Factors of High Labor Turnover in the Retail Industry

In today’s job market the retail industry struggles to maintain its workforce. It is essential to develop and implement effective retention strategies. The first step in developing an effective retention strategy is to identify causes of turnover. Several studies have been published regarding individual turnover factors and their relationship to turnover intention. Job satisfaction, supervisor satisfaction, organizational commitment and organizational justice are major factors for labor turnover in the retail industry.

When an employee makes a decision to leave their company, they will always do what they feel is in their own best interest.

Allen (2018) discusses why employees choose to leave companies and suggests that the theory of organizational equilibrium provides many of those factors. He suggests that individuals will stay with an organization as long as the positive conditions such as satisfactory pay, developmental opportunity and good working conditions outweigh the time and effort required of the person by the organization. He states the highest predictors of turnover include organizational commitment, job satisfaction, supervisor satisfaction, role clarity, job design and work group cohesion.

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Pay and demographics were determined not to be significant factors in turnover decisions. While these factors were compiled from numerous resources by Allen, other researchers have drilled down individual factors and the relative effects on turnover.

In Indonesia, Ikatrinasari, Prayogo, and Ariyanti (2018) examined the relationships between work satisfaction, organizational commitment, salary level, and turnover intention by administering a written questionnaire. They found that in 70.9% of respondents a correlation was shown between co-worker relationships and work environment and in 50.

1% of respondents there was a relationship between job satisfaction and organizational commitment. Turnover intention can be explained by job satisfaction, organizational commitment, and salary level in 53.1% of respondents. Both work satisfaction and organizational commitment had a significant impact on turnover intention. Salary level has an impact on turnover intention to a lesser degree. Job satisfaction and salary level also have a positive impact on organizational commitment. The study results show that there are many variables that are based on a workers’ perception. Concrete variables such as pay have a smaller effect than perceived satisfaction with the job and conditions.

Another example of an employee perception-based variable is organizational justice. Organizational justice is an employees’ understanding of fairness, results and processes within a company. Yang, Treadway, and Stepina (2013) conducted a study to investigate how the perception of work politics and organizational justice impact turnover intentions by means of a questionnaire. They found that role ambiguity was positively related to procedural justice while the perception of politics was negatively related to procedural justice. Procedural justice was positively related to supervisor satisfaction and pay satisfaction and negatively related to turnover intention. Perceptions of politics were positively related to turnover intention and negatively related to supervisor satisfaction and pay satisfaction. An employees’ personal feelings that the system of communication and justice within the company was fair greatly impacted whether or not they intended to leave. Creating an impartial system to address employee concerns and eliminating negative perceptions such as favoritism and politics are essential to creating positive perceptions and increasing retention.

Employees also have to feel empowered in their role. Entry-level employees are susceptible to feelings of overqualification. Erdogan and Bauer (2009) investigated the role of empowerment on perceived overqualification and turnover intention using a questionnaire with entry-level sales consultants. They found at higher levels of empowerment, the employees perceived overqualification was not related to job satisfaction. At low levels of empowerment, perceived overqualification was negatively related to job satisfaction. Intentions to remain were also similarly impacted by various levels of empowerment. They found that turnover was less likely at higher levels of empowerment. No relationship was established between perceived overqualification and job performance. Though none of the test group had any managerial responsibilities, the employees that felt empowered in their role were far more likely to stay with the company than those who did not. Empowerment at all levels of employment increases job satisfaction and retention. Awareness of this perception is essential in developing role clarity and managing talent.

An entensive study was conducted by DeConinck and Bachmann (2005) who researched the relationships between procedural justice, organizational commitment, supervisor satisfaction, job satisfaction, withdrawal cognitions, and turnover by administering two surveys one year apart. They found that higher levels of procedural justice lead to higher levels of supervisor satisfaction and organizational commitment. Increased job satisfaction led to higher levels of organizational commitment which in turn led to lower withdrawal cognitions and turnover. Sales performance was also examined and those with higher sales had lower withdrawal cognitions. This study verified the conclusion by Erdogan and Bauer (2009). Employees who have a perceived sense of organizational justice are more satisfied with their job and therefore less likely to leave. Also, this study verified the relationship between supervisor satisfaction and organizational commitment that Yang et al. (2013) found in their study.

Every year the retail industry struggles with retaining its labor force. The Bureau of Labor Statistics (2018) published a report showing the total number of job openings, hires and separations. The trend revealed that more job openings are present in 2018 than in 2017. Also, total hires and separations are also on the rise. The turnover rate is increasing. It is imperative that a solid, effective retention strategy be developed and implemented immediately. It is estimated that it costs up to 200% of a worker’s salary to replace them. Companies can not continue to support this cost in our changing economy.

Caution should be advised, though; Ikatrinisari et al (2018) study only consisted of 100 participants and Yang et al. (2013) had 782 participants with 79.5% of those participants being female. Erdogan and Bauer (2009) had their participants complete the surveys on company time during meetings.

Overall, each study presented vital factors of labor turnover and demonstrated their interdependency on one another. Job satisfaction and organizational commitment were seen throughout the studies as having both direct and indirect influences on many other factors. Either separately or in combination these two factors can account for the majority of reasons an employee chooses to leave or at least has thoughts of leaving their current role. Though the studies identified these factors, it is only the first step in developing a retention strategy. More research is needed to determine how we can influence employee perceptions regarding organizational justice. An employees’ view of fairness and inclusion is an essential part of retaining that employee long term. People must feel that there is a way to address concerns, without fear of retaliation, and they must also feel like they are a part of the organization, not just a replaceable laborer. This is the crux of the issue faced by many Human Resource managers today. We strive to show value to the people we hire from day one to insure they feel welcome, confident in the processes of the company and they feel a part of the team.