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Term Paper

On
Assessing Employee Turnover In Case Of a Company
Course code: MBA-601
Course Title: Strategic Management

Submitted to:
Chowdhury Abdullah- Al- Mamun, Assistant Professor
Department of Business Studies (UITS)
University of Information Technology & Sciences

Submitted by:
Name: ID:
Anwar Hossain 16202531
Mehedi Hassan 16202507
S.M. Lutfar Rahman 16202541
Md. Rehan Uddin 16202504
Md.Rabiul Islam 16202503

Submission Date: 28.07.2017


Letter of Transmitter

28th July, 2017

To,

Chowdhury Abdullah- Al- Mamun, Assistant Professor


Department of Business Studies (UITS)
University of Information Technology & Sciences

Sub: Term paper on Assessing Employee Turnover in case of a Company

Dear Sir,

It is indeed a great pleasure for us to able to hand over the result of our hardship of the report on
Assessing Employee Turnover in case of a Company. This report is the result of the knowledge
which has been acquired from the respective course .We tried our level best for preparing this
report. The information of this report is mainly based on Assessing Employee Turnover in case
of a Company. Some other details were gathered from the Organization personnel of that
company. All of us gave our hundred percent for making this report come together.

We, fervently hope that you will find plan worth reading. Please feel free for any query or
clarification that you would like us to explain. Hope you will appreciate our hard work and excuse
the minor errors.

Thanking you for your cooperation.


Sincerely yours,

Anwar Hossain 16202531


Mehedi Hassan 16202507
S.M. Lutfar Rahman 16202541
Md. Rashed Hossen 16302508
Md. Rehan Uddin 16202504
Md.Rabiul Islam 16202503
Acknowledgement
Education involves not only reading books and doing exercises but also acquiring knowledge
through doing something practically. This report has designed only for considering that
objective. First of all, we are indebted to our guide teacher Chowdhury Abdullah- Al- Mamun,
Assistant Professor , Department of Business Studies (UITS) , University of Information
Technology & Sciences. Her views, suggestions save us from more difficulties. We are also
grateful to our group members most valuable cooperation, inspiration and suggestions.
Table of Contents
Serial No: Subject Page No:
01. Introduction 05
02. 06-07
Aim & Objectives
03. Review of the 07-08
literature
04. Sources of employee 08
turnover factors
05. Organizational 09
factors
06. Effects of employee 09-10
turnover
07. Strategies to 10
minimize employee
turnover
08. Recommendation 11-12
09. Conclusions 13
10. Reference 14
Introduction
Employee turnover refers to the rate at which an employer gains and losses employee, how long
the staff tend to leave and join the organization (Armstrong, 2006). In his book, Horton (2007)
state that it is becoming a major issue for the organizations especially for the low cadre jobs.
There are many contributors to this scenario that are significant to the employee turnover. Such
aspects can stem from both the company as well as the employees (Izzack, 2010). The employers
are more concerned with the turnover as it impacts negatively and a very expensive aspect of the
business world (Thomas, 2003).

These expenses of staff turnover facing organizations include the cost of training and
development, loss of efficiency, new hires and customer retention. Depending on the industry,
and the job role, the annual wages and salaries range between 30-200% of a single employer
(Trevor,W. (2004). This is more impactful on the lower paying jobs and they tend to cost
companies less per replacement of an employee than do higher paying job roles. However, they
incur the cost more often. For these reasons, most companies focus on employee retention
strategies regardless of pay levels (McClelland, 2003).

According to Oregon (2004) most companies find that employee turnover can be reduced when
issues affecting employees morale are addressed. This is mainly through offering employees
benefits such as reasonable flexibility with work and family balance, performance reviews, and
performance based incentives, along with traditional benefits such as paid holidays or sick days
(Murphy, 2009). The extent to which a company will go to in order to retain employees depends
not only on employee replacement costs, but also on overall performance of the company
(Phillip, 2009). If a company is not getting the performance it is paying for, replacement cost can
be an enormous price to pay in the long run (Bratton, 2003).

According to Blahna (2005) high turnover can be a serious obstacle to organizational efficiency,
quality, and profitability of firms of all sizes. For the smallest of companies, a high turnover rate
can mean that simply having enough staff to fulfill daily functions is a challenge, even beyond
the issue of how well the work is done when staff is available (Richard, 2008). Turnover is no
less a problem for major companies, which often spend millions of dollars a year on turnover
related costs (Miller, 2006). For service-oriented professions, such as management consulting or
account management, high employee turnover can also lead to customer dissatisfaction and
turnover, as clients feel little attachment to a revolving contact (Brian,2009). Customers are also
likely to experience dips in the quality of service each time their representative changes
(Miller,2006).

