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STUDY ON THE CAUSES OF EMPLOYEE TURNOVER IN PRIVATE SECTOR

PREPARED BY:
TITIANA BT NONIAZNI
CHRISTIANE AK RABONG
FATIN ATHIRAH BT AMAT ZAIDEL


1.0 Introduction

Employee turnover is the ratio of the number of workers that had to be replaced in a given time period to the average number of workers (Agnes, 1999). In simpler terms, employee turnover is the series of actions that it takes from the employee leaving to his or her being replaced. It is often utilized as an indicator of company performance and can easily be observed negatively towards the organization’s efficiency and effectiveness (Glebbeek & Bax, 2004). The “seeds” or initial causes of turnover, arising out of the frustration related to budget cutting, hiring freezes, layoffs, and lack of development funds and opportunities, are more likely to be sown at such times (Sharmistha, 2010).

Every organization wished to have high productivity, fewer turnovers and to be profitable. Studies have also been carried out regionally and globally to explore and to study the relationship between various variables with employee turnover. Managing turnover successfully is a must to achieve the above goals. These studied variables include job satisfaction, compensation (salary), job stress, employee relationship with management and career growth.

The rate of turnover varies from company to company. The highest level of turnover normally found in private sectors than public sectors. The levels of turnover also vary from region to region. The highest rates are found where unemployment rate is lower and where it is easy for people to get alternative employment (Rankin N, 2006). Sometimes employee turnover benefits organizations positively. This might happen when a poor performer is replaced by a more skilled employee and when a retired employee replaced by a younger one. Employee turnover may be also costly as it requires different cost to take account such as administrative costs of recruitment, cost of covering during the period in which there is a vacancy, training cost for the new employee and others (Philip J.D, 1990).

Turnover occurs for many different reasons. Sometimes new job attracts employees and pull them to leave the old one. In contrary employee also pushed to leave job due to the dissatisfaction in their present workplace or by domestic circumstances when someone reallocates with their spouse or partner (Campion M.A, 1991). A poor relationship with the management can be an important reason for the employees to leave their jobs. It is relatively rare for people to leave jobs in which they are happy even offered by higher salary elsewhere (Carsten J.M, 1987). A lack of proper training and development is also major cause for voluntary turnover. Employees have a preference for security of their jobs.

1.1 Types of Employee Turnover

1.1.1 Voluntarily Turnover

When employees leave an organization at their own discretion, it is referred to as voluntary turnover (Noe, R.A., J.R. Hollenbeck, B. Gerhart, 2006). It is initiated by the choice of the employee. A similar definition is given by Egan, T.M., B. Yang and K.R. Bartlett (2004), stating that “An instance of voluntary turnover, or a quit, reflects an employee's decision to leave an organization, whereas an instance of involuntary turnover, or a discharge, reflects an employer’s decision to terminate the employment relationship”. According to Manu Rita -Negrin and Shay S. Tzafrir (2004) who study voluntary turnover, it can be affected by a lack of job satisfaction, job stress as well as alternative opportunities. It is thus important to consider attractions such as alternatives when looking at voluntary turnover.

1.1.2 Involuntary

Mathis, J.E. and D.M. Jackson (2004), they define involuntary turnover as “... an instance of involuntary turnover, or a discharge” that “reflects an employer’s decision to terminate the employment relationship”. According to Allen, D.G., L.M. Shore and R.W. Griffeth (2003), involuntary turnover includes retirement, death and dismissal. Boxall, P. and J. Purcell (2003) further state that turnover initiated by the employee such as resigning to take care of a terminally ill family member or accompanying a spouse to another area should also be considered as involuntary as it includes reasons over which the employee has no control. Another definition states that involuntary turnover includes the need to cut costs, restructure or downsize due to reasons which are independent of the affected employee(s), as explained by Bratton, J. and J. Gold (2003). This represents a decision or choice made by the employer. It appears that the distinction between voluntary and involuntary turnover is important but not straightforward (Chiu, C.K. and M.A. Francesco, 2003). Reasons for turnover may be misinterpreted. Employees leaving an organization may wish not to disclose the real reasons for leaving as they are dependent on the organization for future reference and this would of course only come to light during the exit interviews. According to Martin, R. and A. Cristescu-Martin (2003), interviewers may not want to put the organization or the employee in a bad light.

1.2 Causes of Employee Turnover

1.2.1 Job Satisfaction

Dessler (1978) refers to job satisfaction, as the degree of needs satisfaction that is derived from and or experienced on the job. He affirms to the ability of employees in an organization aspirations, feeling happy doing their job with the hope that their needs will be achieved.

Consequently, the inability of employees to achieve their needs will amount to dissatisfaction. Robin (1989) defined job satisfaction as a general attitude towards an individual’s job and the difference between the amount of reward workers receive and the amount they believe they should receive. It is Robin’s opinion that a person with a high level of job satisfaction holds positive attitude toward the job while the person who is dissatisfied with the job holds negative attitude about the job. Also satisfied employees are known to show higher level work performance in organizations. By analyzing job satisfaction an organization can possibly increase positive outcomes such as employee satisfaction and performance, and may decrease absenteeism and turnover. Investigating the employee’s value-perception can aid in managers building and creating work environments that help them to achieve high levels of employee satisfaction.

