Impacts of Employee Turnover (ET)
One of the first studies carried
out on this subject by Pencavel (1972) was when the focus of academic literature started
to shift more on Employee Turnover and Organization performance since the 1970s
more intensely. According to Pancavel's study, he found out that the cost to the company
is greater when the qualifications of the employees were higher and in general ET
was impacting organizational performance negatively. Another study by Alexander
et al. (1994) conducted in hospitals suggests that organizational productivity is
diminished due to ET.
How ET impacts the Organizations
Armstrong (2014) indicates that there
are number of costs to the organization associated with Employee turnover,
including direct replacement and induction cost, HR administrational time &
cost and output cost due to delay in replacement and learning period of
replaced employee until the required skill and knowledge is acquired. Schaefer
(2020) mentions that above all financial costs, there are other intangible losses
such as specialized knowledge or skill of the employee, effect on the company
morale and customer relations can also be impacted.
Can HRM Practices influence ET
There have been many studies and
investigations by scholars on the relationships between HRM practices and employee
turnover, examples Arthur, 1994; Batt, 2002; Shaw et al, 2009 and all of these
studies have a conclusion in common that HRM practices can influence ET and good
HRM Practices can reduce turnover and improve retention
How to Reduce ET
Hiring the right people at first,
providing competitive remunerations, training, motivation and leadership styles
are some of the measures that can be taken by HR Managers and Management to
reduce ET
Conclusion
Human Resources are not only a valuable asset for any organization but also a costly asset and a higher level of employee turnover is very expensive to organizations financially as well as non-financially. Several studies have proved and many authors have concurred that a higher level of employee turnover will be affecting an organization’s efficiency and impact an organization’s performance adversely. HR Managers and Management together need to understand the factors of employees quitting the job and put measures to control in advance to protect from loss of valuable human resources.
References
Alexander, J. A., Bloom, J. R. & Nicholas, B.
A., 1994. Nursing Turnover and Hospital Efficiency: An Organization-Level
Analysis. Industrial relations: a journal of economy and society, 33(4),
pp. 505-520.
Armstrong,
M., 2014. Armstrong’s Handbook of Human Resource Management. 13th ed.
London: Kogan Page.
Ferreira, L.
C. d. M. & Almeida, C. B. d. A., 2015. Employee Turnover and
Organizational Performance: a Study of the Brazilian Retail Sector. Brazilian
Business Review, 12(4), pp. 27-56.
Pencavel, J.
H., 1972. Wages, specific training, and labor turnover in US manufacturing
industries. International Economic Review, 13(1), pp. 53-64.
Schaefer,
P., 2020. How to Reduce Employee Turnover in Your Small Business. [Online]
Available at: https://www.businessknowhow.com/manage/turnover.htm
[Accessed 5 August 2021].
Vocoli,
2015. The Hidden Costs of Employee Turnover (And How to Reduce It). [Online]
Available at: https://www.vocoli.com/blog/january-2015/the-hidden-costs-of-employee-turnover-and-how-to-reduce-it/
[Accessed 05 August 2021].
Wow.Jobs,
2017. High Employee Turnover? What might be going wrong?. [Online]
Available at: https://www.wow.jobs/blog/high-employee-turnover/
[Accessed 06 August 2021].
The negative effects of high employee turnover can range from the immediate and obvious to the more long-term. In the short-term, leavers can cause gaps in your staffing and the headaches associated with recruitment. In the long-term, a high turnover rate within your business may indicate to current staff and job-seekers that you’re not the best choice for them, affecting your prospects. Good job Fayas. Thanks for sharing.
ReplyDeleteThank you very much for the comments Harsha
DeleteImportant topic to discuss Fayaz,
ReplyDeleteTo mitigate the effects of employee turnover, organizations should be aware of the most common causes so that they can avoid costly mistakes. Employees frequently leave organizations with a toxic culture and poor leadership. Employees may leave if you overwork them, give them meaningless or boring assignments, pay them low wages, and do not provide proper development and training.
