Turnover (employment)

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In human resources context, turnover or staff turnover or labour turnover is the rate at which an employer loses and gains 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 may be harmful to a company's productivity if skilled workers are often leaving and the worker population contains a high percentage of novice workers. Companies also often track turnover internally across departments and divisions or other demographic groups such as turnover of women versus turnover of men.

In the United States, the average total non-farm seasonally adjusted monthly turnover rate was 3.3% for the period from December 2000 to November 2008.[1] However rates vary widely when compared over different periods of time or different job sectors. For example, during the period 2001-2006, the annual turnover rate for all industry sectors averaged 39.6% before seasonal adjustments,[2] during the same period the Leisure and Hospitality sector experienced an average annual rate of 74.6%.[3]

Costs[edit]

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 between 30% (the figure used by the American Management Association) to upwards of 150% of the employees' remuneration package.[4] 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. The true cost of turnover is going to depend on a number of variable including ease or difficulty in filling the position and the nature of the job itself.

In a healthcare context, staff turnover has been associated with worse patient outcomes.[5]

Internal versus external[edit]

Like recruitment, turnover can be classified as "internal" or "external".[6] Internal turnover involves employees leaving their current positions and taking new positions within the same organization. Both positive (such as increased morale from the change of task and supervisor) and negative (such as project/relational disruption, or the Peter Principle) effects of internal turnover exist, and therefore, it may be equally important to monitor this form of turnover as it is to monitor its external counterpart. Internal turnover might be moderated and controlled by typical HR mechanisms, such as an internal recruitment policy or formal succession planning.

Internal turnover, called internal transfers, is generally considered an opportunity to help employees in their career growth while minimizing the more costly external turnover. A large amount of internal transfers leaving a particular department or division may signal problems in that area unless the position is a designated stepping stone position.

Skilled vs. unskilled employees[edit]

Unskilled positions often have high turnover, and employees can generally be replaced without the organization or business incurring any loss of performance. The ease of replacing these employees provides little incentive to employers to offer generous employment contracts; conversely, contracts may strongly favour the employer and lead to increased turnover as employees seek, and eventually find, more favorable employment.

Voluntary versus involuntary[edit]

Practitioners can differentiate between instances of voluntary turnover, initiated at the choice of the employee, and involuntary turnover initiated by the employer due to poor performance or reduction in force (RIF).

The US Bureau of Labor Statistics uses the term "Quits" to mean voluntary turnover and "Total Separations" for the combination of voluntary and involuntary turnover.

Causes of high or low turnover[edit]

High turnover often means that employees are dissatisfied with their jobs, especially when it is relatively easy to find a new one.[7] It can also indicate unsafe or unhealthy conditions, or that too few employees give satisfactory performance (due to unrealistic expectations, inappropriate processes or tools, 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.

Each company has its own unique turnover drivers so companies must continually work to identify the issues that cause turnover in their company. Further the causes of attrition vary within a company such that causes for turnover in one department might be very different from the causes of turnover in another department. Companies can use exit interviews to find out why employees are leaving and the problems they encountered in the workplace.

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 and Oldham's Job Characteristics Model.[8]

Thomas suggests that there tends to be a higher level of stress with people who work with or interact with a narcissist, which in turn increases absenteeism and staff turnover.[9] Boddy suggests the same dynamic where there is corporate psychopath in the organisation.[10]

Investments[edit]

On the other hand, low turnover may indicate the presence of employee "investments" (also known "side bets")[11] in their position: certain benefits may be enjoyed while the employee remains employed with the organization, which would be lost upon resignation (e.g., health insurance, discounted home loans, redundancy packages). Such employees would be expected to demonstrate lower intent to leave than if such "side bets" were not present.

How to prevent turnover[edit]

Employees are important in any running of a business; without them the business would be unsuccessful. However, more and more employers today are finding that employees remain for approximately 23 to 24 months, according to the 2006 Bureau of Labor Statistics[citation needed]. The Employment Policy Foundation states that it costs a company an average of $15,000 per employee, which includes separation costs, including paperwork, unemployment; vacancy costs, including overtime or temporary employees; and replacement costs including advertisement, interview time, relocation, training, and decreased productivity when colleagues depart. Providing a stimulating workplace environment, which fosters happy, motivated and empowered individuals, lowers employee turnover and absentee rates.[12] Promoting a work environment that fosters personal and professional growth promotes harmony and encouragement on all levels, so the effects are felt company wide.[12]

Continual training and reinforcement develops a work force that is competent, consistent, competitive, effective and efficient.[12] Beginning on the first day of work, providing the individual with the necessary skills to perform their job is important.[13] 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.[14] Networking and strategizing within the company provides ongoing performance management and helps build relationships among co-workers.[14] It is also important to motivate employees to focus on customer success, profitable growth and the company well-being .[14] Employers can keep their employees informed and involved by including them in future plans, new purchases, policy changes, as well as introducing new employees to the employees who have gone above and beyond in meetings.[14] Early engagement and engagement along the way, shows employees they are valuable through information or recognition rewards, making them feel included.[14]

When companies hire the best people, new talent hired and veterans are enabled to reach company goals, maximizing the investment of each employee.[14] Taking the time to listen to employees and making them feel involved will create loyalty, in turn reducing turnover allowing for growth.[15]

Calculation[edit]

Labour turnover is equal to the number of employees leaving, divided by the average total number of employees, multiplied by 100 (in order to give a percentage value). The number of employees leaving and the total number of employees are measured over one calendar year.