Employee satisfaction is the effect of how people feel about their job. Someone is satisfied about something because it is what they expected from it. Employee satisfaction deals not only with value addition but also with their expectations. It will account for the relationship between characteristics and job satisfaction.

1.2.2 Pay Scale

According to Shaw, J.D.et al (1998), pay is something given in exchange for services rendered in an organization. It has an important role in retaining and rewarding high quality employees but at the expense of the overall labor costs for any organization. Also, by binding pay with performance, an employer can monitor and control specific activities and level of performance. Employees need to prove their worth in order to stay longer with the organization by providing quality work or else run the risk of getting terminated. Pay has a strong determination to job satisfaction (Shaw, J.D., et al, 1998). There are two categories of pay linked with job satisfaction; one is satisfaction with pay by itself and the other, the prospects of financial rewards in the future for a job performed well. There is a longstanding interest of two items which are correlated with job satisfaction.

Porter and Steers (1973), and Price (1977) reported; pay to be consistently and negatively related to turnover. However, Mobley, Griffeth, Hand and Meglino, (1979) review concludes that findings concerning pay are not conclusive. According to Griffeth, Hom, Gaertner (2000), pay and pay-related variables have a modest effect on turnover. Their analysis also examined the relationship between pay, a person’s performance and turnover. They concluded that when high performers are inadequately rewarded, they quit. It is their opinion that jobs which provide adequate financial incentive are more likely to make employees to stay with the organization. Large organizations can provide employees with better chances for advancement and higher wages and hence ensure organizational attachment (Idson and Feaster 1990).

1.2.3 Management

Cappelli, P. (1992) state that the relationship between managers and employees influences employees’ decision to staying a job. Research shows that supervisors and managers have an important impact on employee turnover. The length of time that employees stay in an organization is largely determined by the relationship between employees and their managers (Dailey, R.C. and D.J. Kirk, 1992). Employees value certain factors about managers. Firstly, Gomez-Mejia, L.R. and D.B. Balkin (1992) notes that employees desire managers who know and understand them and who treat them justly. Employees also prefer managers who can be trusted. If employees feel that their managers are fair, reasonable and supportive, levels of job satisfaction increase. Secondly, if the manager shows interest in the well-being of employees and is supportive and sensitive towards employees emotionally, employee job satisfaction increases (Miller, J.G. and K.G. Wheeler, 1992). Furthermore, autonomy is valued by employees and decreases turnover.

Debrah (1993) noted that a supervisor with poor interpersonal skills and who is also inflexible very quickly drives employees away. Muchinsky (1990) argues that insufficient information on how to perform the job adequately, unclear expectations of peers and supervisors, ambiguity of performance evaluation methods, extensive job pressures, and lack of consensus on job functions or duties may cause employees to feel less involved and less satisfied with their jobs and careers, less commitment to their organization, and eventually display a propensity to leave the organization (Tor et al., 1997). If roles of employees are not clearly spelled out by management/supervisors, this would accelerate the degree of employees quitting their jobs due to lack of role clarity.

1.2.4 Lack of Recognition

Recognition is the best form of feedback. Failing to recognize workforce’s accomplishments as an employer means your team is less likely to drive results.

Managers and leaders alike should use recognition to drive the bottom line and foster a meaningful relationship with their teams. Today’s employees want to be acknowledged for successes affecting the company and are more inclined to drive results when their work is celebrated. Recognition increases productivity and creates a culture of engaged employees, positively affecting your company’s bottom line (Suleiman R, 2012).

1.2.5 Excessive Workload

Heavy workloads are not uncommon in today's workplace. Downsizing, fear of job security and an uncertain economy often prompt workers to accept or take on increasingly greater work responsibilities and longer hours. This increased level of performance doesn't necessarily result in increased levels of productivity. In fact, it can lead to problems and circumstances that actually reduce earnings for a company (Lisa McQuerrey, 2012).

1.3 Strategies to Reduce High Level of Employee Turnover

1.3.1 Pay more (or offer a path to a raise).

If employer willing to pay their employees more than a competitor would, they will be less likely to leave for other work. A well-paid employee have an incentive to work harder and commit themselves to their job, while employees who are making relatively little will not usually have the same level of dedication or loyalty (Ross. K, 2004).

If employer does not have the cash to pay their employees more than the competition, get creative. For instance, offering company stock options or equity plans is a relatively low-cost way to increase the long-term earning potential of your employees. As an added benefit, these sorts of options give the employees a real financial stake in the company, if they work hard and help the company do well, their stock value will go up and they will make money.

1.3.2 Offer potential for advancement.

Employees like to feel like their hard work is being rewarded. As a manager or business owner, part of making sure your employees feel this way is compensating them fairly for their work, but another part is giving them the opportunity to achieve the non-tangible benefits of recognition and advancement. Reward exceptionally smart, resourceful, and hard-working employees by gradually increasing their responsibility and giving them more important titles. An employee who's advanced from an entry-level position to a manager role is much more likely to be loyal to your company than one who's done the same job for years in spite of her hard work (Vivian. G, 2012).

