The extent of productivity is a very vital aspect of any business, organization or industry. Various factors affect the productivity of a particular company. The employee’s turnover is one of the core factors which is highly considered by most organizations to be a challenging problem in business. In fact, the impact of turnover has also received considerable attention, particularly by the human resources professionals, senior management and of course, by the industrial psychologists. Labor turnover usually measures the entire movement of employees in and out of the employment with an individual organization. In this paper, I will look at the background and historical perspective on turnover, current issues that are related to turnover, as well as the personal, professional experience or options about labor turnover.
The concept of Labor Turnover
According to recent research, attracting and also retaining outstanding talents in an organization is considered as one of the best strategies for achieving business financial success (Raikes and Vernier, 2004). Therefore, the entire effect of labor turnover has some indirect and direct cost of a particular business, with its bill requiring approximately 50 to 150% of the annual salary (Mercer, 2004). According to researchers and consultancies, the ability to retain employees may become increasingly challenging in future. However, the United Kingdom bases research has suggested that labor turnover rates have remained stable.
Background and Historical Perspective of Labor Turnover
From history, the absence of an empirical measure of labor training has made most of the human capital analysis, particularly for wage structure indirect. The level of education is crucial in analyzing the range of lifetime earnings, but not the entire shape of payment profile. Labor turnover is measured using the separation rates such as layoffs, quits as well as discharges per 100 employees on the organization payroll. Among the United States workers, the aggregate data on turnover is available from various research and studies that typically focus on the manufacturing sector. The data reveals the high rate of turnover in the early decades of 20th century, a substantial decline in the 1920s, fluctuations, especially during a severe economic crisis of 1930s.
Therefore, the contemporaries expressed their concern about the high rate of turnover, back in the early part of the century and carried out various studies to understand the concept of turnover, cause, and consequences. The dramatic change in the high rate of labor turnover back In early twentieth century was closely associated with the work-initiated element of turnover rate. Also, the entire idea that job investment consists components of firm-specificity, which was introduced by the Oi (1962) and Becker (1964) produced a connection between the inter-firm labor mobility and the human capital investments. This hypothesis has been proven valuable and useful, specifically in analyzing the inter-occupational, inter-country, and inter-industry differences in the turnover.
The overall reduction in labor turnover, back in the 1920s, looks to be the starting point of a long run trend. According to various studies, which were seeking to identify the reason why most people started quitting their respective jobs less frequently, have pointed the role of the altered employment relationships. In the United States, new practices of employers emerged, which were categorized as welfare initially and then as the development of internal labor market. This included various policies that were aimed at strengthening the connection between firms and workers. One of the most important parts of these plans was the development of personnel departments, the provision of job training, providing seniority-based compensation, and also, the internal promotion ladders. Others suggest that the changes in turnover were as a result of immigration declines, after the newly implemented quotas as well as the black market of labor (Goldin 2000, Jacoby, 1985).
Current Issues Related To Labor Turnover
Labor turnover, especially in industries such as accounting, has always been an issue. In most cases, the revolving workforce result in increased training costs, poor working morale, inconsistent production, and more importantly, the limited or reduced profit margins. In fact, according to the Society For Human Resources Management (SHRM), most business owners, as well as employers, are supposed to focus on labor turnover for some specific reasons. Job turnover is responsible for the most cost implications experienced in most industries since it is expensive to replace workers. However, these costs vary. Some research has discovered that the cost incurred in replacing or hiring new staff in a particular industry is as high as 60% compared to the salary of the old employee. Also, the total costs of replacing staff, including all the training and lost of production involved, may range from approximately 90% to 200% of the annual salary of an employee. The following are some current problems that are associated with labor turnover;
The high rates of replacing current staffs with new employees result to lower employee productivity. Those employees who have already acquired additional experience and expertise in a defined industry are also aware of all the company’s goals, policies, and of course, the way and techniques to use to meet their entire responsibilities and roles within the enterprise. Hiring new labor force will then require a company to take a significant amount of time to tell the new employees the way to fulfill their roles, and also, how they are supposed to undertake responsibilities because industries with a high rate of labor turnover tend to possess additional inexperienced employees. Therefore, due to this reason, those firms may conjointly suffer from reduced employee productivity. On the other hand, some companies with few numbers of workers usually notice it particularly more challenging to interchange employees, since employees in these companies fill a spread of various roles which are specialized. Approximately 40% of most engineers also suggest that employee turnover causes the lower productivity (Bandhanpreet K. , Mohindru and Dr. Pankaj., 2013).
