The Impact of Employee Turnover on an Organization - Research Paper Example

The main purpose of the research study is to find out the impact of employee turnover on an organization. In addition to this, this research paper will use strategic human resource management practices to solve the issue. Facts and figures have been analyzed in this research work in the context of the organizations’ employee turnover issue. Employee turnover rate of the industries of various segments like garments, IT, insurance have been analyzed. Maslow’s Hierarchy of needs motivational theory has been discussed to motivate the employees and reduce employee turnover. Finally the research will summarize all the important points in the conclusion part. Introduction Employee turnover has become one of the real world problems that an organization must deal with in order to be a successful company. This research paper has focused on the employee turnover issue that company faces in today’s corporate environment. Employee turnover has been the real problems for an organization. High turnover of employee in an organization means percentage of losing employees each year is higher compared with percentage of number of people employed and hired. Higher turnover of a company indicates that company is not doing right job of selecting employees or failing to provide better work environment for employees. This affects the financial performance of an organization and also can also lead to low worker productivity (Hwang 7). The rate of employee turnover is even higher in the highly developed industrial nations. The level of performance of the employee and their ability depends upon the internal environment of an organization. One of main reason that can effectively affect the performance of an organization is due to employee turnover. The reason behind of selecting this research topic is because employee turnover has been one of the main issue that organization faces. Most of the workers leave their jobs and find better one because they are not satisfied (Becker 9). There may be many factors like job satisfaction, salary, work environment and work load. The research study scrutinized the employee turnover problem and find out to reduce the problem. Analysis Employee turnover is caused mainly due to the series of incidents or by sole that can lead to employee leaving companies by wish of the company or by choice. It can also be described as the rate at which employer is replaced by employees. As a result this can create several detrimental impacts on an organization. Study done in the year 207 to find out the percentage of managers and professional left their job due to unfairness. 9.5% of the managers and professionals left their job due to unfairness. 4.6% of Caucasian women and 3.0% of Caucasian men left their because of unfairness. Experience workers of certain companies are more aware of the goals and policies of the company. But when experience managers and workers leave their job it becomes difficult for companies. New workers will require time and training to be aware of company policies and goals. Companies with high turnover have more inexperience workers. The average employee turnover rate is 8.7% in today’s competitive business environment. High turnover can become expensive for certain companies to manage. An employee leaving a job can bring costs such as severance pay. Due to this, the whole process of recruitment, selection and hiring have to be done once again. Turnover costs are very high and it becomes difficulty for certain companies as it affects the financial performance of the organization. Direct cost for turnover included recruitment, selection and training cost of new employee. Both time and expenses are wasted during this process. Indirect cost for turnover includes the overtime expenses and increase in workload. The estimation cost varies from company to company. Some organization may costs few hundred dollars but some organizations estimation costs can raise up to four times the annual salary of employees. In 2011, it has been estimated that around 17.9% of total workforce leaves their jobs. High percentage of workforce leaves their jobs are often due to workplace policies and salary. The bureau of Labor statistics data reveals that around 37% of employee’s left their jobs are from food-service industries. In the year 2011, it has been revealed that nearly twice as many employees left their jobs. Employees of these companies tend to get low wages and often don’t have any workplace policies and benefits. Eventually these employees leave their jobs. Total cost of turnover is an important economic problem for companies. This is mainly due to the fact that one-fifth of workers quits their jobs every year and it addition to this one-sixth of employees are fired from the company. For companies it becomes problematic because the costs required to replace the employees are much higher. In long term basis, if a company saves money by firing an employee because of low productivity then company also address the cost required to replace the workers. Employee quitting the jobs can cost companies in money, time and other necessary resources. Research study suggests that the cost of replacing with new employees can be as high as 50%-60% of the annual salary of an employee. It is also suggested that total cost expensed by company associated with turnover can be as high as 90%-200% of the total annual salary of employee. When retention of employee in a company is higher than normal rate then customer productivity, satisfaction and profitability will be automatically higher than normal. It has been surveyed from renowned global companies that has employee turnover rate lower than 3%. In 2012, Intel has 2% employee turnover rate (Cook 16). Mercedes-Benz USA turnover rate is 3% and SAS Institute turnover rate is 2%. The average employee turnover rate in UK is 15% a year. But percentage varies depending upon the employees working on different firms and industries. The highest employee turnover rate has been found in private sector companies in catering, retailing and call centers. It is clear from all of these statistics that it is very important for an organization to develop a retention plan which can help to retain employees and lower employee turnover. Discussion The impact of employee turnover has been consideredas most seemingly and costly intractable human resource challenges faced by an organization. One of the most common effects on employee turnover is financial loss. Companies that are losing poor performing employee do not create any negative impact on financial position. Strategies that can be implemented by organization to reduce employee turnover are discussed below: The best strategic human resource management practice that can be applied to solve the issue of employee turnover is the consideration of Maslow’s Hierarchy of needs motivational theory. Maslow’s Hieracrchy of Needs Theory This theory helps organization to motivate their employees to achieve company objectives. Company that satisfies Maslow’s Hierarchy of needs motivational theory can feature highly on employee retention and satisfaction. Employee motivation is very important factor that is necessary achieving goals. Training, education, experience and compensation are not enough for an employee to be at proper level. Motivation is very important factor for an employee to be at proper level. Low motivation of employees can gradually lead to employee turnover. This theory can help to motivate the employees that can reduce employee turnover. Physiological need is the