Causes of Employee Turnover
Superior University
MODULE:
BUSINESS RESEARCH METHOD
INDIVIDUAL ASSIGNMENT:
PROPOSAL WRITING
COURSE INSTRUCTOR:
Miss TEHIMINA AKBAR
SUBMITTED BY:
11321
PROGRAM:
M.com 2-A
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Causes of Employee Turnover
RESEARCH PROPOSAL
ON
CAUSES OF EMPLOYEE TURNOVER
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Causes of Employee Turnover
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ABSTRACT
This proposal is aimed at conducting a study to investigate the causes of employee
turnover. Proposed study will use different research articles to develop a model
which shows that employee satisfaction, employee motivation and employee
involvement has an impact on employee turnover.
Introduction to
Proposed Research Title
CAUSES OF EMPLOYEE TURNOVER:
Background of Study
Employee turnover is the number of permanent employees leaving the company within the reported
period versus the number of actual active permanent employees on the last day of the previous reported
period.
Five reasons due to which employees leave organizations:
1. The most common reason why employees leave a certain organization is that they see better
opportunity elsewhere. Man has a growing desire to own more things and better pay can give them this.
Apart from that, they are compelled to look for better pay because of financial needs.
2. Another reason could be that the employees are not happy with the organization. There are cases
when employees leave the company even if they offer competitive salaries. This is because of the
organization itself. The employee does not approve of the management style and they are unhappy with
the culture of the organization. These factors can cause employees to say goodbye to the organization.
3. There are also cases when the employees leave because of their fellow employees or his superiors.
Clashes of personalities are common in the workplace. When an employee can no longer stand the
tension in the workplace, he may opt to leave the organization. It does not matter if he finally got his
dream job or receiving a generous paycheck. If he no longer has peace of mind, he will look for another
job.
4. It is man's nature to seek for growth. If he feels that there is no room for him to grow in a certain
organization, he will look for a place where he can grow further. However, this is not a factor for
everyone. There are those who are satisfied to do the same thing even after ten years.
5. The condition of the organization could also be a factor. If it is unstable, the employees will surely
Causes of Employee Turnover
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look for a more stable organization. They would not want to stay long in an organization that could close
any time1.
MODEL
TOPIC
Dependent Variable
Employee Turnover
VARIABLES
Independent Variable
Employee Satisfaction
Employee Motivation
Employee Involvement
EXPLANATION OF MODEL
Employee Turnover (Dependent Variable):
Employee turnover is the difference in the rate of employees leaving a company and new employees
filling up their positions. While for building a model employee turnover is specified as dependent
variable.
Employee Satisfaction (Independent Variable):
Employee satisfaction describes how satisfied an individual is with his or her job. According to my
perspective happier people are more satisfied with their jobs. And is used as independent variable for
research proposal.
Employee Motivation (Independent Variable):
1
http://www.articledashboard.com/Article/Five-Common-Causes-of-Employee-Turnover/976138
researched on 01.06.11 at 7:45 PM.
Causes of Employee Turnover
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Motivation refers to the beginning, direction, intensity and determination of human behavior. And
treated as independent variable for employee turnover.
Employee Involvement (Independent Variable):
Employee involvement means how much employees are showing their interest towards organization.
Job involvement is defined as the extent to which the individual identifies psychologically with his/her
job (Blau, 1985b) and is used as independent variable in this proposed study.
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LITERATURE REVIEW
To understand the nature of employee turnover it is necessary to first define the terminology. While
there are many definitions of employee turnover for the purpose of this paper turnover is defined as “the
movement of workers 1 in and out of employment with respect to a given company” (Nature). This
movement is usually considered voluntary however involuntary separations are also of concern, but will
not be the focus of this research.
According to the article “The Nature of Employee Turnover” there is four distinct categories of
turnover that a company must consider:
• Voluntary separations: Termination of the employment relationship initiated by the employee.
• Layoffs: Suspensions from payroll that are initiated by the employer due to an economic slow down.
• Discharges: Permanent termination of employment for disciplinary reasons.