Management Frustration and Customer Service
Company Managers, CEOs, and Directors of a particular firm usually get frustrated by the constantly revolving employee turnover. In fact, approximately 40% of the employees typically contribute to employees who work for a longer term, getting frustrated and quitting the job. Also, poorly developed and equipped workers add more burden on the management to work hands-on the business or stores. This takes away from their decision-making as well as the supervisory responsibilities and duties.
On the other hand, high rate of labor turnover is damaging the ability of a business or firm to retain customers and also, supply high-quality and reliable customer service. Currently, most consumers are feeling more comfortable when talking to the same staff and the customer service representatives over an extended period. Familiarity and personal relationships develop the loyalty of a client. According to research, small businesses are higher positioned compared to their large competitors to acquire the benefits of customer service. However, if staffs are perpetually feat and being replaced with others, it limits the overall power of the business to craft a convincing rapport with their respective customers. Approximately 30% of the new employees points out that most clients say that the replaced employees better serve them (Dr. Rainayee R. A. 2013).
High Development and Training Costs and Low Morale
In a high labor turnover company, the training and development costs are also high compared to the entire salary increment of the current workers. Approximately 63% of the management in different companies points out that new employees require sufficient training to do the job effectively. Also, new workers usually take more time to develop their skills and expertise in a particular field.
Furthermore, high rate of labor turnover is associated with low morale in many firms. In fact, working morale in a high incidence employees turnover company is usually weak. Note that the shared norms, as well as the value of a particular group of workers, may yield a lot in a company. Therefore, motivating all employees to share their mission and vision of the enterprise, and of course, perform at high levels is challenging, especially when colleagues are vanishing all around them. The relationship in workplaces is critical to an employee’s satisfaction with the work. As partners leave and replaced with others, remaining employees perpetually got to cycle through the technique of going more acutely aware regarding the opposite mitigated employees, who usually got an additional higher level job.
Relationship Between Efficiency And Turnover
The entire relationship between turnover and efficiency is explained regarding knowledge-based organizational theory (Grant, 1996). The most important tenet of the theory is that a company that successfully establish, maintain, and of course, apply the job-relevant skills and knowledge usually perform better in the marketplace compared to industries that do not use. There two aspects of this theory, that is, the coordination and knowledge transfer. In fact, the mental model in the individuals’ heads is where a vast majority of an organization’s knowledge lies (Kim, 1993). Therefore, the transfer of knowledge and working skills pertains to the entire culture that exists within the worker and how it’s moved between them. Explicit knowledge is that which is easily communicated, written and also contained in the procedures, policies, rules or regulations of a particular organization (Grant, 1996).
Therefore, no prices boundary line can determine or define the harmfulness of labor turnover for an organization. However, since it varies depending on the job market, there are some adverse effects on the current firms. If employee training is a smooth and speedy process in a particular organization, with minimized costs, it is possible to offer quality services even with the high rate of turnover.
On the other hand, if the process of recruiting new workers is too expensive and also the process of acquiring employees for the available vacancies takes months, them labor turnover in this firm is seen as problematic. According to the research of the International Chartered Institute of Personnel and Development, it discovered that the rate of labor turnover for all workers was approximately 15.7% back in the year 2005. The information depicts that two main directions are encountered in the market. First, various firms or organizations that feel a real shortage of people and also their rate of turnover reaches about 25% including the lower qualification positions. The second one is the firms running or operating in highly specialized fields, like the nuclear and chemical power sectors, which face an opposite situation especially when the labor turnover rate is at the minimum market level (Haines,1999).
