Organizations invested a lot for their staff in terms of induction and training, maintain and retain them in their organizations. These employees are very important because of their value is huge to the organization, and not easily replicate (Meaghan et al 2002). Every organization wishes have high productivity, reduce errors and is successes. However, to provide basic necessities of secure environment, good pay and benefits as cost-effective is very difficult to organization. In addition, with the impact of globalization in the world, it has been touted that every organization must manage and control their staff turnover for the interests of organizations. (Anantha Raj A. Arokiasamy 2013) A variety of factors have also been found, which cause staff turnover, such as job satisfaction, work environment, payment and compensation (Kevin et al 2004). Therefore, organizations must furthest reduce staff turnover. It is necessary to have a more comprehensive understanding of staff turnover, especially on the reason, effects and strategies.
The literature review includes staff turnover types, effects of staff turnover, strategies to decrease staff turnover.
2. Literature review
2.1 Staff turnover definition
In the word of Price (1977), the turnover refers to the ratio that the number of people who have left during the period divided by the average number of the people of the organization during the period.
According to Abassi and Hollman (2000), staff turnover is a rotation of workers around the labour market between different companies, job and occupations, and between employment and unemployment.
Staff turnover was stated by Antle (2008) as a situation, which staffs leaves the organization voluntarily for various reasons, thus affect negatively the cost and capacity of the organization to deliver minimum required services.
2.2 Types of staff turnover
There are two main types of staff turnover identified by Noe (2006): voluntary turnover and involuntary turnover.
Noe (2006) explained when workers are base on their own willing and discretion to exit an organization exit an organization, such mean voluntary turnover. A lack of job satisfaction, job stress, training and development as well as others better opportunities of job can affect voluntary (Manu Rita -Negrin et al 2004). In turnover analysis of Ruth Mayhew (2011), such employees who resign, retire or directly leave their organization are belonging to voluntary turnover. Egan (2004) stated voluntary turnover reflects decision of staff to exit an organization, whereas involuntary turnover reflects decision of staff to terminate the employment relationship.
According to Noe (2006), involuntary turnover will be occurred if staff terminate hire or ask staff to resign. Boxall (2003) states involuntary turnover can be produced when the employee resign to take care of aged serious ill family member or accompany a spouse. It includes retirement, death and dismissal (Allen, D.G. 2003). Another definition indicate involuntary turnover includes the need to cut cost, restructure or downsize due to employees are independent (Bratton, J. 2003). Moreover the distinction between voluntary and involuntary turnover is important but not straightforward (Chiu, C.K. 2003).
2.3 Effects of staff turnover
Lots of reason attention to turnover issue is because there are some significant effects for staff turnover in business organization (Denvir 1992). Hogan (1992) found high turnover might have negative effects in organization.
2.3.1 Positive effects of staff turnover
18.104.22.168 Costs savings
Neil Kokemuller (2007) indicated companies can use a way that lay off high-salaried staff to provide early retirement plans to lay off high-salaried and low-performing staff, and replace a more productive and less-costly employee. Employers can reconfigure their remuneration and set the new level of salaries for new employees who are inexperienced in staff turnover (Ruth Mayhew 2011).
Egan (1995) observed it is unnecessary that pay raises to low labor expenses associated with employee due to not sticking around long enough. Moreover organizations offering position that do not require skilled employee help to cost savings of staff turnover.
22.214.171.124 High efficiency
Alexander (1996) pointed out staff turnover helps to inject talents, also leads to update work process and technology-driven solutions. New recruits bring new business because they have a lot of effective programmes to improve job efficiency and productivity.
Adler (1999) supported that new ideas and perspectives are allowed to enter organization in staff turnover. Organization may improve job efficiency by obtaining more tech-savvy and entrepreneurial-minded employees from staff turnover rather than lack awareness of new ways of looking at things.
126.96.36.199 Employee competency
Md. Rezaul Hasan Shumon and Shamsuzzoha (2007) found poor performers might be replaced by more skilled employees, or retired staffs are replaced by younger to create better achievement in staff turnover. In addition, Arie C. Glebbeek & Erik H. Bax (2002) observed the turnover help eliminate less productivity employees due to age, physical and mental wear and tear, or unable to cope with the job stress, and obtain better employees.
188.8.131.52 The price of quality
Cappelli (2000) found staff turnover is the price the transaction must pay for hiring high skilled and well-educated professionals. Although these “job-hopping” inevitably will leave the Organization, they significantly contribute to the success of the organization during their stay organization. Prevent the turnover a deal would be to hire more “average” employees who are less attracted by external labor market.
184.108.40.206 Facilitating internal labor market
In the summary of Baron and Kreps (1999), Internal labor markets provide opportunities for employee career development and therefore is an important means of motivation, if productivity can not be easily measured and increase in the short term, the company may need to find better workers, thus staff turnover increase demand for internal labor market to run properly.