(Mamun and Hasan, 2017)


Aim & Objectives
The employee retention is one of the hottest topics of the modern Human Resources
Management. The organization has to attract, hire and retain talents. Most businesses are great
when it comes to attracting and hiring new employees, but they fail in the retention practices.
Such companies do not realize high costs of the turnover. They need to run special and expensive
processes to train and onboard new employees; they have high recruitment costs and their brand
name on the job market is not great. How should Human Resources set right goals and objectives
in the area of the retention of employees?

The high-performance company focused on innovative services and products cannot tolerate
high turnover of employees. The organization develops the know-how and teaches employees the
corporate culture. It invests in the development of the sustainable competitive advantage. The
low retention of employees undermines the effort of the leadership team to make the company
lean, profitable and agile.

The retention of staff is a mission critical responsibility of Human Resources. It is accountable


for the development, management and update of different retention policies, procedures, and
processes. HR has to provide the line management with right tools to retain employees. It has to
design flexible schemes allowing to react to changed conditions. It is the manager who can
influence the employee, but Human Resources has to deliver tools to make promises working.

Human Resources should set retention goals and objectives in following areas:

retention strategy design and update;

retention plans design;

employee nominations and approvals;

measurement and changes introduced.

The retention strategy is a core driver for the retention policy in the company. The leadership
team is the owner of the document, and Human Resources has to measure the progress, failures,
and successes. Human Resources cannot be the owner of the strategy because it is the leadership
team who needs to protect and retain employees. The team has to carry costs. However, they
want proposals from Human Resources; they need the proper market mapping and regular
evaluation of best practices available. This is the right goal for HR.

An excellent retention plan is always a critical success factor. Human Resources cannot develop
just one plan because each group of employees has different needs and requirements. HR should
always design at least two or three alternatives the employee can choose from. However, HR
should also prepare several levels of programs so that the employee can earn a higher retention
status. HR should construct plans together with managers and employees. The leadership team
has to approve them. This is the goal for Human Resources.The retention program is based on
nominations and a limited number of seats. Human Resources has to design and manage the
appointment program that is fair and gives balanced chances to all line managers. There should
be an explicit list of key job roles and just employees from the list should be allowed to enter the
program. However, the leadership team should receive several wildcards to include other key
employees. However, rules should be known to everyone in the organization. HR is a gatekeeper,
and it has to play the role fair.

Finally, the retention program has to be measured. HR has to measure the performance of the
retention plan. HR has to measure a difference in the turnover, the development of the attrition
and the satisfaction of employees in the program. HR has to make sure that the retention strategy
has a real impact on the business performance.

(Mamun and Hasan, 2017)

Review of the literature on employee turnover


Employee turnover as a term is widely used in business circles. Although several studies have
been conducted on this topic, most of the researchers focus on the causes of employee turnover
but little has been done on the examining the sources of employee turnover, effects and advising
various strategies which can be used by managers in various organizations to ensure that there is
employee continuity in their organizations to enhance organizational competitiveness. This paper
examines the sources of employee turnover, effects and forwards some strategies on how to
minimize employee turnover in organizations. Keywords: Employee, turnover, sources, effects,
strategies.

Organizations invest a lot on their employees in terms of induction and training, developing,
maintaining and retaining them in their organization. Therefore, managers at all costs must
minimize employees turnover. Although, there is no standard framework for understanding the
employees turnover process as whole, a wide range of factors have been found useful in
interpreting employee turnover Kevin et al.(2004). Therefore, there is need to develop a fuller
understanding of the employee turnover, more especially, the sources what determines employee
turnover, effects and strategies that managers can put in place minimize turnover. With
globalization which is heightening competition, organizations must continue to develop tangible
products and provide services which are based on strategies created by employees. These
employees are extremely crucial to the organization since their value to the organization is
essentially intangible and not easily replicated Meaghan et al. (2002). Therefore, managers must
recognize that employees as major contributors to the efficient achievement of the organizations
success Abbasi et al. (2000). Managers should control employee turnover for the benefit of the
organization success. The literature on employee turnover is divided into three groupings:
sources of employee turnover, effects of turnover and the strategies to minimize turnover.

