WHY IT IS DIFFICULT TO RETAIN EMPLOYEES?

Introduction

The most valuable assets of every organization are its workforce; retaining them has become a challenge to organizational management because of varied employee needs.  For instance, providing day-care facility for employees might not be a concern to one employee, it could however, be a serious concern to another.  Also, employee development and reward system might be a concern to one employee, however; this might not also be a concern to another employee.  It has been difficult for management to decide what makes employees happy.  The difficulty involved in understanding employees needs and providing those needs are some of the reasons why it’s difficult to retain and prevent turnovers.  There are other reasons why it’s difficult for organizations to retain employees.  These reasons include: First, the direction of the labor market in reference to a particular profession.  For instance, if Accountants are in short supply and there is high demand for Accountants, therefore, Accountants will have a strong bargaining power in the market that will enable them to move around for higher salaries and benefits.  Globalization and information technology have also contributed to employee turnover.  Organizations have looked for other production processes to cut production costs and remain competitive in the global market.  Replacing assembly lines with automation and precision equipment has contributed to high turnover in some occupations.

Problem Statement

Employee turnover is a relationship between the number of employees a company must replace in a given time period to the average number of total employees.  Today, organizations are finding it difficult to retain employees as a result of the many baby boomers retiring from the workforce.  Employee turnover has become a serious management problem because of its financial and morale impact on organizations scarce resources.  There is a new pattern in employment and turnover in today’s corporate environment.  People change several jobs within a year rather than choose to grow in one; and this has also been a problem for corporate management.  Why is this a challenge to corporate management? 

First, employees as well as potential employees are looking for a balance between family life and work and when it comes to employment, a lot of decisions made are habitual and personal.  “From this, it follows that the majority of employment decisions made are better described as habitual, impulsive or based on personal or family as well as intuitive feel, rather than probabilistic.” (Morrell, Clarke & Wilkson 2004, p. 337). Corporate management has understood the trade off in allowing high performance employees to leave; to address this problem, some corporate management has started offering work at home options to high performance employees to lure them to stay.  In addition, employees use the person to organization fit principle to determine if they have a future with an organization; this as well poses a problem to management.  One of the patterns in today’s employment decision is that, employees focus more keenly on the notion of person organization fit, this set forth the concept that certain types of organizations have cultures that are more or less attractive to certain types of individuals and employees. (Delcampo 2006, p. 466).

Second, employees could leave an organization involuntarily.  Involuntary turnover arises when employees move across organizational entities.  With this form of turnover, the employee experiences minimal impact due to right sizing or downsizing within the organization.  Also, this form of turnover allows individual skills to be moved from one entity of an organization to another.

Also, financial difficulty and organizational changes has been the historical initiator of involuntary as well as voluntary turnover. Organizations had to bear the financial load in training, recruiting, placing, and hiring employees as others leave voluntarily or involuntarily.  Management may be compelled to consolidate or eliminate a department within an organization due to financial difficulty to cut costs and stay competitive in business.  Two decades ago, employers were hiring employees out of desperation, and overwhelmed them with work and responsibility.  Most of those hired in this manner left within a short period of time.  Today’s technology and job market has changed the trend.  How does technology and management training change the hiring trend today?

First, today employers have skill testing technology that has been used to reduce and improve employee satisfaction and motivation.  The technology testing has helped management to reduce turnover; because it enables management to determine if a candidate is best fit for a position.  This has helped today’s management to determine low and high performing employees.  Organization’s valuable assets are their high performing employees; and when they start leaving, it is an indication that the organization is in trouble.  It appears that organizational management does not care much when low performing employees leave the organization.  “In other words, the employers have to understand the damages resulting from high performance employees leaving, and the benefits resulting from poor performance employees leaving.” (Dalton & Todor, 1982 as cited in Hong & Chao 2007, p. 216).