2.3.2 Negative effects of staff turnover
220.127.116.11 Decreased performance
Based on the argument of Ton and Huckman cited in the Harvard business school article of 2008, staff turnover leads to a huge negative impact which degrades performance in the workplace. According to these authors, they vited a 48-month study conducted in a large U.S retail chain reaveled that both profit margin and customer service were adversely affected by turnover. Inexperienced workers are unlikely to provide high-value solutions and optimal service in job. Stone (2011) points out those companies with high turnover may be difficult to finish the necessary or important daily functions.
18.104.22.168 High costs
Philips (1990) concluded staff turnover may be expensive because of it lead to different costs such as recruitment cost, selection cost, cost of covering during the period of vacancy, training cost for new employees. Replace skilled employees or managers require pay three to five times the annual salary. In addition, the turnover incurs several indirect costs, companies may experience operational disruption as key staff departure (Staw 1980), and this could also be the loss of specific human resources that exist in leaving employees (Becker 1962).
22.214.171.124 Management frustration
In the word of Hamer (2007), managers feel frustrated as turnover of staff when manager manages company operation. Manager found himself spending so much time to recruit and train new employees, but not to coach and develop them because of staff ceaselessly turn. In addition, poor equipments and the employees ask more burdens to work practices of companies in the management.
126.96.36.199 Low morale
Accoding to Ologunde et al (1999), low morale of the staff is due to has increased the rate of staff turnover. Motivating employees to share the vision of business and perform at high levels is difficult when colleagues and co-workers are vanishing all around them. Workplace relationships are a key to a job satisfaction of employee. Mowday et al (1982) stated this demoralization may be due to the loss of a respected colleague. Friends and co-workers leave, remaining employees constantly have to cycle to know new employees.
188.8.131.52 Reduction in market return
The research about “The Negative Impacts of a High Turnover Rate” by Miki Markovich (2011) showed even if the marketing costs keep consistent through attraction of new customers, return on investment, if the company loses customers return and customer referrals due to less experienced staff or low-quality products in staff turnover. This increases the cost of customer, reduced marketing return on investment. Gwen Moren (2011) also noted knowledgeable employees exit, take experience and ability with them, lead to customer commitments can not been met, thus the company losers lots of customers thereby reduce market return.
184.108.40.206 Decreased productivity
Armstrong (2001) observed that in the result of staff turnover, newer employees may be lower productivity and efficiency of job, because the interruption of worker in daily operations, lack of experience or not obtain integrated training. Guthrie (1999) found that staff turnover is associated with decreased productivity when use of high involvement work practices is high. Maertz and Campion (1998) stated staff turnover can hamper the overall productivity of an organization. The newly replaced employee may not be efficient like the previous one.
2.4 Strategies to reduce turnover
High turnover level is existed, lead to negative impact to business organization. Whereas Mobley (1982) told us employee retention could be improved by better recruitment effort, career planning and development, working condition, organization communication and commitment, flexible working hours and turnover policies.
Recruit Suitable Employees: It has to select that the right people for the job are recruited, if an organization wants to reduce staff turnover, it is referred to as recruit suitable employees by Hulin (1985). Organization recruited the right people at right job, and attracts employees to remain in the organization. Schervish (1983) appears failure to recruit workers with appropriate competence will doom the firm to failure.
Recruit Valuable Employees: Mobley (1982) states the firm hire the best applicants for the jobs are required, make a significant contribution. They are best source of creative ideas. Moreover the organization employ spouses of staff are valuable for retaining talent thereby limit the employees to leave the organization.
This review of effects of staff turnover identifies types of staff turnover, effects of staff turnover, includes advantages and disadvantages, and several strategies to reduce staff turnover. Staff turnover most be reduced in business organization to enhance performance and competitiveness.
It is important that have an understanding of why staff would leave the organization. Therefore, in order to avoid employee turnover or reduce its impact in business organizational growth, managers have to be considered all the reasons and co-relations of staff turnover. It is also recommended that several strategies should follow for avoiding staff turnover and reducing its impact on the sustainable growth of the organization.
Abassi, S.M., Hollman, K.W. (2000). “Turnover: the real bottom line”, Public Personnel Management, 2 (3), pp. 333-342.
Antle, B.F. (2008) Individual and organizational factors in Job retention in Kentucky’s Child welfare agency, Children and Youth Review, 31(5), pp. 547-554.
Anantha Raj A. Arokiasamy (2013) A Qualitative Study on Causes and Effects of Employee Turnover in the Private Sector in Malaysia, Middle-East Journal of Scientific Research, 16 (11), pp. 1532-1541.
Alexander J, Bloom J, Nuchols B. (1994) “Nursing turnover and hospital efficiency: an organization-level analysis”, Industrial Relations, 33 (4), pp. 505-520.
Adler, P., Goldoftas, B. and Levine, D. (1999) Flexibility versus efficiency? A case study of model changeovers in the Toyota production system. Organization Science. 10(1), pp. 43–68.
Allen, D.G., Shore, L.M. and. Griffeth, R.W (2003) The Role of Perceived Organizational Support and Supportive Human Resource Practices in the Turnover Process? Journal of Management, 29(1), pp. 99-118.
