Employee Turnover and Retention: An Overview

IRJMST Vol 5 Issue 8 [Year 2014] ISSN 2250 – 1959 (0nline) 2348 – 9367 (Print)

International Research Journal of Management Science & Technology http://www.irjmst.com 29

Employee Turnover and Retention: An Overview

Niharika Singh

Research Scholar, Mizoram University

Abstract

Today’s fast changing competitive business environment occasioned by globalization and

advanced communication technologies posing challenges before human resource

professional. Since, good performers can be taken away by the competitor and the

chances increase with increasing industrialization and ease of accessibility. To retain

employees, organizations spend huge amount of money. This article is an effort to

identify the causes and impact of employee leaving an organization to understand need of

retaining an employee. It further discuss about models ,types of turnover and a brief

introduction to retention.

Introduction

The 1990s have brought a revolutionary change in Indian business. Post- liberalization is marked by a

shift from command economy to market driven economy; from sheltered market to competitive market;

from monopoly to competition; and from domestic model to global made. Such a shift calls for a

different approach to human resource problems (Khamurddin, 2006). With the opening of Indian

economy there is no dearth of opportunities for the talented ones even for the less talented ones,

facilitating inter- firm employee mobility (job hopping to the layman). Khamurddin (2006) states

globalization has vastly increased global competition. Throughout the world, firms that formerly

competed with local firms now face an onslaught on HR functions, employee hiring, training,

compensation and retaining are to be guided by the global perspective. Moreover, modern world has

provided everyone new and sound communication technologies, making possible for people to connect

not only with domestic but also international market. And changed “cultural context” has a major impact

on the Indian working community in their attitude to work and organization. Gone are the days of

traditional loyalty to organization, considered to be old fashioned in today‟s scenario, job hopping is the

current convention or vogue of corporate employment (Mukharjee, 2010).

In face of rapid industrialization, it is not only the employer assessing the candidates in terms of his

qualification, experience, ability etc; the employees also at the same time judge the employer. In a world

where technologies, processes, and products are quickly duplicated by competitors, and the pace of

change and level of competition are constantly increasing, human capital are the most reliable sources


International Research Journal of Management Science & Technology http://www.irjmst.com Page 130

for organization success. The need for specialized and trained manpower in the organization has given

focus to the words like turnover and retention. Employee turnover refers to the movement of employees

in and out of a business. However, the term is commonly used to refer the number of employees leaving.

Employee retention is defined “as the ability to hold onto those employees you want to keep for longer

than tour competitors.” (Johnson,2000).Managing retention and keeping the turnover rate below target

and industry norms is one of the most challenging issues facing most of the organizations today.

Employee Turnover

Mobley(1982) defines turnover as cessation of membership in an organization by individuals who have

received monetary compensation from the organization. Though, there is a high concern in the industry

to lower the turnover rate. But not all turnover is bad. Too little turnover can be as a big problem as too

much. Certain level of turnover is desirable for any organization for introducing „new blood‟ and to

remove unproductive people. Furthermore, what constitutes desirable level for turnover varies from

sector to sector. For instance, the fast food industry is arguably suited to operating with higher rates of

turnover than industries such as mining which have more expensive human capital inputs. Excessive

turnover is always a problem, especially when it occurs among the best performing or star employees.

Top performers are also more visible than the average or low performers in internal and external labor

markets (Groysberg, Lee, & Nanda, 2008) making it more easier for the star performers to leave with

better opportunities in hand. Turnover continues to be a vibrant field of research from more than 55

years with thousands of published article on the subject. Some renown contributor for the field are

March, Simon, Porter, Steers, Mobley, Griffeth, Price, Mueller, Mitchell, Lee and Holtom.

Types of Turnover

Turnover can be divided based on various categories, such as:

(A)When employee terminates an employee or ask them to resign is termed as involuntary turnover. It

can cause a doubt of job security in remaining employees. Whereas, other low performing employee

termination may come as a relief to remaining employee whose morale and productivity suffer when

poor performer affect the workforce climate.

When a competent employee choose to leave an organization to work elsewhere, is voluntary turnover.

(B)Further, turnover can be functional or positive turnover when poor performers choose to leave

(Abelson &Baysinger, 1984)(((ART 114))) As Dalton etal.(1979;1981)have argued rather than simply

concerning with the rate of employee seperations, it is vital to see who is leaving and how easily they

may be replaced. If poor performing employee is leaving and if a loose labor market exits it is functional

for the organization. Whereas, a good performing employee leaving with hard-to replace skills,because

of dissatisfaction or better job offer somewhere else is dysfunctional or negative turnover.

Cost of Turnover



Turnover is considered as a problem because imposes extensive costs on both individuals and

organizations. (Mitchell et al., 2001) Estimates of the losses for each employee vary from a few

thousand dollars to more than two times the person‟s salary depending on the industry, the content of the

job, the availability of replacements and other factors. (Hinkin& Tracey,2000). At individual level,

significant energy is expended on finding new jobs, and adjusting to new situations. Moreover, they

have to give up known routines and interpersonal connections at one‟s previous place of employment

can be very stressful to the employee.(Boswell, Boudreau and Tichy, 2005).At organizational level,

direct cost such as exit interview time, administrative requirements, cost of temporary workers,

recruitment , selection and formal and informal training of the new employee until he attains

performance level equivalent to the one who quits. Griffeth and Hom(2001) summarizes that turnover

cost can be broken down into three categories: separation cost(incurred in exit interview), replacement

cost (incurred to replace employees) and training cost. In addition to these, there are some indirect or

less quantifiable costs such as knowledge and expertise gained through experience. Often they take

away the clients with whom they established closed relations. In order to avoid these costs,

organizations make effort to hold the valuable employees.