• Other: Retirement, death, and permanent disability2.
When calculating a company’s turnover rate it should first be determined what employee separations
will be included in the calculation. Many times unavoidable separations, or separations that the company
could not control, will not be included in the rate. Unavoidable separations are very different from
voluntary separations in which the company does play a role in retaining the employee. Examples of
unavoidable separations include: retirement, death, permanent disability, or a spouse changing jobs to a
different community3. Since employee turnover generally focuses on the motivation of employees to
maintain the employment relationship, these unavoidable terminations are not always factored into the
employee turnover rate and will be excluded for this study.
Employee turnover is a concern for any organization due to the major impact it has on the bottom line.
However, turnover does not always bring on negative consequences to the organization; there are
positive aspects of turnover for both the organization and the exiting employee. Whether employee
turnover impacts the organization in either a positive or negative way depends on the type of turnover
that is experienced, either functional or dysfunctional. Functional turnover occurs when poor performers
leave and good performers stay. This instance often occurs when the organization terminates the
employment relationship. When good performer’s leave and poor performers stay, the organization
experiences dysfunctional turnover. When looking to reduce turnover, a company focuses on
dysfunctional turnover due to its negative impact on the organization. The most pressing and often
overlooked impact of turnover is the loss of productivity experienced immediately after the loss of an
employee. Service firms recognize that delivery of services and customer loyalty decline when
employees leave, and that overall firm productivity decreases significantly due to the lack of manpower
to accomplish the constant or increasing workload. Employee turnover has a large impact on the
organization not only in the form of direct monetary costs, but also in lost productivity. It is for these
2
3
The Nature of Employee Turnover, 2002. Article. CCH-EXP, HRM- Personnel. 26 Oct. 2002 _http://80-health.cch.com_.
Griffeth H. Employee Turnover. Cincinnati: South-Western College; 1995.
Causes of Employee Turnover
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reasons that it is essential for organizations to understand the causes of turnover and work to correct
them4.
Employee turnover is a much studied phenomenon (Shaw, Delery, Jenkins and Gupta 1998:511).
However, there is no universally accepted account for why people choose to leave organizations (Lee
and Mitchell 1994), even though it is primarily instances where the employee makes the decision
Voluntary turnover is of interest because in most cases, this represents the bulk of turnover within an
organization. Such instances of turnover also represent a significant cost, both in terms of direct costs
(replacement, recruitment and selection, temporary staff, management time) and in terms of indirect
costs (morale, pressure on remaining staff, costs of learning, product/service quality, organizational
memory) and the loss of social capital (Dess and Shaw 2001). Although there is currently no accepted
framework for understanding the turnover process as a whole, a wide range of factors have been found
useful when it comes to interpreting employee turnover, and these have been employed to model
turnover in a range of different organizational and occupational settings. These include: job satisfaction
(Hom and Kinicki 2001); labor market variables (Kirschenbaum and Mano-Negrin 1999); various forms
of commitment (see Meyer 2001 for a review); equity (Aquino, Griffeth, Allen and Hom 1997);
psychological contract (Morrison and Robinson 1997) and many others (see Morrell, Loan- Clarke and
Wilkinson 2001 for a review).
Further on they revealed that turnover process based on theory of decision making. The underlying
premise of the model is that people leave organizations in different ways, and it outlines five pathways
describing various decision processes any one of which a leaver may go through before finally quitting.
If turnover has increased as a result of the implementation of change, and this turnover is mainly
unavoidable (i.e. the organization could not influence it because the change has happened), these leavers
represent the well-known eggs in the omelets.
Second, if turnover has increased as a result of the implementation of change, and the levels of
avoidable and unavoidable turnover are approximately equal, then it will be beneficial to look more
closely at the phenomenon and uncover those areas where involvement will result in lower levels of
avoidable turnover. This represents a mid-point, where the internal impact of change is difficult to
understand, but signaling significant room for improvement.
Third, if turnover has increased as a result of the implementation of change and it is
for the most part avoidable, then this implies that the process is being mismanaged, and that an
Organization is passing up on the chance.