Armstrong, M. (2001) A handbook of Human Resource Management and Practic. 8th edn. London: The Bath Press Ltd. CPI Group.
Arie C. Glebbeek & Erik H. Bax (2002) Labour Turnover and Its Effects on Performance: An Empirical Test Using Firm Data. Available at: http://som.eldoc.ub.rug.nl/FILES/reports/themeA/2002/02A30/02A30.pdf (Accessed: 01/10/2014).
Boxall, P. and Purcell, J. (2003) Strategy and Human Resource Management, New York: Palgrave Macmillan.
Baron & Kreps (1999) Strategic human resources: framework for general managers. New York: Wiley.
Becker, G. (1962) Investment in human capital: A theoretical analysis, The Journal of Political Economy, 70(5), pp. 9–49.
Bratton, J. and Gold, J. (2003) Human Resources Management Theory and Practice, 3rd edn, New York: Palgrave Macmillan.
Cappelli (2000) A market-driven approach to retaining talent, Harvard Business Review, 78(1), pp. 103-111.
Denvir, A. and McMahon, F. (1992) “Labour turnover in London hotels and the cost effectiveness of preventative measures”, International Journal of Hospitality Management, 11 (2), pp. 143-154.
Egan, T.M., Yang, B. and Bartlett, K.R. (2004) The effects of organizational learning culture and job satisfaction on motivation to transfer learning and turnover intention. Human Resource Development Quarterly.15 (3), pp. 279-301.
Egan, G (1995) A clear path to peak performance, People Management, 1(10), pp. 34–37.
Guthrie, J.T. (1999). Engagement in reading: Processes, practices, and policy implications. New York: Teachers College Press.
Gwen Moren (2011) The Hidden Costs of Employee Turnover. Available at: http://www.entrepreneur.com/article/220254 (Accessed: 29/09/2014).
Kristian Hamer (2007) “Labour turnover in the retail industry: Predicting the role of individual, organisational and environmental factors”, International Journal of Retail & Distribution Management, 35(4), pp. 289 – 307.
Hulin, C.L., Roznowski, M. and Hachiya, D. (1985) Alternative opportunities and withdrawal decisions: Empirical and theoretical discrepancies and an integration. Psychological Bulletin, 97(1), pp. 233-250.
Hogan, J.J. (1992) “Turnover and what to do about it”, The Cornell HRA Quarterly. 33 (1), pp. 40-45.
Kevin, M.M., Joan, L.C. and Adrian, J.W. (2004) Organizational change and employee turnover, Personnel Review, 33(2), pp. 161-166.
Mowday, R., Porter, L., Steers, R. (1982) Employee-Organization Linkages: The Psychology of Commitment, Absenteeism, and Turnover. New York: Academic Press.
Mobley, W. H. (1982). Employee Turnover: Causes, Consequences, and Control. Addison-Wesley: Philippines.
Md. Rezaul Hasan Shumon & Shamsuzzoha, A.H.M. (2007) Employee Turnover-a Study of its Causes and Effects to Different Industries in Bangladesh. Available at: http://www.fvt.tuke.sk/journal/pdf07/3-str-64-68.pdf (Accessed: 02/10/2014).
Meaghan Stovel & Nick Bontis (2002), Voluntary turnover: knowledge management-friend or foe? Journal of intellectual Capital, 3 (3), pp. 303-322.
Miki Markovich (2011) The Negative Impacts of a High Turnover Rate. Available at: http://smallbusiness.chron.com/negative-impacts-high-turnover-rate-20269.html (Accessed: 22/09/2014).
Maertz, C. P., & Campion, M. A. (1998). 25 years of voluntary turnover research: A review and critique. International Review of Industrial and Organizational Psychology, 13(1), pp. 49-81.
Noe, R.A., Hollenbeck, J.R. Gerhart, B. and Wright, P.M. (2006) Human Resources Management Gaining A Competitive Advantage.4th edn, New York: McGraw Hill.
Neil Kokemuller (2012) Positive effects of turnover. Available at: http://yourbusiness.azcentral.com/positive-effects-turnover-21217.html (Accessed: 03/10/2014).
Ologunde, B.O., and Akinpelu, D.A. (1999) Antimicrobial activity of Vernonia amygdaline leaves. Fitoterapia J. Study Med Plants, p. 432.
Philips, J.D. (1990) The price tag on turnover. Personnel Journal, 69(12), pp. 58-61.
Price, J.L (1977). The study of turnover, 1st edn, Ames, IA: Iowa State University Press.
Ruth Mayhew (2011) Advantages of turnover. Available at: http://smallbusiness.chron.com/advantages-turnover-11194.html (Accessed: 30/09/2014).
Schervish, P.G. (1983) The structural Determinants of unemployment, Vulnerability and power in market relations, New York: academic press, pp: 71-112.
Staw, B. (1980) The consequences of turnover, Journal of Occupational Behavior, 1(4), pp. 253–273.
Ton, Zeynep, and Robert S. Huckman. (2008)”Managing the Impact of Employee Turnover on Performance: The Role of Process Conformance.” Organization Science 19(1), pp. 56–68.