Personal Professional Experiences Or Opinions About Labor Turnover
Because employment satisfaction usually influences the rate of labor turnover decisions, there are various indicators to control for the global job satisfaction. Most organizations with the internal labor market experience lower turnover compared to those with the external job market, due to an alternative external wage offer, which is small. This is because workers have accumulated organization specific skills and knowledge that can affect pay levels elsewhere. Also, fringe benefits like pension and insurance lower the rate of labor turnover. Consequently, to proxy for the availability of an internal job market, personally as a profession, I can develop an indicator that equals individual if a position change within an employer to be a promotion.
Personally, those strategies that are implemented to minimize the rate of labor turnover can confront the problems experienced due to turnover. That turnover that is attributed to the inadequate selection procedures, for instance, is unlikely to improve such as the policy modification to focus exclusively on the induction process. Employee engagement, the ability of an organization to engage, optimize and retain the entire value of its overall workers hinges on how well employments are designed, the time invested, and the commitment, as well as the support, displayed to the employees by management. According to me, I think this can motivate workers to stay in the organization.
Accessibility of organization’s skills and knowledge is another excellent solution for the high rate of turnover. I think that the extent of the firm’s “collaborativeness” as well as the ability of such organizations to make ideas and knowledge widely available to workers can make them stay in the company and of course, improve the level of productivity. Information sharing should, therefore, be made at every level of management. In fact, this information and knowledge sharing and accessibility will result in a sturdy performance from the workers and also, develop strong corporate culture (Sofat,2016).
Another thing I can propose with the aim of reducing the overall rate of labor turnover is workforce optimization. This is the success of an organization in optimizing the overall performance of the workers by developing or creating essential processes for assessing the work done, developing accountability, offering good conditions for working and more importantly, making excellent hiring options to retain workers in their firms. I think that the benefits of gaining a perfect understanding of the factors related to the entire recruitment, workers motivation and also retention of employees can be further underscored by improving the personnel costs.
Finally, I think the concept of employees empowerment can assist in enhancing the continuity of employees in an organization. Personally, it is my idea that empowered employees, especially in a case where the managers of an organization supervise many people compared to the traditional hierarchy as well as delegate many decisions to their respective subordinates can assist in worker retention. Note that managers in an organization act as a coach and they are responsible for helping employees in solving their problems.
If the above strategies are taken into account and implemented, the entire organization will have the ability to survive in these dynamic environments by treating every worker as one of their assets, which usually required a lot of attention. It has, therefore, been widely stated in the current situation and recent years that all companies and organizations are supposed to prepare themselves for the war of labor turnover. Because of the aggressive competitivity, the global performance and productivity of such sectors will severely suffer from the high rate of labor turnover, which will result in a bad performance. The high level of job turnover will also lead to the concentration of resources, specifically within the core group of agencies. Consequently, this will put the independence and diversity of humanitarian at risk. On the other hand, donors and organizations must assume their responsibilities, with a great coordinating effort to alleviate the constraints that will be caused the high rate of labor turnover.
- Bandhanpreet K. , Mohindru and Dr. Pankaj. (2013). Antecedents of Turnover Intentions: A Literature Review, Global Journal of Management and Business Studies.
- Dr. Rainayee R. A. (2013). Employee Turnover Intentions: Job Stress or Perceived Alternative External Opportunities , International Journal of Information, Business and Management.
- Goldin, C. D., & National Bureau of Economic Research. (1994). Labor markets in the twentieth century. Cambridge, MA: National Bureau of Economic Research.
- Grant R. M. (1996). Toward a knowledge-based theory of the firm. Strategic Management Journal.
- Haines, D. W. (1999). Illegal immigration in America: A reference handbook. Westport, Conn. [u.a.: Greenwood Press.
- RAIKES Lucille and VERNIER Jean-François, (2004), “Rewarding and retaining key talent: are you ready for the recovery?”, www.towersperrin.com
- Sofat, R. (2016). Strategic financial management. Place of publication not identified: Prentice-Hall Of India.