However it was found strong support that shocks play an important part in some people’s decisions to
leave voluntarily. According to me there is little research specifically exploring the link between
organizational change and turnover and suggest that this is a gap in the literature. No-one would
seriously challenge the idea that mismanaging organizational change can result in people choosing to
leave. Indeed, the above article focuses on impact of organization change on employee turnover5.
Disappointed employees may choose to withdraw from the organization in at least four ways, viz.,
psychological withdrawal, lateness, absenteeism, and turnover. There are reasons for assuming that these
different forms of withdrawal may be interrelated either negatively or positively. This study attempts
to determine the direction and strength of the relationships among the various forms of withdrawal. Most
of the previous research in this area has focused only on the relationship between absenteeism and
turnover (e.g., Kerr, Koppelmeir & Sullivan, 1951; Hill & Trist, 1955; Argyle, Gardner, & Cioffi, 1958).
Lyons' (1972) review concluded that the relationship between these two forms of withdrawal was
positive and that there was unsure support for the notion that there is a progression of withdrawal,
4
5
“Employee turnover: a neural network solution3” by Randall S. Sextona,∗, Shannon McMurtreyb, Joanna O.
Michalopoulosc,
Angela M. Smithc
Kevin M. Morrell, John Loan-Clarke and Adrian J. Wilkinson “Organizational Change and Employee Turnover”
Causes of Employee Turnover
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absenteeism being the lesser, and turnover the more serious, form. The present study extends the
previous research in two ways: (1) The definition of withdrawal is expanded to include a wider array of
variables. A fruitful line of future research on this topic would focus on the nature of these relationships
over time. Obviously, turnover is the final withdrawal response, but it would be beneficial to examine
whether the other forms of withdrawal follow a sequential pattern6.
However we have conducted the proposed research to highlight the causes of employee turnover. Which
are employee satisfaction, employee motivation and employee involvement which impacts employee
turnover. Employee withdrawal from an organization can take many behavioral forms, including
turnover, absenteeism, and lateness. But according to occupational variables employee satisfaction,
employee motivation and employee involvement are included in this study.
However study7 conducted determinants of excess labour turnover (churning) in the Luxembourg labour
market using a rich employer-employee matched data set. In this study, we have investigated the
dynamics of the Luxembourg labour market over the last decade. Several findings are worth pointing
out. In line with a small but growing literature for other countries and regions, we find that churning
rates are both considerable and persistent. While churning rates vary across sectors, some of these
differences can be directly explained by worker- and establishment-specific features. Furthermore, the
dynamics of churning are very similar between commuting and non-commuting workers. In general, just
as with previous studies, we finds that the reallocation of workers across establishments in excess of
employment changes is a natural feature of labour markets and not merely just the result of unfortunate
mismatches.
However another study8 identify key variables that affect warehouse employee turnover. These
variables include: occupational variables (e.g. skills, years of experiences); organizational variables
(e.g. firm size, industry); individual variables (e.g. pay scale, job security). This study also develops a
conceptual model for linking the aforementioned variables reflecting job alternatives and job
satisfaction to warehouse employee turnover.
The above study conducted experimental analysis to determine which variables significantly influence
warehouse employee turnover. The empirical analysis is based on data obtained from the questionnaire
survey intended for various industries such as manufacturing, third-party logistics providers,
wholesalers, and retailers which get actively involved in warehousing operations. The survey data was
analyzed using a series of regression analyses to identify variables significantly influencing warehouse
employee turnover. However it was found that Job security turned out to be one of the most important
factors for recruiting and retaining warehouse employees, whereas monetary incentives have little or
nothing to do with warehouse employee turnover. The larger the warehouse, the higher the employee
turnover. That is to say, a lack of personal attention paid to warehouse employees may have the adverse
impact on their retention. More experienced warehouse workers are less liable to give up on their current
6
ORGANIZATIONAL BEHAVIOR AND HUMAN PERFORMANCE 21, 73-79 (1978)
A Note on the Structure of Employee Withdrawal, TERRY A. BEEHR, Illinois State University and NINA GUPTA,
The University of Michigan
7
“The determinants of excess worker turnover in Luxembourg” by Luisito Bertinelli, Olivier Cardi, Teoman Pamukc¸ Eric
Strobl, Robert Thornton. Received 10 April 2007, Revised 27 June 2008, Accepted 13 July 2008 International Journal of
Manpower
8
“Examining sources of warehouse employee turnover” by Hokey Min
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jobs than less experienced warehouse workers, probably because the former is more familiar to
warehouse working environments.
