of whatever form is an involuntary source of employee turnover.

There are other types of involuntary employee turnover, such as the need to provide care for a family member or a child. However, this isn’t prevalent any more because there are government policies that allow individuals affected by such circumstances to return to work. They are also provided with flexible work schedules that don’t cause permanent loss of employment. It is only in a few cases will employee turnover occurs because of the need to take care of a child or an ailing family member.

Organizational Factors

Organizational instability is one of the leading causes of employee turnover (Ongori, 2007). A predictable work environment tends to encourage employees to stay. Employees want to be assured or guaranteed of their job security in the near and distant future. They can’t get that assurance in an organization that is facing instability. Financially struggling companies or those that are at the brink of bankruptcy or collapse are likely to experience high employee turnover, regardless of whether they can pay their workers. The lack of assurance on future employment is enough motivation for employees to look for better prospects. A stable organization also promises career advancement.

As part of organizational factors, employee turnover can also emerge from a lack of robust communication systems. Employees feel comfortable and stay longer in positions that involve them in some decision making (Ongori, 2007). They want to understand the issues that fully affect their working environment. Proper communication and being involved in the decision making gives them much-needed recognition. Iqbal (2017), identifies a lack of attention as one of the sources of employee turnover. In some regions of the world, such as Saudi Arabia, lack of recognition is the biggest obstacle to employee productivity and significantly contributes to employee turnover (Iqbal, 2017). 14% of the respondents said that not having a say in the decision making affects their productivity negatively (Iqbal, 2017).

Other organizational factors that serve as the source of employee turnover include poor recruitment policies, poor personnel policies, inadequate grievance procedures, lack of motivation, or poor supervisory policies. According to Ongori (2007), such kind of organizational issues means there is no proper management and policies and practices on personnel matters, which means employees are not recruited scientifically. The promotion process doesn’t follow the spelled-out policies and no adequate grievance procedures, which in turn forces employees to quit.

Consequences of Employee Turnover

As was earlier indicated, companies spend a considerable amount of money to attract and retain the best talent. As a result, employee turnover is one attribute that leads to loss of investments. Ampomah & Cudjor (2015) outlines five adverse effects of employee turnover to an organization.

Additional Recruitment and Replacement Costs

According to Ampomah & Cudjor (2015), the additional recruitment and replacement costs account for 21% of the negative costs associated with employee turnover. With such high percentages, employee turnover ends up being expensive from the view of the organization (Ongori, 2007). According to Ongori (2007), some of the replacement costs include the search for external labor for a possible substitute, selection between competing replacements, the induction of the one chosen as a replacement, then offering formal and informal training of the recruit u...