Second, advance management training teaches management to compensate employees well.  Compensating employees well may motivate them to stay with the organization longer.  That is why there is a positive relationship between employee performance, motivation, and turnover.  Employees may stay longer with organizations if they are well paid and motivated.  Management and leadership motivate and reward high performance employees to prevent them from leaving. Organizational management and leadership pay particular attention to high performance employees and the attention given them has made them less likely to leave.  The negative relationship between performance and turnover appears to be the major conclusive finding, indicating that high performance employees would be less likely to leave than lower performance ones if they are well compensated and motivated. (Hong & Chao, 2007 p. 217).  Losing high performance employees means higher costs of human resources in a form of rehiring, training, and placement.  Management action may cause some low performing employees to leave an organization; because such employees are viewed as liabilities and may not be contributing to the accomplishment of the organizational mission and vision.  Morrell, et al. (2004) has conducted the most relevant theoretical and quantitative research in the area of turnover today. 

Most Relevant Theoretical Research Conducted in this area

Research shows that 25 percent of voluntary and involuntary turnovers are predominant within the low performance employees.  Further research indicates that employees may leave an organization because of: first, labor market situation and second, structural complexity.  This researcher will examine the factors affecting both the market situation and the structural complexity and how employees determine which factor influences them most in making their quitting decisions.  Morrell, et al. has analyzed and provided recommendations to senior management of the National Health Service (NHS) of England and Wales as to the factors causing the high rate of nurse turnover in NHS’s major institutions. What triggers the decision to quit and the justification of quitting were studied.  The methodology used in the research was both quantitative and qualitative. 

A sample of 352 nurse quitters in the NHS system was analyzed; and it was concluded that many NHS system nurses left their position because of alternative opportunities elsewhere as well as a strong labor market for nurses within the system.  In addition to the alternative bargaining power and the strong labor market for nurses, the studies also indicate that most nurses left their position because of job stress and dissatisfaction. “For many nurses, the decision to leave will not just be a cause of anxiety and uncertainty; it will also be a consequence of stress and dissatisfaction” (Kemery, Dedeian, Mossholder, and Touliatos 1985 as cited in Morrell, et al. 2004 p.335).  The following was the relevant and theoretical as well as the quantitative analysis of the research.

            First, NHS is made up of 200 Trusts; and each trust operates as a separate organization.  Nurses within the NHS system have the flexibility to move from one trust to another and it is difficult to track and document this mobility.  The structural complexity of the NHS system makes it difficult to document turnovers within the trust because when one nurse leaves one trust for another it is considered intra-NHS mobility which is inaccurate and misleading.  “To simply construe the organization as the NHS loses sight of the vast, costly problem of intra-NHS nursing turnover, because leavers moving from one trust to another would count as remaining within their organization.” (Morrell, et al. 2004 p. 339). 

            Second, most nurses left one trust of the NHS system to another trust because of the strong bargaining power.  Shortage of health professionals had contributed to the stronger bargaining power of nurses within the NHS trust. “The shortage of nurses across the virtually all NHS Trust means there are widespread available alternative jobs and bargaining power for nurses and health professionals.” (Morrell, et al. 2004 p. 338).  When employees have alternative job opportunities available, the tendency to seek other jobs with higher salaries and benefits will be greater.  This will bring about high turnovers across the trust.  Strong labor market and the availability of alternative job opportunities influence turnover. 

Why Employee Turnover is Significant?

            Employee turnover is significant because, it has morale and financial impact on the day to day operation of an organization.  Employee turnover demands management attention because when high performing employees leave, it puts pressure on organizational scarce resources.  Management incurs costs in rehiring, training, placement, and motivating employees.  This poses a significant burden on management to do whatever they can to retain and motivate employees.  Organizational management incurs direct and indirect costs as a result of turnover.  Direct costs include: cost of hiring and training while indirect costs include: costs of process disruption (Thatcher, Stepina, & Boyle 2002).  What other reasons may contribute to turnover? 

            Organizational commitment may determine the level of employee loyalty to the vision and mission of an organization.  The level of employee commitment may determine who leaves and who stays in an organization.  For instance, the higher an employee’s commitment to the values and mission of an organization, the lower the turnover.  An analysis of 16 research studies shows a relationship between organizational commitment and turnover. Employees who are highly committed show a small turnover rate and vice versa.

This research will add to the body of literature studied on employee turnover because; it explores the morale as well as the financial impact of turnover on the existing employees when high performing ones leave; this paper also suggests another area of study that has never been explored  or researched before. 