Employee turnover can often be conceptualized in terms of demographic (e.g. gender, age, educational
level), occupational (e.g. skill level, experience, tenure, status), organizational (e.g. firm size, industry,
job contents, working environments), and individual (e.g. pay scale, reward, advancement opportunity,
job security, job involvement). As such, a majority of the past literature about employee turnover
attempted to examine the influence of certain demographic, occupational, organizational and individual
variables on turnover rates (see, e.g. Mobley et al., 1979 and Reichers, 1985 for excellent reviews of
turnover literature). The turnover literature in the logistics field (especially studies dealing with truck
driver turnover) seems no different from the pattern established in this prior research. For instance,
Beilock and Capelle (1990) found that demographic variables such as a driver’s age and educational
level are significantly associated with driver turnover. Through the experimental study of irregular route
truck drivers, Richard et al. (1995) reported that a dispatcher’s friendliness, fairness, and attitude toward
drivers often affected driver turnover. Similarly, Keller and Ozment (1999a, b) and Keller (2002)
discovered a significant correlation between a dispatcher’s treatment of a driver and driver turnover.
But the current study did not fully explore the impact of traditions on warehouse employee turnover,
despite the growing diversity of warehousing workforce. Also, the current study was primarily based on
the feedback provided by warehouse managers. Future research may incorporate the opinions of
warehouse workers into the turnover model.
Another study9 states that increasing turnover of frontline staff in call centre’s is harmful to the delivery
of quality service to customers. And aims to present the context for the rapid growth of the business
process outsourcing (BPO) sector in India, and to address a critical issue faced by call centre
organizations in this sector – the high employee turnover. Following a triangulation approach, two
separate experimental investigations are conducted to examine various aspects of high labor turnover
rates in the call centre sector in India. Study one examines the research issue via 51 in-depth interviews
in as many units. Study two reports results from a questionnaire survey with 204 frontline agents across
11 call centre’s regarding employee turnover. This research reveals a range of reasons – from boring
work, stressful work environment, adverse working conditions, lack of career development
opportunities; to better job opportunities elsewhere, which emerge as the key causes of increasing wear
and tear rates in the Indian call centre industry. But the gap was that there are several issues that need to
be handled carefully by management of call centres in India to overcome the problem of increasing
employee turnover, and that this also demands support from the Indian government.
This was all about the findings of different researchers on different fields. But this study focuses on
causes of employee turnover arises due to employee satisfaction, employee motivation and employee
involvement. Which are further discussed one by one.
“Insights into the Indian call centre industry:can internal marketing help tackle high employee turnover? By Pawan S.
Budhwar, Arup Varma, Neeru Malhotra, Avinandan Mukherjee.
