User:MGMT90018 2015S2 Turnover (employment)/sandbox

Companies around the world invest much money on their human force in terms of induction, training, developing, maintaining and retaining their employees to decrease the turnover of the workforce. In human resources context, employee turnover is the rotation in labor market between different jobs, companies, and occupations for various reasons; and between the two phases of employment and unemployment. Various factors affect the employee turnover rate of an organization; however, there are no specific reasons that stimulate employees to leave a company. However, the employee turnover represents a costly expense to companies on a daily basis. Performance appraisals, company benefits, wages and employee attendances are the factors that are important to take into consideration when it comes to rating the employee turnover.

Definition of Employee Turnover
Employee turnover (also known as wastage, labor turnover or attrition) is the rate at which employees leave a company. According to Ongori “the term turnover is defined by James Price as the ratio of the number of organizational members who have left during the period being considered divided by the average number of people in that organization during the period”. However, sometimes the process of filling a vacancy is known as turnover. The employee turnover is not only a concept in management but also is a common issue in human resources management, which is gaining attention around the world because it can be costly and disruptive.

Voluntary vs. Involuntary turnover
Voluntary turnover refers to the separation from the company initiated by the employee for some different reasons such as job insatisfaction, job stress or alternative opportunities in a new company. The reasons for the voluntary turnover might be different among individuals; furthermore, employee turnover causes various issues to any organization. However, as Arokiasamy mentions the voluntary turnover can be detected and controlled in advanced. On the other hand, the involuntary turnover is the company’s decision to finish the employment relationship; therefore the employees have no choice in the termination of the contract. The involuntary turnover may result from the following situations: restructure, the necessity to cut costs, dismissal, retirement, physical or mental disability, relocating abroad, redundancy or death.

External vs. Internal turnover
Employee’ turnover can be also classified in external and internal turnover. On one hand, external turnover refers when employees leave their current assignments and roles to start a new position in an external organization. On the contrary, internal turnover refers when employees shift their current positions to take up a new role in the same company.

Avoidable vs. Unavoidable turnover
Unavoidable turnover becomes from uncontrolled life decisions such as job transfer for a partner or moving to a new area. On the contrary, effective human resources tools such as performance appraisal can prevent avoidable turnover. Therefore, it is vital to distinguish if the organization is dealing with an avoidable or unavoidable turnover to determine the actions needed to face them.

Skilled vs. Unskilled employees
Unskilled workers who work under contract experience high rates of turnover. These types of workers do not have a permanent status in the companies; therefore, they do not receive the same condition and benefits of being a permanent employee. As a result, they usually leave the companies at the slightest opportunity of having better benefits in other company. On the contrary, the turnover in skilled workers represents a form of human capital lost to any organization.

Job Satisfaction
The relation between employee turnover and job satisfaction is high because people who are not satisfied with their jobs are most likely to leave easily especially if there are few alternatives.

Pay
The remuneration is an important factor to take into consideration to avoid employee turnover. Pay represents a strong determination when it comes to determinate job satisfaction and to achieve high productivity in any organization.

Career Promotion
Rewards and career promotion programs are part of the compensation package for employees to enhance their performance in the organization. However, if these types of rewards are not well managed it will contribute to workers’ negative perceptions, and they are more likely to quit the job.

Management
According to Arokiasamy the relationship between employees and managers have a significant impact on employee turnover. Therefore, when the job satisfaction increases due to the autonomy valued by employees, the turnover decreases respectively.

Job Fit
According to Muchinsky and Tuttle a mismatch between what the employee wants and what the company needs influence in the decision of quit the job.

Workplace bullying
According to Kramar bullying is “the repeated persistent negative acts by one employee, or a group of workers, against others, which creates a hostile work environment.” Therefore, sarcasm, sexual harassment, silence, verbal insults and isolation are the most common ways of bullying within organizations. In consequence, higher rates of employee turnover are associated with workplace bullying respectively.

Impact of Employee Turnover on the Companies
Employee turnover represents an issue to any organization, and it may bring significant effects on them. Many authors argue that high rates of turnover might be negative on the profitability of companies if it is not managed adequately. When an employee leaves a company for any reason, it represents a cost due to the replacement process, which includes selection, induction and training of the new employee. In addition to the replacement cost, employee turnover might have psychological and social effects. According to Lee and Mitchell turnover includes another cost such as loss of productivity, loss of sales and management’s time. In consequence, the profitability of the company might be affected due to the turnover. Therefore, if employee turnover is not managed adequately, it would bring adverse consequences to the organization in terms of human resources costs and the liquidity position of the organization.

The Employee Turnover Index
The employee turnover index also known as the employee wastage index is the most common formula to measure turnover "developed by the U.S. Department of Labor." The employee turnover index is considering one of the easiest methods when it comes to calculating and understand employee turnover. The formula is:

$$\left ( \frac{Number of leavers in a specified period (usually a year)} {Average number of employees during the same period} \right ) \times 100%$$

Stability Index
The stability index provides an indication of the trend for longer service workers to remain with the organization; therefore, it shows the degree of willingness to continue working in the company. The formula is:

$$\left ( \frac{Number with 1 year's service or more} {(Number employed 1 year ago} \right ) \times 100%$$

The Cost of Employee Turnover
According to Armstrong the following factors should be taken into consideration when it comes to measuring the cost of employee turnover in any organization:
 * Recruiting replacements cost
 * Introducing replacements cost (induction, training, etc.)
 * Training replacements cost
 * Leaving cost
 * Cost of Human Resources time
 * Loss of output in general

Controlling Turnover
Employee turnover can be controlled in different methods. Improving the recruiting, the selection, and the hiring processes are some ways to reduce involuntary turnover. Also, good employee orientation will help to reduce turnover because employees who have a well-designed induction are less likely to quit. Moreover, having a good a fair salary can help to prevent turnover. Career promotion can help companies to keep employees with a high level of job satisfaction. Even though in some cases turnover is inevitable, organizations must develop strategies to control it, especially when it is caused by organizational factors.

Models
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 researchers, 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
 * Aquino et al. (1997) Referent Cognitions Model
 * Mitchell & Lee (2001) Job Embeddedness Model