Employees turnover is a much studied phenomenon Shaw et al. (1998).But there is no standard
reason why people leave organization. Employee turnover is the rotation of workers around the
labour market; between firms, jobs and occupations; and between the states of employment and
unemployment Abassi et al. (2000). The term turnover is defined by Price (1977) 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. Frequently,
managers refer to turnover as the entire process associated with filling a vacancy: Each time a
position is vacated, either voluntarily or involuntarily, a new employee must be hired and trained.
This replacement cycle is known as turnover Woods, (1995). This term is also often utilized in
efforts to measure relationships of employees in an organization as they leave, regardless of
reason. Unfolding model of voluntary turnover represents a divergence from traditional
thinking (Hom and Griffeth, 1995) by focusing more on the decisional aspect of employee
turnover, in other words, showing instances of voluntary turnover as decisions to quit. Indeed,
the model is based on a theory of decision making, image theory Beach, (1990).

(Mamun and Hasan, 2017)

Sources of employee turnover factors


Peters et al, 1981;Saks, 1996) have attempted to answer the question of what determines people's
intention to quit by investigating possible antecedents of employees intentions to quit. To date,
there has been little consistency in findings, which is partly due to the diversity of employed
included by the researchers and the lack of consistency in their findings. Therefore, there are
several reasons why people quit from one organization to another or why people leave
organization. The experience of job related stress (job stress), the range factors that lead to job
related stress (stressors), lack of commitment in the organization; and job dissatisfaction make
employees to quit Firth et al. (2004). This clearly indicates that these are individual decisions
which make one to quit. They are other factors like personal agency refers to concepts such as a
sense of powerlessness, locus of control and personal control. Locus control refers to the extent
to which people believe that the external factors such as chance and powerful others are in
control of the events which influence their \lives Firth et al. (2004). Manu et al. (2004) argue that
Employees quit from organization due economic reasons. Using economic model they showed
that people quit from organization due to economic reasons and these can be used to predict the
labour turnover in the market. Good local labour market conditions improve organizational sta-
bility Schervish (1983). Large organizations can provide employees with better chances for
advancement and higher wages and hence ensure organizational attachment (Idson and Feaster
1990). Trevor (2001) argues that local unemployment rates interact with job satis-faction to
predict turnover in the market. Role stressors also lead to employees turnover. Role ambiguity
refers to the difference between what people expect of us on the job and what we feel we should
do. This causes uncertainty about what our role should be. It can be a result of misunderstanding
what is expected, how to meet the expectations, or the employee thinking the job should be
different Kahn et al. Muchinsky, 1990. Insufficient information on how to perform the job
adequately, unclear expectations of peers and supervisors, ambiguity of performance evaluation
methods, extensive job pressures, and lack of consensus on job functions or duties may cause
employees to feel less involved and less satisfied with their jobs and careers, less committed to
their organizations, and eventually display a propensity to leave the organization (Tor et al.,
1997). If roles of employees are not clearly spelled out by management/ supervisors, this would
accelerate the degree of employees quitting their jobs due to lack of role clarity. Voluntarily vs.
involuntary turnover There are some factors that are, in part, beyond the control of management,
such as the death or incapacity of a member of staff. Other factors have been classed as
involuntary turnover in the past such as the need to provide care for children or aged relatives.
Today such factors should not be seen as involuntary turnover as both government regulation and
company policies create the chance for such staff to come back to work, or to continue to work
on a more flexible basis Simon et al. (2007).
(Mamun and Hasan, 2017)
Organizational factors
Organizational instability has been shown to have a high degree of high turnover. Indications are
that employees are more likely to stay when there is a predictable work environment and vice
versa (Zuber, 2001). In organizations where there was a high level of inefficiency there was also
a high level of staff turnover (Alexander et al., 1994). Therefore, in situations where
organizations are not stable employees tend to quit and look for stable organizations because
with stable organizations they would be able to predict their career advancement. The imposition
of a quantitative approach to managing the employees led to disenchantment of staff and hence it
leads to labour turnover. Therefore management should not use quantitative approach in
managing its employees. Adopting a cost oriented approach to employment costs increases
labour turnover Simon et al. (2007). All these approaches should be avoided if managers want to
minimize employee turnover an increase organizational competitiveness in this environment of
globalization. Employees have a strong need to be informed. Organization with strong
communication systems enjoyed lower turnover of staff (Labov, 1997). Employees feel
comfortable to stay longer, in positions where they are involved in some level of the decision-
making process. That is employees should fully understand about issues that affect their working
atmosphere (Magner et al. (1996). But in the absence openness in sharing information,
employee empowerment the chances of continuity of employees are minimal. Costly et al.
(1987) points out that a high labour turnover may mean poor personnel policies, poor recruitment
policies, poor supervisory practices, poor grievance procedures, or lack of motivation. All these
factors contribute to high employee turnover in the sense that there is no proper management
practices and policies on personnel matters hence employees are not recruited scientifically,
promotions of employees are not based on spelled out policies, no grievance procedures in place
and thus employees decides to quit. Griffeth et al. (2000) noted that pay and pay-related variables
have a modest effect on turnover. Their analysis also included studies that examined the
relationship between pay, a persons performance and turnover.