9
Causes of Employee Turnover
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The objective of the proposed study wants to shows that there is a relationship/impact between
employee satisfaction, employee motivation and employee involvement and is directly or indirectly
related with employee turnover. As employee satisfaction, employee motivation and employee
involvement are not combinely focused. So we have conducted a search for those who want to know
their combined relationship with turnover. However there are so many causes for turnover like salary,
Job performance, personal growth, reward, compensation but this study focuses three causes of
employee turnover employee satisfaction, employee motivation and employee involvement
In this study we will focus the relationship between employee satisfactions specified as independent
variable for employee turnover. However the previous research10 conducted shows the effects of
employee satisfaction and turnover on customer satisfaction in turn, on revenue and cost measures. A
background analysis of this fact provides further insights into the sensitivity of urban or rural location of
a store. Many firms have recently been emphasizing the use of nonfinancial measures such as customer
satisfaction, product quality and employee satisfaction, as an integral part of their management control
systems (Ittner, Larcker and Rajan 1997; Banker, Potter and Srinivasan 2000). The service-profit chain
concept examines that there are direct relationships between profitability, customer loyalty, and
employee satisfaction, loyalty, and productivity (Heskett et al. 1994). Several researchers have strongly
advocated that a happy employee makes a happy customer11. A study of the ‘100 Best Companies to
Work For’ finds that the companies with the most satisfied employees had an above-average annual
return to shareholders (Fortune December 1,1998). A Gallup study finds positive correlation between
employee satisfaction and financial performance (Economist August 8, 1998). A survey of hospital
employees finds significant correlations between nursing-staff satisfaction scores and patient loyalty
(Atkins, Marshall and Javalgi 1996). Another correlation study using data collected for 298 public
schools finds support for the link between satisfaction levels of teachers and school performance
(Ostroff 1992). To our knowledge, however, there has been no academic study that experimentally
documents systematic and background links between employee satisfactions. But in this study we are
focusing on employee satisfaction and turnover. It was found that a satisfied employee is more likely to
be motivated to serve the customer better.
Other studies of employee turnover have found that overall job satisfaction is negatively related to
employee turnover (Cotton and Tuttle 1986). Where as it was found that this research has broadened the
relationship of employee satisfaction and turnover but they lacked on one side the have disseminated
data without its written consent. Sowe have pointed a gap that employees are very much conscious of
their ethical consideration for their security so they should notice this factor too in their study.
Another research12 conducted to justify our second employee motivation (independent variable) has
impact on employee turnover (dependent variable). The purpose of the present study was to examine
their
10
11
November 10, 2000 “A CONTEXTUAL STUDY OF LINKS BETWEEN EMPLOYEE SATISFACTION, EMPLOYEE
TURNOVER, CUSTOMER SATISFACTION AND FINANCIAL PERFORMANCE” Rajiv D. Banker, Constantine
Konstans, Raj Mashruwala.
A recent report on recipients of Arthur Andersen’s Best Practice Award 2000 states: “If a company doesn’t
have motivated employees, service will suffer, customers won’t be happy. If customers aren’t happy, profits will be affected.
If profits are adversely affected, shareholders won’t be happy. They are all part of a
continuous cycle.”
12
June 2008”Exploring the relative and combined influence of mastery-approach goals and work intrinsic motivation on
employee turnover intention”, Anders Dysvik and Ba°rd Kuvaas Department of Leadership and Organizational
Management,
Norwegian School of Management, Oslo, Norway
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relative and combined influence of approach goals and work essential motivation on turnover intention.
Researchers have recently directed their attention towards employee work motivation as predictors for
employee turnover (Richer et al., 2002), as motivational sources have been found to influence employee
turnover beyond job satisfaction and organizational commitment (e.g. Mitchell et al., 2001). With
particular interest for the present study, previous studies have found employees’ goal orientation (13)
and essential motivation to predict employee turnover and turnover intention, respectively. But is this
study we are focusing impact of employee motivation on turnover.
However the relationship between goals and turnover intention was only positive for employees low in
central motivation. The results suggest that central motivation holds a salient role for predicting turnover
intention. For managers and organizations, then, emphasis it should be placed on
facilitating work environments supportive of central motivation in order to maintain employees’
turnover intention at low levels. Indeed the gap was found that the two most important limitations are
the cross-sectional nature of the study and the reliance on self-reported questionnaire data.
Consequently, experimental and/or longitudinal studies are needed to examine causality issues.
