Tianhao Mr. Findley Human Resources Management MGT-3375 Nov 28,2010 Employee Turnover Introduction “In a human resources context, turnover or labor turnover is the rate at which an employer gains and loses employees. Simple ways to describe it are “how long employees tend to stay” or “the rate of traffic through the revolving door. ” Turnover is measured for individual companies and for their industry as a whole. If an employer is said to have a high turnover relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industry.
High turnover can be harmful to a company’s productivity if skilled workers are often leaving and the worker population contains a high percentage of novice workers. ”(Wikipedia,Jan,2009) Turnover occurs when employees leave an organization and have to be replaced. With today’s baby boomer generation beginning to retire from the labor market, many companies are finding it increasingly difficult to retain employees. Turnover is becoming a serious problem in today’s corporate environment. The employment culture is changing as well.
It is now relatively common to change jobs every few years, rather than grow with one company throughout the employment life as was once commonplace. In addition, employees are increasingly demanding a balance between work and family life. Types of Employee Turnover Turnover is classified in a number of ways. Each of the following classifications can be used, and the various types are not mutually exclusive: * Involuntary Turnover Employees are terminated for poor performance or work rule violations * Voluntary Turnover
Employees leave by choice Involuntary turnover is triggered by organizational policies, work rules, and performance standards that are not met by employees. Voluntary turnover can be caused by many factors, including career opportunities, pay, supervision, geography, and personal/family reasons. Voluntary turnover also appears to increase with the size of the organization, most likely because larger firms are less personal, are permeated by an “organizational bureaucracy,” and have more employees who are inclined to move. Functional Turnover Lower-performing or disruptive employees leave * Dysfunctional Turnover Key individuals and high performers leave at critical times Not all turnover is negative fo organizations; on the contrary, some workforce losses are desirable, especially if those who leave are lower-performing, less reliable individuals, or disruptive co-workers. Unfortunately fo organizations, dyfunctional turnover does occur. That happens when key individuals leave, often at crucial work times.
For example, a software project leader left in the middle of a system upgrade in order to take a promotion at another firm in the city. His departure caused the system ungrade timeline to slip by two months due to the difficulty of replacing that project leader. * Uncontrollable Turnover Employees leave for reasons outsides the control of the employer * Controllable Turnover Employees leaves fo reasons that could be influenced by the employer Employees quit for many reasons that cannot be controlled by the organization.
These reason include: (1) the employee moves out of the geographicarea, (2) the employee decides to stay home with young children or elder relatives, (3) the employee’s spouse is transferred, and (4) the employee is a student worker who graduates from college. Even though some turnover is inevitable, many employees today recognize that reducing turnover is crucial. Therefore, they must address turnover that is controllable. Organizations are better able to retain employees if they deal with the concerns of employees that are leading to this type of turnover. Causes of high or low turnover
High turnover often means that employees are unhappy with the work or compensation, but it can also indicate unsafe or unhealthy conditions, or that too few employees give satisfactory performance (due to unrealistic expectations or poor candidate screening). The lack of career opportunities and challenges, dissatisfaction with the job-scope or conflict with the management have been cited as predictors of high turnover. Low turnover indicates that none of the above is true: employees are satisfied, healthy and safe, and their performance is satisfactory to the employer.
However, the predictors of low turnover may sometimes differ than those of high turnover. Aside from the fore-mentioned career opportunities, salary, corporate culture, management’s recognition, and a comfortable workplace seem to impact employees’ decision to stay with their employer. Many psychological and management theories exist regarding the types of job content which is intrinsically satisfying to employees and which, in turn, should minimise external voluntary turnover.
Examples include Hertzberg’s Two factor theory, McClelland’s Theory of Needs, and Hackman & Oldham’s Job Characteristics Model Effects of Employee Turnover High turnover can be a serious obstacle to productivity, quality, and profitability at firms of all sizes. For the smallest of companies, a high turnover rate can mean that simply having enough staff to fulfill daily functions is a challenge, even beyond the issue of how well the work is done when staff is available.
Turnover is no less a problem for major companies, which often spend millions of dollars a year on turnover-related costs. For service-oriented professions, such as management consulting or account management, high employee turnover can also lead to customer dissatisfaction and turnover, as clients feel little attachment to a revolving contact. Customers are also likely to experience dips in the quality of service each time their representative changes. The cost of turnover varies with the difficulty of the job to be performed.
For example, in a food-processing company, showing someone how to put jars of jam into a cardboard box may take five minutes, so the cost of training someone to handle this job would not be high. If, however, the tyrannical manager of the food processing line at the company kept driving away food cookers and quality-control workers, the cost of constantly training employees in this critical area could be high. Turnover costs Many organizations have found that turnover is a costly problem.
In many service industries, the turnover rates and costs are are frequently very high. Employee turnover can cost companies millions per year. Good managers work to reduce turnover by taking a step beyond business level conversation. When accounting for the costs (both real costs, such as time taken to select and recruit a replacement, and also opportunity costs, such as lost productivity), the cost of employee turnover to for-profit organizations has been estimated to be up to 150% of the employees’ remuneration package. There are both direct and indirect costs.
Direct costs relate to the leaving costs, replacement costs and transitions costs, and indirect costs relate to the loss of production, reduced performance levels, unnecessary overtime and low morale. In a healthcare context, staff turnover has been associated with worse patient outcomes. The costs of employee turnover can be staggering, ranging anywhere from 1/2 to 5 times an employee’s annual wages dependant upon his or her position. It is neither possible, nor desirable to completely eliminate turnover from your organization.