Effects of employee turnover


Employee turnover is expensive from the view of the organization. Voluntary quits which
represents an exodus of human capital investment from organizations Fair (1992) and the
subsequent replacement process entails manifold costs to the organizations. These replacement
costs include for example, search of the external labor market for a possible substitute, selection
between competing substitutes, induction of the chosen substitute, and formal and informal
training of the substitute until he or she attains performance levels equivalent to the individual
who quit John (2000). Addition to these replacement costs, output would be affected to some
extend or output would be maintained at the cost of overtime payment. The reason so much
attention has been paid to the issue of turnover is because turnover has some significant effects
on organizations (DeMicco and Giridharan, 1987; Dyke and Strick, 1990; Cantrell and
Saranakhsh, 1991; Denvir and Mcmahon, 1992).Many researchers argue that high turnover rates
might have negative effects on the profitability of organizations if not managed properly (Hogan,
1992; Wasmuth and Davis, 1993; Barrows, 1990). Hogan 1992, nearly twenty years ago the
direct and indirect cost of a single line employee quitting was between $ 1400 and $4000.
Turnover has many hidden or invisible costs Philips (1990) and these invisible costs are result of
incoming employees, co-workers closely associated with incoming employees, co-workers
closely associated with departing employees and position being filled while vacant. And all these
affect the profitability of the organization. On the other hand turnover affects on customer
service and satisfaction Kemal et al. (2002). Catherine (2002) argue that turnover include other
costs, such as lost productivity, lost sales, and managements time, estimate the turnover costs of
an hourly employee to be $3,000 to $10,000 each. This clearly demonstrates that turnover affects
the profitability of the organization and if its not managed properly it would have the nega-tive
effect on the profit.
(Mamun and Hasan, 2017)
Strategies to minimize employee turnover

Strategies on how to minimize employee turnover, con-fronted with problems of employee


turnover, management has several policy options viz. changing (or improving existing) policies
towards recruitment, selection, induction, training, job design and wage payment. Policy choice,
however, must be appropriate to the precise diagnosis of the problem. Employee turnover
attributable to poor selection procedures, for example, is unlikely to improve were the policy
modification to focus exclusively on the induction process. Equally, employee turnover
attributable to wage rates which produce earnings that are not competitive with other firms in the
local labor market is unlikely to decrease were the policy adjustment merely to enhance the
organizations provision of on-the job training opportunities. Given that there is increase in direct
and indirect costs of labour turnover, therefore, management are frequently exhorted to identify
the reasons why people leave organizations so that appropriate action is taken by the
management. Extensive research has shown that the following categories of human capital
management factors provides a core set of measures that senior management can use to increase
the effectiveness of their investment in people and improve overall corporate performance of
business: Employee engagement, the organizations capacity to engage, retain, and optimize the
value of its employees hinges on how well jobs are designed, how employees' time is used, and
the commitment and support that is shown to employees by the management would motivate
employees to stay in organizations.. Knowledge accessibility, the extent of the organizations
collaborativeness and its capacity for making knowledge and ideas widely available to
employees, would make employees to stay in the organization. Sharing of information should be
made at all levels of management. This accessibility of information would lead to strong
performance from the employees and creating strong corporate culture Meaghan et al. (2002).
Therefore; information accessibility would make employees feel 052 Afr. J. Bus. Manage. that
they are appreciated for their effort and chances of leaving the organization are minimal.
(Mamun and Hasan, 2017)

Recommendation
Reducing employee turnover is dependent on the total work environment you offer for
employees. Employees thrive when the work environment supports them in attaining their goals
and dreams. The best employees for your organization share your vision and values about what
they want to experience at work.

These recommendations about reducing employee turnover are also common-sense, basic and
incredibly hard to find in organizations today. Wonder why this is so? It's because many
organizations have not figured out that valuing employees is a win-win for employers and
employees.

Select the right people in the first place through behavior-based testing and competency
screening. Sure, an onsite interview gives you a feel for whether the person can fit within
your culture, but your key to selecting the best employees is to determine how well they
can do the job. The right person, in the right seat, on the right bus is the starting point.

At the same time, don't neglect to hire people with the innate talent, ability, and smarts to
work in almost any position even if you don't currently have the best match available.
Hire the smartest people you can find to reduce employee turnovertheir versatility will
make them exceptional contributors. You just need to make sure that they are not bored
doing the same old thing. Think job enrichment and promotions.