Now we will discuss our next variable (Employee Involvement) and see that what previous researchers
have found. The study14 focus conceptualization of how job involvement and organizational
commitment could interact to affect turnover and absenteeism. Less empirical research exists about the
relationship of job involvement with turnover and absenteeism. The meta analysis by Boal and Cidambi
(1 984) suggests that job involvement is a better predictor of frequency of absence than duration. It is
more likely that a small number of absences of long duration actually are due to medical reasons. on the
other hand, frequent absences of short duration may reflect attitudinal problems. For employees with a
high level of job involvement, the job is important to one's self-image (Kanungo, 1982). These
individuals identify with and care about their jobs. Employees with a high level of organizational
commitment feel positively about the organizations they work for: They identify with a particular
organization and wish to maintain membership in it (Porter, Crampon, & Smith, 1976). Workers with
high levels of both job involvement and organizational commitment should be the most motivated
because they are attracted by both the job and the organization. As such, job involvement and
organizational commitment may function as interactive "orientations."For example, the job itself can
help an individual meet his/her inherent growth needs (Kanungo, 1982), while the organization can help
an individual meet his/her social and other extrinsic reward needs (Angle & Perry, 1983; Sheldon,
1971). Also, based on past experimental research, it seems that job involvement and organizational
commitment complement one another as predictors of turnover and absenteeism. A literature review
revealed several different conceptualizations of job involvement, including job involvement defined as:
(a)the degree of importance of one's job to one's self-image (Lodahl & Kejner, 1965; Lawler & Hall,
1970); (b) the degree to which an individual is actively participating in his/her job (Allport, 1943; Bass,
1965); and (c) the degree to which an individual's self-esteem or self-worth is affected by hasher
perceived performance level (French & Kahn, 1962; Gurin, Veroff, & Feld, 1960). This study describes
how job involvement and organizational commitment can enhance our understanding of task-related
effort as well as withdrawal behaviors.
13
Goal orientation is also described in the literature as achievement goals. For consistency purposes, we use the description
goal orientation in this article.
14
“Conceptualizing How Job Involvement and Organizational Commitment Affect Turnover and Absenteeism”
GARY 3. BLAU, Temple University, KIMBERLY B. BOAL University of Nevada, Reno from Academy of
Managernent Review, 1987 Vol 12, No 2. 288300
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experimental research is needed to test the competence of this model. However, to do so, researchers
will need to:
(a) Utilize such techniques as moderated regression to test the significance.
(b) Attempt to review the reasons for the absenteeism/turnover.
However it was found by previous research study that employee satisfaction, employee motivation,
employee involvement are directly or indirectly related with employee turnover.
Means high employee satisfaction employee motivation, employee involvement will the retention of
turnover. Because lacking of these factors affect the organization and over all profit of any sector.
So it the responsibility of managers to focus on these factors and try to retain their employees because it
was well said that employee doesn’t leave organizations they leave managers and move on.
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SUMMARY
Nowadays, it is becoming a major problem among most of the companies, especially in low paying jobs.
There are many aspects that play a significant role in the employee turnover rate of a particular
company. Such aspects can stem from both the company as well as the employees. The employers
generally give more importance to the employee turnover rate, as it is a very expensive aspect of the
business.
When employees leave the company, the employer has to incur a considerable amount of direct and
indirect expense. These costs normally include advertising expenses, resource management expenses,
loss of time and productivity, work inequality, and employee training and development expenses for
new joiners. The company may quarterly calculate employee turnover rates to find out the factors
causing the turnover. If the company determines the most common causes of employee turnover, it
would certainly be able to take the necessary steps for recruiting and retaining well-qualified personnel.
However this proposed study shows that employee satisfaction, employee motivation and employee
involvement is directly or indirectly related with employee turnover. Because three of them are not
much combinely focused in this study. However the above discussed research shows the relationship of
Employee involvement with Turnover, Job involvement and turnover, Job satisfaction and motivation
with turnover, Organizational change and turnover. But employee satisfaction, employee motivation and
employee involvement are not combinely focused. So we have conducted a search for those who want to
know their combined relationship with turnover. However there are so many causes for turnover like
salary, Job performance, personal growth, reward, compensation but this study focuses three causes of
employee turnover employee satisfaction, employee motivation and employee involvement