The turnover rates within a workforce are an effective measure of a company’s loyalty ratings.
A company with high employee turnover has problems. The root causes of turnover must be discovered to reduce the number of employees leaving the organization and seeking employment elsewhere. If a company has worked hard to recruit good talent, the last thing it wants to do is continue to pay costs for recruiting, on boarding and training new people to replace others. The impact of staff turnover is significant; its effects are felt in productivity, revenues and remaining employee.
Causes of Employment Turnover
Most business leaders boil turnover down to a basic concept: are employees happy at work or not. There are many reasons for unhappiness at work. A common reason for turnover lies with the pay and benefits. Employees need to make enough money to provide a decent lifestyle for themselves and their families. If a company is consistently paying below-standard rates, people might come to the company to get enough experience until they can transition to a company where there is a better pay and benefits package.
Another common reason is employee appreciation or the lack of appreciation. Employees want to feel appreciated and recognized for doing a good job. If management is oblivious to the good work employees do, people will seek a place where their efforts are not taken for granted.
Lack of Training and Development
According to Paul (2004), training and development is a function of human resource management concerned with organizational activity aimed at bettering the performance of individuals and groups in organizational settings. It has been known by several names, including "human resource development", and "learning and development. New-hire Induction and staff development are two essential requirements for job preparation which are mandatory from the employers. The preparation of the job starts from recruitment (Bratton, 2003). Those employees who begin their jobs without any form of orientation are most likely unaware of workplace policies and procedures that they can benefit from. Additional training throughout the employment relationship helps the employee to update skills and become more productive and produce efficient workforce. When employees lack the training necessary to become more productive, their performance suffers and they will either leave of their own volition for jobs that provide training and employee support or they will be terminated for poor performance (Armstrong, 2003).
Lack of Employee Motivation
Armstrong, (2003) contends that motivating employees can be a manager's biggest challenge. Employee motivation is a key to the overall effectiveness of an organization. An understanding of the applied psychology within a workplace, also known as organizational behavior, can help achieve a highly motivated workforce. Fair promotion conducted on bases of performance greatly motivates employees and a key demotivating factor to employees is failure by the organization management to carry out promotion on basis of performance and merit. 10
Lack of Career Development
According to the U.S. Department of Labor, (2009) 64 percent of Americans who leave their jobs say they do so because they don't feel appreciated. Gupta (2008) reported that almost 70 percent of people in the United States say they receive no praise or recognition in the workplace. A study by Chartered Institute of Personnel Development (2009) found out that, in UK, employee turnover is extremely costly to companies with large numbers of employees. In the banking industry, employee turnover can also mean the loss of valuable customer relationships. Understanding this, Zions Bank traditionally monitored employee satisfaction using periodic paper-based surveys and by encouraging employees to manually submit comments and suggestions (Chartered Institute of Personnel Development, 2009).
Employees must have the necessary tools to perform their duties. This includes the proper equipment, machinery and computer technology as well as adequate lighting, work space and ergonomically-correct seating. Poor working conditions due to physical elements lead to low productivity and overall job dissatisfaction. The latter, particularly when left 14
Impact of Employees’ Turnover on Organization Efficiency
1 Increased Customer Dissatisfaction
According to Homer (2007) states that staff turnover is costly and disruptive. It reduces the outputs and is disruptive as it requires the schedules and programs to be modified. It causes the organization to lose a lot of money because they have to employ other staff to come and help. There are a number of reasons that contributes to the rate of turnover in companies and they vary. They both stem from the company the employees. Turnover is a very expensive aspect to companies, the reason the employers gives it importance (Oregon, 2004).
Disruption to service delivery
As the labor market continues to tighten, employers are increasingly concerned about maintaining a stable workforce. They need competent, dedicated, and effective workers to serve their customers to fulfill their missions. Without a sufficient qualified and productive workforce, employers are vulnerable to competitive forces as well as the impact of negative relationships with their customers.
Increase in work load for employees
Horton, (2007), states that the escalation in the rate of labor turnover is a major concern for businesses and is clearly impacting on organizational performance. High level of stress leads to employees making unnecessary mistakes/accidents and low morale leads to them not caring about what they do. Staff turnover breaks the team spirit and group cohesion, which is necessary for the successful and smooth running the business. Gupta (2008) states that “the real cost of staff turnover leads to lowered morale among other employees who must shoulder the workload, lost revenue from sales not made, the loss of customers who fled to competitors for better service”. The morale of staff may be lowered because work overload, overtime work, substitute personnel and working with fewer staff than required is problematic. This causes an increase in errors during the performance of activities and results in poor service.
Determine the mitigating strategies of reducing employees’ turnover
1 Working Environment
According to Martin (2005) Human resource is very essential in running any business, without which there would be no success. However, employers are faced with the dilemma of turnover as employee average stay in the company is 23-24 months. according to the 2006 Bureau of Labor Statistics (Izzack,2010) According to Harrie (2002) the Employment Policy Foundation states it costs the employer an estimate of $15,000 per head, including separation costs, paperwork, unemployment; vacancy costs, including overtime or temporary employees and replacement costs including advertisement, interview time, relocation, training and decreased efficiency when colleagues depart (Horton, 2007). Providing a stimulating workplace environment, which fosters happy, motivated and empowered individuals, lowers employee turnover and absentee rates. Promoting a work environment that fosters personal and professional growth promotes harmony and encouragement in all levels of organization (Martin, 2005).
According to Robert (2006) continual training and reinforcement develops a work force that is competent, consistent, competitive, effective and efficient, beginning on the first day of work, providing the individual with the necessary skills to perform their job is important. According to Fredrick (2010) before the first day, it is important the interview and hiring process expose new hires to an explanation of the company, so individuals know whether the job is their best choice. Networking and strategizing within the company provides ongoing performance management and helps build relationships among co-workers (Gareth,2008).
Remuneration is the most common cause of the employee turnover rate being so high. Employees’ value jobs that compensate them well (Gupta, 2008). Companies that do not offer good salaries, tend to face the highest turnover. To avoid this scenario, companies should strive to be competitive enough in order to retain qualified and talented personnel.
Staff turnover can also have a negative impact on other employees by disrupting group socialization processes and increasing internal conflict, which can lead to triggering additional absenteeism In addition, the interpersonal bond that is developed between employees is central to the communication patterns that are characteristic and unique to any organization. People grow professionally and personally, and good employers are able to accommodate these changes in the circumstance. A highly satisfied workforce is far more capable of meeting organizational goals and customer needs than an apathetic and uninspired one (Martin, 2005).
Employers who communicate regularly with employees lessen the risk of creating a workforce that feels undervalued and unappreciated. Keeping employees informed about organizational changes, staffing plans and fluctuating business demands is one way to ensure employees remain with the company. Neglecting employee concerns about job security through lack of communication or excluding employees from discussions that can affect their job performance, such as policy or procedural changes, negatively impacts the way employees view their employer. Their views transform to dissatisfaction and finally low productivity due to low morale and disengagement