Causes of Turnover

There are many reasons why people leave voluntarily. Sherratt(2000) and Van Vianen, Feji, Krauz, and

Taris(2004)introduced two responsible for turnover; the pull and push motives. Pull motives coming

from outside the environment, such as availability of opportunities in external market to improve one‟s

career, resignation by employees from organization to go into private business. The push motives are

internal to the organization, such as dissatisfaction with current work situation, job stress, no career

growth and so on.Pettman (1973) categorized factors for turnover as (a) External factors, such as

employment perceptions, unemployment rate, and union presence. (b) Work-related factors, such as pay,

job performance, role clarity, overall job satisfaction, organizational commitment. (c) Personal

characteristics of the employee, such as age, tenure, gender, education, marital status.

Historically, two major factors have captured most of the academic literature are job satisfaction and job

alternatives. (Mitchell et al., 2001).If dissatisfiedemployees gets a suitable opportunity they leave, if not

stays. Satisfied employees are less attracted by alternative jobs. But turnover is a complex process. At

times satisfied employee may leave or a dissatisfied employee may stay. And to understand it further,

other attitudes have been studied such as organizational commitment, job involvement, perceived

organizational support, psychological contract violation and so on.

Models of Turnover

A number of models have been introduced till now in the effort of explaining why and how of turnover.

Some of the most valuable models have been discussed here:

Unfolding model of turnover: Introduced by Lee, Mitchel, Holtom, Mc. Daniel &Hill (1999). They

proposed that there are five decision paths people may follow to leave a job. Three of the paths were

initiated by a shock or environmental event rather than job dissatisfaction, such as job offer, spouse



relocation, poor appraisal and the like. A shock is a particular, jarring event that initiates the analyses

involved in quitting. Other two path were initiated by job dissatisfaction. They basically focused on

how employee leaves.

Cusp catastrophe model: Introduced by Sheridan and Abelson‟s (1983). This model incorporates two

withdrawal determinants, job tension and organizational commitment. It shows a two-dimensional

control surface with withdrawal behavior as a third, vertical axis.

Comprehensive structural model: Introduced by Price and Mueller (1981,1986) ,identified the precedent

of job satisfaction and intent to leave and added organizational commitment as a mediator between these

two variables.

Mobley‟s Process Model, Integrative adaptation and withdrawal model, the unified model of turnover

and many more model of turnover has been given out on the subject.

Employee Retention

Turnover is all about leaving, whereas retention is all about staying. Low employee turnover rate means

high employee retention. Employee retention connotes the means, plan or set of decision making

behavior put in place by organization to retain their competent workforce performance. (Gberevbie,

2008). In simple words, retention is efforts by an organization to create an environment so that employee

stay longer. Retention is the key concern of most leading organizations especially in service industry,

which is a people intensive industry. “They are aware that competitiveness is devised from talent and it

follows that recruitment and retention are not just human resource issues nut an important part of

business strategy.” (Thornston, 2008)

Employee retention is a strategic and coherent process that starts with an examination of the reasons that

employee join an organization. Retention is a complex construct, not just one variable and it is affected

by several factors, among which are: job satisfaction, work overload etc. The reasons for people staying

in an organization are multidimensional and lie in culmination of a host of social, psychological and

organizational factors. In developing countries, due to general influence, compensation is crucial but it

not the only critical retention factor. Reasons for staying are seen as the simple obverse of reasons for

leaving. But that is just oversimplification of facts. Factors making employees stay is very often

different from what make them leave. (Mitchel et al., 2001). Apart from that, while making retention

strategy, one has to keep in mind “one size does not fit all”. Employees from different industry or

department or level have different needs. One cannot expect that one single strategy can make them all

stay. Thus to create an environment where all want to stay employer has to keep their individual needs

in their mind.

Some of the traditional trends in Employee Retention Strategies are:



Job Satisfaction: It encompasses the feelings, beliefs and thoughts about the job. An employee who is

satisfied with her/his job will most likely stay. Hence, management need to identify and apply

appropriate variables that will create job satisfaction.

Training: Training is referred to as a planned effort to facilitate the learning of job-related knowledge,

skills and behavior by employee. Employers who make an effort to train employee, which is crucial for

their personal and career growth, is appreciated by employees. Hence, they tend to stay in the

organization.

Reward: When an employee receive fair reward for their contribution towards organization, they tend to

stay.

Supervisory Support: Supportive supervisor helps an employee not only to achieve individual target but

smooth relationship between them enhance the chances of employees stay in the organization.

However, competitive market and qualified workforce has been demanding much more than basic

requirements. Thus to develop an effective retention strategy organizations some add on have been made

such as participatory decision making, work flexibility to offer employees work-life balance, career

growth and the like.

Conclusion

Employee retention means many things to many people in each organization. In simple language,it

means stopping good employee from leaving the organization. Infact , the concept of employee retention

arose in response to increasing number of employees leaving the organizations due to various on-the-job

or off-the-job reasons. Some of the turnover is avoidable, whereas some are unavoidable. Realizing the

importance of vital human capital in the organization, the only source could not be duplicated by a

competitor, all the efforts have to be made to give delay avoidable turnover as long as possible. Some

organizations have introduced measures like six month notice to be given by the employee, or salary in

lieu thereof. These are shortsighted methods. Whereas, the approach should be to allow the employee to

go if he wants to go and waive off the notice period. Since an outgoing employee can never give his best

to the organization. Thus efforts are not to be made only to make employees stay but to make them want

to stay to get best results.

References

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Employee Turnover and Retention: An Overview

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