first level of Maslow’s theory. This level is to focus on physiological and health care need. Organization should provide additional health care options to employees. Health care should be at the work place so that employees can get health care at their work place (Guest 3). Costs that are related with health care must be lowered so that employee can feel that company cares for them. The great way of promoting health is by having inexpensive cafeteria for employees. New employees beginning their career in companies are always concerned about the physiological needs like stable income and salary. Safety need is the second level of Maslow’s theory. This level of need consists of property, Employment security and personal safety (Luthans 12). This need can be satisfied by creating a mandatory workforce session and training on what is needed to be done during the time of emergency. Emergency case can be weather related issues, fire hazards, etc. Organization can also include visual warning signs in stairs and elevators during the time of emergency. Work environment must be a safe place for an employee. When these two basic Maslow’s need are met, then employee wants belonging need. Belonging and love level of hierarchy of needs contains of belonging to family, groups and friends. Building a friendly environment in an organization that helps to build a good team spirit among the groups of employees (Kervin 14). This can help to satisfy the need of an employee. Creating social outlets for employees can help employees to interact with team sports and builders. Affinity groups are great for an organization that enables to bring people together in a social setting. Main point is that employee is eager to work in the organization when they are accepted by other employees and can interact with each other. Effective interpersonal relation is vital for creating a successful environment in workplace. When these three needs are satisfied then employee wants needs of esteem and self-actualization to be satisfied. These two levels are highest level of needs. Promote continued education for employees (Fox 5). After promoting these, employees should be provided tuition reimbursement programs. The esteem need of an employee can be meet by allowing employees to take part on operational matters and also allowing them to give their decisions on the matter. This is a powerful method that can help employees to meet their esteem. Popular methods that can be implemented to make work more rewarding for employees are job enrichment, cross training and special assignments. Self-actualization level of need describes the individual development and growth of an employee. To meet this level, employee needs to be skillful and wants more challenging job and also freedom from supervision. This is the highest level of Maslow where managers of an organization focus to promote and environment that can help employee to meet their own self-actualization need. Managers must continuously change the work environment so that it can keep workforce motivated and can help to reduce the employee turnover. This strategy can help to reduce the employee turnover. As it can help the employees to get motived on their work and they can realize that company are doing their best to make them feel more comfortable (Rogers 6). Promoting job satisfaction and creating strong company loyalty can help to retain employees. There should be an employee attitude surveys that can provide the information about employee’s feeling about the job. Human resource strategic practices affect the commitment of workers towards the organization and can also affect the employee turnover in many ways. Strategies are broken in three parts which are empowerment, motivation and skill- enhancing. Empowerment and motivational practices are applied by increasing employee commitment towards the job and also decreasing tendency of workers to leave the organization. Skill-enhancing practices is applied by selection and hiring processes. Hiring and selection process are done for external candidates and also providing training for workers. This practice can signals to the employees that company value their workers. And it can automatically increase employee’s motivation and commitment towards the organization. This practice can help to increase the employee turnover. Providing positive feedback on employee performance can help to propel success in and individual. Performance reviews can help to communicate with the employees regarding their contribution to the company. Proper performance review can help employee and their managers to look at the bigger picture of the employee performance (Thomas 18). Performance may be below expectations but this review can help employees to look at the expectation of the company that is needed to be fulfilled. Performance review can help to motivate the underperforming employees to improve. As employees feels that they are valued in the origination then it can eventually reduce the employee turnover rate (Turnley 8). These tools are strategies can help organization to address the cause of the turnover and reduce it. Employees needed to be feel values in the organization and appreciated and should be given balance work-life options so that they don’t leave the organization. Conclusion Employee turnover has become one of the important real world situations that are faced by an organization. Hiring educated and top performing employees requires a skill but keeping enthusiastic and top performing employees is an art. Increase in employee turnover can lead to financial losses. So it requires proper planning and carefully implementing it. It is clear from the research study that proper strategies are required to reduce the employee turnover. It is impossible to remove the employee turnover but company can take certain actions during turnover to reduce it. Every employee should feel that they are valued and appreciated in an organization. Employee should be given regular feedback on their performance and provided growth opportunities. Finally it can be concluded that to maintain healthy work environment, regular system to capture and consistent assessment of workplace environment must be in place. Works Cited Becker, Brendon. “The Impact of Human Resource Management on Organizational Performance”. Academy of Management Journal 81.2 (2003): 9. Print. Cook, David. “Service Typologies”. International Journal of Management 29.1 (2010): 16. Print. Fox, Samuel. “A Model of Work Frustration”. Journal of Organizational Behavior 8.1 (2001): 5. Print. Guest, Daniel. “Human Resource management and Performance” Journal of Human Resource Management 65. 2 (2006): 3. Print. Hwang, Stewart. “Relationships among Internal Marketing, Employee Job Satisfaction and International Hotel Performance: An Empirical Study”. International Journal of Management 22.2 (2001): 7. Print. Kervin, Jack. “Explaining Nursing Turnover Intent”. Journal of Organizational Behavior 56.1 (2008): 14. Print. Luthans, Frank. “The Need for and Meaning of Positive Organizational Behavior”. Journal of Organizational Behaviour 21.1 (2002): 12. Print. Rogers, Edward. “Measuring organizational performance in strategic human resource management: Problems, prospects and performance information markets”. Human Resource Management Review 41.2 (2002): 6. Print. Thomas, David. “Coordinated supply chain Management”. European Journal of Operational Management 18.1 (2009): 18. Print. Turnley, William. “Re-Examining the Effects of Psychological Contract Violations”. Journal of Organizational Behavior 19 .1 (2000): 8. Print. Read More