\left ( \frac{NELDY} {(NEBY + NEEY)/2} \right ) \times 100

Where:
NELDY = Number of Employees who Left During the Year
NEBY = Number of Employees at the Beginning of the Year
NEEY = Number of Employees at the End of the Year

For example, at the start of the year a business had 40 employees, but during the year 9 staff resigned with 2 new hires, thus leaving 33 staff members at the end of the year. Hence this year's turnover is 25%. This is derived from, (9/((40+33)/2))*100 = 24.66%.

Models[edit]

Over the years there have been thousands of research articles exploring the various aspects of turnover, and in due course several models of employee turnover have been promulgated. The first model and by far the one attaining most attention from researcher, was put forward in 1958 by March & Simon. After this model there have been several efforts to extend the concept. Since 1958 the following models of employee turnover have been published.

  • March and Simon (1958) Process Model of Turnover
  • Porter & Steers (1973) Met Expectations Model
  • Price (1977) Causal Model of Turnover
  • Mobley (1977) Intermediate Linkages Model
  • Hom and Griffeth (1991) Alternative Linkages Model of Turnover
  • Whitmore (1979) Inverse Gaussian Model for Labour Turnover
  • Steers and Mowday (1981) Turnover Model
  • Sheridan & Abelson (1983) Cusp Catastrophe Model of Employee Turnover
  • Jackofsky (1984) Integrated Process Model
  • Lee et al. (1991) Unfolding Model of Voluntary Employee Turnover[16]
  • Aquino et al. (1997) Referent Cognitions Model
  • Mitchell & Lee (2001) Job Embeddedness Model

See also[edit]

References[edit]

  1. ^ "Job Openings and Labor Turnover Survey". Bureau of Labor Statistics. 2008. Retrieved 2009-01-21. 
  2. ^ U.S. Department of Labor, Bureau of Labor Statistics, total non-farming separations (not seasonally adjusted), Series ID JTU00000000TSR, http://data.bls.gov/cgi-bin/surveymost?jt "Job Openings and Labor Turnover Survey "
  3. ^ U.S. Department of Labor, Bureau of Labor Statistics, total separations Leisure and Hospitality (not seasonally adjusted), Series ID JTU70000000TSR, http://data.bls.gov/cgi-bin/surveymost?jt "Job Openings and Labor Turnover Survey "
  4. ^ Schlesinger, Leonard A.; James L. Heskett (1991-04-15). "Breaking the Cycle of Failure in Services". MIT Sloan Management Review 33 (3): 17–28. Retrieved 2009-01-21. 
  5. ^ Williams ACdeC, Potts HWW (2010). Group membership and staff turnover affect outcomes in group CBT for persistent pain. Pain, 148(3), 481-6
  6. ^ Ruby, Allen M. (January 2002). "Internal Teacher Turnover in Urban Middle School Reform". Journal of Education for Students Placed at Risk 7 (4): 379–406. doi:10.1207/S15327671ESPR0704_2. 
  7. ^ Carsten, J. M., & Spector, P. E. (1987). Unemployment, job satisfaction, and employee turnover: A meta-analytic test of the Muchinsky model. Journal of Applied Psychology, 72(3), 374-381. doi: http://dx.doi.org/10.1037/0021-9010.72.3.374
  8. ^ Hackman, J. Richard; Greg R. Oldham (August 1976). "Motivation through the design of work: test of a theory". Organizational Behavior and Human Performance 16 (2): 250–279. doi:10.1016/0030-5073(76)90016-7. 
  9. ^ Thomas D Narcissism: Behind the Mask (2010)
  10. ^ Boddy, C. R. Corporate Psychopaths: Organizational Destroyers (2011)
  11. ^ Tett, Robert P; John P. Meyer (1993). "Job Satisfaction, Organizational Commitment, Turnover Intention, and Turnover: Path Analyses Based on Meta-Analytic Findings". Personnel Psychology 46 (2): 259–293. doi:10.1111/j.1744-6570.1993.tb00874.x. Retrieved 2009-01-21. 
  12. ^ a b c Employee Pride Goes Wide. (2005, February 2). Graphic Arts Monthly, Retrieved February 23, 2009, from Academic Search Premier database.
  13. ^ Costello, D. (2006, December). Leveraging the Employee Life Cycle. CRM Magazine, 10(12), 48-48. Retrieved February 23, 2009, from Academic Search Premier database.
  14. ^ a b c d e f Testa, B. (2008, September 22). Early Engagement, Long Relationship?. Workforce Management, 87(15), 27-31. Retrieved February 23, 2009, from Academic Search Premier database.
  15. ^ Skabelund, J. (2008, May). I just work here. American Fitness, 26(3), 42-42. Retrieved February 23, 2009, from Academic Search Premier database.
  16. ^ Lee, T. H., Gerhart, B., Weller, I., & Trevor, C. O. (2008). Understanding voluntary turnover: Path-specific job satisfaction effects and the importance of unsolicited job offers. Academy of Management Journal, 51(4), 651-671.

Further reading[edit]