Control Variables

            Difference in employers’ geographic location has been identified as an important variable that may determine turnover. The closeness of employees to their families and significant others may be a reason to look elsewhere for opportunities or stay with their current employers.  For instance, two families living and working across two time zones may decide to look for opportunities closer to each other.  Research shows that gender and age are another variable that may determine turnover decisions among employees.  Female employees have reportedly shown high turnover rates than their male counterparts. 

Null Hypothesis

This researcher has tested the following five hypotheses to explain the relationship between job dissatisfaction and certain variables to employee turnover: Benefits, Salaries, and so on: The results of this null hypothesis may predict that a particular factor (Job Dissatisfaction) will produce an effect on the researcher’s dependent variable (Turnover).

H1a:  Turnover related to lack of potential to grow

Results

H1a:  Turnovers related to lack of potential to grow (0.361, p<0.001)

H1b:  Turnover related to specific variable, that is, supervision (0.248, p<0.001)

H1c:  Turnover related to work environment (0.280, p<0.001)

H1d:  Turnover related to lack of training (0.255, p<0.001)

H1e:   Turnover related to low morale (0.472, p<0.001)

Statistically meaningful relationships were observed between turnover and employee dissatisfaction.  The statistics shows further that the decision to leave an organization is different for different individuals within an organizations.

Alternative Hypothesis

Alternative hypothesis is the possibility that an observed effect is genuine and the null hypothesis is the rival possibility that it has resulted from random chance.

H1a:  Potential to grow decreases, turnover increases (0.361, p<0.001)

H1b:  Hostile supervision increases, turnover increases (0.248, p<0.001)

H1c:  Unfavorable work environment increase, turnover increases (0.280, p<0.001)

H1d:  Lack of employee training increases, turnover increase (0.255, p<0.001)

H1e:  Employee morale decreases, turnover increases (0.472, p<0.001)

Directional Hypothesis

This is the hypothesis that specifies the direction of the predicted hypothesis, that is to say, whether the predicted relationship will be positive or negative. This is also known as one tailed hypothesis.  In reference to the above hypothesis, there is a direct correlation between job dissatisfaction and employee turnover; as seen in H1a and H1e above.

            In conclusion, this researcher has explored why it is difficult for organizational management to retain their most valuable assets – employees.  Organizational management finds it difficult to retain employees because of family and personal needs; especially with the baby boomers.  Organizational cultures might not be conducive for certain group of employees and therefore the decision to separate from those organizations. Different salary or benefit needs; and different satisfaction levels have caused employee turnover.  Age and gender difference have also been determined to contribute to turnover.  The labor market and the availability of alternative opportunities have as well contributed to the high turnover among certain professions.  For instance, there is a high demand for health professionals today; and this has given nurses and other healthcare providers’ strong bargaining power on the market.  Creating a formula to assess the financial and moral impact of employee turnover is open for further research.  Another area open for further research is what makes an employee happy on-the-job: promotion or high salaries?

References

Delcampo, R.G. (2006). The influence of culture strength on person-organization

fit and turnover.  Journal of Management, Vol. 23 No. 3.  Retrieved April 11, 2008 from Argosy University Online Library, Business Source Premier.

Dick, R.V, Christ, O, Stellmacher, J, Wagner, U, Ahlswede, O, & Grubba, C. (2004).  Should

            I stay or should I go?  Explaining turnover intentions with organizational identification

            And job satisfaction. 

Hong, W.C., & Chao, R.M. (2007).  A comparative test of two employee turnover prediction

            models.  Journal of Management.  Retrieved March 01, 2008 from Argosy Online Library

Morrell, K, Clarke J.L., & Wilkinson. (2004). The role of shocks in employee turnover.

            Journal of Management, Vol. 15.  Retrieved March 31, 2008 from Argosy University

            Online Library, Business Source Premier.

Thatcher, J.B, Stepina, L.P, & Boyle, R.J. (2002).  Turnover of information technology workers:

Examining empirically the influence of attitudes, job characteristics, and external markets.  Journal of Management.  Vol. 19, No. 3