1.3.3 Rebalance the work load.

According to Irene A. (2007) when a teams’ workload is unbalanced, frustration, dissatisfaction and team conflicts can result, as well as production issues such as under-productivity by some, over-productivity by others and missed deadlines. In some cases, mental and physical stresses caused by an unbalanced workload can cause illness. To prevent these issues, rebalance the workload on a regular basis by assessing the situation thoroughly and involving the team in helping you to determine how best to divide the work.

1.3.4 Offer competitive benefits.

In order to maintain a successful business, it is crucial to have not only an attractive product or services offering, but also be able to recruit and maintain a group of productive, qualified employees. There are many factors involved in reaching these goals, but one in particular is often overlooked: an appropriate benefits plan. Designing the right benefits plan for your employees can make a significant impact on business’s success. An ideal plan will be competitive in a market where companies are offering increasingly upgraded plans to recruit the best possible staff. However, it is also crucial to ensure that your package is cost-effective (F. Rothberg, 2012).

1.3.5 Encourage friendly employee relationships.

Maintaining friendly and cooperative work relationships fosters a positive and productive work culture, particularly in workplaces which rely heavily on effective team work. Those with a cognitive impairment such as autism spectrum disorder, or a psychiatric condition like anti-social personality disorder are more likely to present as unsociable or uncooperative at work and may find it difficult to control their behaviour, as a direct result of the disability or disorder. This can make it difficult for them to integrate into the workforce and often leads to exclusion or social isolation (Synapse, 2014).

1.3.6 Trust your employees with responsibility.

People tend to work hardest (and smartest) when they think their jobs matter (Jill Casner, 2004). Though this is often forgotten by even the best managers, it is surprisingly intuitive. Try to make an effort to give the employees with even the most minor jobs some sense of importance or responsibility. If they understand exactly how their work is essential to the business's success, they will have added motivation to succeed in their jobs.

According to Dr Rhonda Savage (2009), trust and respect are two essential elements for building relationships in the workplace and beyond. It is all about the relationships with people, which does not necessarily mean friendships. Relationships are built over time, when one person has respect for another. Gradually, trust beings to build, too. People do not have to be a close personal friend with everyone at work, but people do always need to show each person respect and professionalism.

CONCLUSION

It is important for managers to have an understanding of why people would leave the organization and it is equally important to identify those factors that attract people to organizations (Zandy, B., C.F. Leibowitz and L.K. Beverly, 1986). Job satisfaction has the largest direct effect on turnover intent (Zimmerman K., 2009). Therefore, if the above strategies are taken into account the business would be able to survive in a dynamic environment by treating their employees as one of their assets which needs a lot of attention. Employees are the backbone of any organization, they need to be motivated and maintained in an organization at all cost to aid the organization to be globally competitive in terms of providing quality products and services to the society. We need to emphasize the importance of employee retention and that the impact on the organization. Therefore the intention of the study in examining these factors and relating them to the study is to provide a general view of what the management need to know and expect and what are the various avenues available for future consideration to address acute issues pertaining to employee turnover.


REFERENCES

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2. Harkins, P.J. (1998). Why Employees Stay--or Go. Workforce, 77(10): 74-78.

3. Mobley, W.H., R.W. Griffeth, H.H. Hand and B.M. Meglino. (1979). Review and conceptual analysis of the employee turnover process. Psychological Bulletin, 86: 493-522.

4. Mondy, R.W. (2010). Human resources management 11th ed. Upper Saddle River, NJ: Prentice Hall.

5. Nel, P.S., P.D. Gerber, P.S. Van Dyk, G.D. Haasbroek, H.B. Schultz, T. Sono and A. Werner (2001). Human Resources Management, 5th Edition, Cape Town: Oxford University Press.

6. Noe, R.A., J.R. Hollenbeck, B. Gerhart and P.M. Wright. (2006). Human Resources Management Gaining A Competitive Advantage.4thEdition, New York, McGraw Hill.

7. Egan, T.M., B. Yang and K.R. Bartlett. (2004). The effects of organizational learning culture and job satisfaction on motivation to transfer learning and turnover intention. Human Resource Development Quarterly.15 (3): 279-301.

8. Manu Rita -Negrin and Shay S. Tzafrir. (2004). Job search modes and Turnover, Career Development International, (5): 442-446.

9. Mathis, J.E. and D.M. Jackson. (2004). A review and meta-analysis of the antecedents, correlates and consequences of commitment. Psychological Bulletin, 108: 171-194.

10. Allen, D.G., L.M. Shore and R.W. Griffeth. (2003). The Role of Perceived Organizational Support and Supportive Human Resource Practices in the Turnover Process?, Journal of Management, 29(1): 99-118

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13. Shaw, J.D., J.E. Delery, G.D. Jenkins and N. Gupta. (1998). An Organization-level Analysis of Voluntary and Involuntary Turnover, Academy of Management Review, 41(5): 511-525.

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