Some of the costs associated with employee turnover are unavoidable and must be expected to occur in the normal course of business. Turnover Calculation (1). Calculate the average number of employees (2). Calculate the number of departures during the period (3). Divide departures by number of employees Prevent Turnover Employee turnover is not just a Human Resources Issue. When an employee leaves a company, the employee takes with him knowledge and experience, that which cannot be monetarily measured and that cannot be easily recreated.
These are the little hints, tricks and history that relates to how to perform effectively and efficiently. Higher turnover can cost a company millions of dollars per year and can slow down productivity! It is important for managers to find ways to motivate and reward employees that don’t break a budget line item, but still make the employee feel needed! Most employees spend between 40 and 60 hours per week on the job and away from a family. Because of this, the workplace sometimes becomes almost like a second home.
This is a huge amount of time and the last thing a good employee wants is to feel that time is wasted or has become inefficient. “Managers can make the difference! Although professional achievement goals are mentioned quite often in managerial handbooks; these handbooks don’t always make note of the small things that make coming to work a desired event. Humans enjoy interaction. Although bonding is a term that has been misused lately, this is exactly what a manager should encourage. Some workplaces are conservative and some are liberal. No matter the culture, the small things matter!
If most of the employees enjoy playing ping pong, watching Judge Judy or like pizza, what better way to reward employees who contribute the most? A used ping pong table can cost fifty dollars – a used TV set can cost about the same and pizza can certainly cost less. Lunchtimes can be used to engage in some fun activities that relieve stress and encourage sharing. ” (Linda,2007) Here are some steps for reducing employee turnover. First, hire the right people and continue to develop their careers. Does your company have an ongoing career development program, tuition reimbursement, or skills training program?
An investment in upgrading the workforce is one of the best investments a company can make when looking at long-term growth. Hiring the people that are a good “fit” with the culture of the organization — meaning that their values, principles, and goals clearly match those of the company — and then training as necessary will go a long way toward ensuring employee loyalty and retention. Second, most companies with low turnover rates are very employee oriented. They solicit input and involvement from all employees and maintain a true “open-door” policy that avoids closed-door meetings.
Employees are given an opportunity for advancement and are not micro-managed. Intrinsic rewards are critical. Employees must believe they have a voice and are recognized for their contribution. Remember that “trust” and “loyalty” are a two-way street. Third, develop an overall strategic compensation package that includes not only base and variable pay scales, but long-term incentive compensation, bonus and gain-sharing plans, benefit plans to address the health and welfare issues of the employees, and non-cash rewards and perks as well.
To be competitive in today’s labor market, most companies find it necessary to offer a standard benefit package, including health, dental, and life insurance, vacation and leave policies, and investment and retirement plans. In general, reducing employee turnover saves money. Money saved from not having to find and train replacement workers can be used elsewhere. Not All Empolyee Turnover is Bad “Not All Employee Turnover Is Bad — Celebrate ‘Losing the Losers’. (John,2009) It’s hard to find a more misunderstood and mismanaged human resource area than employee turnover. Executives are constantly sounding off about how “bad” employee turnover is, but in some cases, employee turnover is actually a positive thing. Imagine, for example, that you had a poor-performing worker like Homer Simpson. If Homer walked in late one day as usual and announced that he was leaving, would you consider that a bad thing, or would you secretly celebrate his departure? The idea of keeping everyone is just plain silly.
The fact is that there are many factors that can transform “ordinary turnover” into either positive or negative turnover. As a result, few firms are beginning to classify their turnover as either “regrettable” or desirable turnover. Whether turnover is good or bad depends primarily on the business impact caused by the departure of the employee. “It’s easy during tough economic times to under focus on turnover and retention because the turnover rate of almost every firm decreases, as employees increase their emphasis on job security.
However, this “lull” in turnover might be an ideal time to re-examine your processes, metrics, and goals related to turnover and retention. It’s especially important to act now because quite often the “seeds” or initial causes of turnover are more likely to be happening now because of the frustration related to budget cutting, hiring freezes, layoffs, and lack of development funds and opportunities. ”(John,2009) Summary Employee turnover is a ratio comparison of the number of employees a company must replace in a given time period to the average number of total employees.
A huge concern to most companies, employee turnover is a costly expense especially in lower paying job roles, for which the employee turnover rate is highest. Many factors play a role in the employee turnover rate of any company, and these can stem from both the employer and the employees. Wages, company benefits, employee attendance, and job performance are all factors that play a significant role in employee turnover. Now days most managers make their best to reduce the high employee turnover to make the organization better, but nothing is absolutely, “Not all turnover is bad”.
References Dr. John Sullivan, Not All Employee Turnover Is Bad — Celebrate “Losing the Losers” retried from http://www. ere. net/2009/04/06/not-all-employee-turnover-is-bad-celebrate-losing-the-losers/ Linda Banks, Reduce Employee Turnover: How to encourage your employees to stay retrieved from Nov 28,2010 http://www. suite101. com/content/reduce-employee-turnover-a20445 Wikipedia founder Jimmy Wales, Turnover(employment) retrieved from Nov 28,2010 http://en. wikipedia. org/wiki/Turnover_(employment) http://www. missouribusiness. net http://www. referenceforbusiness. com