Offer an attractive, competitive, comprehensive benefits package with components such


as life insurance, disability insurance and flexible hours. One young employee whose
stated reason for accepting a job offer was the availability of a 401(k) match is not the
exception, Research on Millennials and money indicates that they do not want to repeat
the mistakes of their parents. Better benefits equal reduced employee turnover.

Provide opportunities for people to share their knowledge on-the-job via training
sessions, presentations, mentoring others and team assignments. Employees like to share
what they know; the act of teaching others ensures the employee's own learning. Training
others is the best indicator of learning.

Demonstrate respect for employees at all times. Listen to them deeply; use their ideas;
never ridicule or shame them. Via your communication, share that you value them.

Offer performance feedback and praise good efforts and results to reduce employee
turnover. Your recognition of employee contributions is your most powerful form of
employee reinforcement and retention. People want to know that their work makes a
difference.
People want to enjoy their work. Make work fun. Engage and employ the special talents
of each individual. A day without laughter should be abnormal.

Enable employees to balance work and life. Allow flexible starting times, core business
hours and flexible ending times. (Yes, his son's soccer game is as important as work.)

Involve employees in decisions that affect their jobs and the overall direction of the
company whenever possible. Involve them in the discussion about company vision,
mission, values, and goals. This strategic framework will never live for them or become
owned by them if they merely read it in email or hanging on the wall.

Recognize excellent performance, and especially, link pay to performance to reduce


employee turnover. Your key employees are motivated when their above-average efforts
are recognized and rewarded.

Base the upside of bonus potential on the success of both the employee and the company
and make it limitless within company parameters. (As an example, pay 10% of corporate
profits to employees.)

Recognize and celebrate success. Mark their passage as important goals are achieved.
Bring in pizza or breakfast to celebrate reaching milestones and turn the occasion into a
brief ceremony while you celebrate success.

Staff adequately so overtime is minimized for those who don't want it and people don't
wear themselves out. You will discover that salaried employees who are engaged and
excited will work the hours necessary to get their jobs done.

Nurture and celebrate organization traditions. Have a costume party every Halloween.
Run a food collection drive every November. Pick a monthly charity to help. Have an
annual company dinner at a fancy hotel.

Provide opportunities within the company for cross-training and career progression.
People like to know that they have room for career movement. This is a serious deterrent
to employee turnover.

Provide the opportunity for career and personal growth through training and education,
challenging assignments and more responsibility.

Communicate goals, roles, and responsibilities so that people know what is expected and
they feel like part of the in-crowd.

According to research by the Gallup organization, encourage employees to have good,


even best, friends, at work. This will increase their commitment to you as an employer.
Conclusions

Therefore, if the above strategies are taken into account the business would be able to survive in
a dynamic environment by treating their employees as one of their assets which needs a lot of
attention. Employees are the backbone of any business success and therefore, they need to be
motivated and maintained in organisation at all cost to aid the organisation to be globally
competitive in terms of providing quality products and services to the society. And in the long-
run the returns on investments on the employees would be achieved. Management should
encourage job redesign-task autonomy, task significance and task identity, open book
management, empowerment of employees, recruitment and selection must be done scientifically
with the objective of retaining employees. Managers should examine the sources of employee
turnover and recommend the best approach to fill the gap of the source, so that they can be in a
position to retain employees in their organisation to enhance their competitiveness in the this
world of globalization. Managers must understand that employees in their organizations must be
treated as the most liquid assets of the organisation which would make the organisation to
withstand the waves of globalization. This asset needs to be monitored with due care, otherwise
their organizations would cease to exist. Employees should be given challenging work and all
managers should be hired on the basis of know how by following laid down procedures of the
organisation and this would make organisation to have competent managers at all levels of
management and hence good supervision noted pay and payrelated variables have a great effect
on employee turnover. Management must compensate employees adequately. They should pay
employees based on their performance and in addition they should given employees incentives
like individual bonus, lump sum bonus, sharing of profits and other benefits. Hence, if these are
put in place they would minimize employee turnover.
Reference
1. Al Mamun CA& Hasan MN(2017). Factor affecting employee turnover and
sound retention strategies in business organization problems and perpaction in
management 15(1), 63-71.
2. www.recruiter.com
3. Turnover-State of Oklahoma Website. Retrieved from www.ok.gov:
http://www.ok.gov/opm/documents/Employee%20Turnover%20Presentation.ppt
4. Beam, J. (2014, December 25). What is Employee Turnover? Retrieved from
WiseGeek: http://www.wisegeek.org/what-is-employee-turnover.htm
5. The True Costs of Turnover http://www.insightlink.com/blog/calculating-the-cost-
of-employee-turnover.cfm