In the other hand, Offering a work environment with fair pay, good working conditions, appropriate recognition and autonomy, supportive leadership and opportunities for advancement can help reduce turnover.
Thank you for the comments and adding more value Umesh. Agree with your comments.
DeleteEmployee turnover ratio is the ratio of employees leaving the organization compared to the total workforce at a given moment. It reflects how stable the workforce is, what percentage of employees depart during a given period. Employee Retention is an HR tool focused on the future of the company’s workforce. Employees look for a more stable and safe place to work. Too many changes complex all initiatives and strategic planning of an organization. Totally agreed with your comment that “HR Managers and Management together need to understand the factors of employees quitting the job and put measures to control in advance to protect from loss of valuable human resources.”
ReplyDeleteEmployee Turnover affects the HR functions also. When turnover is high, organizational leaders face increased costs associated with engaging, selecting, and training replacements. Other, more difficult-to-quantify effects also rise, such as failures in productivity, morale, customer satisfaction, and innovation.
ReplyDeleteThe employee turnover rate includes economic and social performance in human resource management in various types of organizations. This indicator is considered to be one of the most important indicators of the overall management of an organization and, specifically, the effectiveness of personnel management.
ReplyDeleteThere are 04 types of Employee turnovers, Voluntary, Non-voluntary, Functional, Dysfunctional. It affects the overall organizational performance negatively as skilled and knowledge workers leave often and incur a huge cost replacing them. The HRM must formulate strategies to minimize employee turnover and must be vigilant on employee behavior to take measures if necessary.
ReplyDeleteHi Fayaz,The impact of employee turnover is most often felt at the team level. The remaining team, at least initially, must absorb their departing team member’s workload. This can lead to a decline in productivity, as the team struggles to manage their previous duties on top of their new responsibilities.
ReplyDeleteObviously, it’s important for organizations to reduce turnover rates. However, in order to reduce these rates, organizations must first understand the main reasons employees leave for other positions. Good people don’t leave good organizations—they leave poor management.
ReplyDeleteHi Fayaz, this is a crucial problem in most organizations, and it will be a cost for businesses from the time of hiring to the time of departing. There are companies that use excellent HR practices to look after their personnel. Companies such as Aitken Spence Group, Hayles Group, Lion Brewery Ceylon, and and some have a low turnover rate.
ReplyDelete“Employees turnover is costly to all level of organizations regardless of its nature and usually the productivity and quality of the products or services are always negatively affected” (Ali, 2009)
Nice article Fayaz. The topic you have chosen, employee Turnover is a vast area in the HR management and having several sides to discuss. In general, its an unstoppable process up to some extent and some one may think that the Job market may not exist successfully without the Employee Turnover factor in the organizations. However, as you have correctly mentioned, employee turnover costs a lot of money for the organization since hiring and firing involves a massive amount of investment. Loyal employees are part of the true stake holders of any organization and loyalty reduces the Employee Turnover. Keep up the good writing.
ReplyDeleteHigh employee turnover is costly and can negatively affect the business. High turnover is caused by a lack of communication, support, and company culture. Ensuring that the staff has an amazing experience with the organization can help decrease turnover and increase engagement. Agreed Fayaz
ReplyDeleteEmployee Turnover is a critical factor to any organization as it has negative impact in terms of, for instance apparel industry, if the sewing team has high staff turnover it will have negative impact on Production, affecting sales and revenue and finally the company books.
ReplyDeleteTherefore, every organization must seek ways of motivating its employees, creating a environment friendly work culture among the organization, enhance the learning and development ability and tools for the employees and etc. Higher staff turnover is a negative analytic tool which is costly to the company to replace such vacuum. Thank You.
Every institution's most started talking topic is ET. ET evolves at a hidden cost that every employer must consider. Organizational investments in onboarding, training and development are exorbitant. As a result, most companies should talk about ET where you can control the hidden costs.
ReplyDeleteThank you for sharing this type of valuable article.The impact of high staff turnover includes decreased productivity, increased recruitment costs, avoidable time spent on training new employees, and lost sales. Businesses with high staff turnover typically experience low employee morale and productivity rates.
ReplyDelete