Employee turnover is costly and a disruptive issue that affects organizational effectiveness. Human resource development (HRD) is concerned with the number of employees leaving. Leaders in HRD would prefer to retain employees than to see them leave a performance gap. This paper explores the determinants of employee turnover, its consequences, trends in academia and implications on institutional effectiveness. Secondary sources of data including peer reviewed articles were utilized. This paper aims to bring awareness to the performance gap and encourage university – based HRD practitioners to redirect efforts and resources to mitigate employee turnover in their institutions.
With the tightening labor market, the aging population, the skills gap and positions to fill, hiring the best and retaining the best becomes a priority. Employee turnover needs leadership attention. Employee turnover is the term used to describe the rate at which employees leave an organization and are replaced by new employees within a certain time frame (Asegid et al., 2014; Bilau et al., 2015; Ugoani, 2016; Zhang, 2016). Employee turnover is synonymous to labor turnover and the opposite of employee retention (Phillips & Edwards, 2009). This metric or key performance indicator (Arokiasamy, 2013; Huffman et al., 2014) is expressed as a percentage or rate. The time frame is tracked either on a monthly or yearly basis. The formula for calculating employee turnover rate is seen in Figure 1; the rate is calculated by dividing the number of staff members leaving within the period by the number of workers employed in the organization (Phillips & Edwards, 2009).
Figure 1. Formula Used to Calculate Employee Turnover Rate
There are essentially two types of employee turnover namely, voluntary turnover and involuntary turnover (Khoele & Daya, 2014; Satope et al., 2014; Sun & Wang, 2017; Zhang, 2016). Voluntary turnover refers to an employee deciding to leave the organization at their own will. Examples of this form of turnover include resignations, sabbaticals, study leave and relocation. Involuntary turnover is the type of turnover initiated by the organization. Cases of involuntary turnover include dismissals, redundancy or terminations. According to Nalini and Balaji (2016), employee turnover can be further categorized into functional and dysfunctional as displayed in Figure 2.
Figure 2. Types of Employee Turnover
Functional turnover refers to low-performing staff members leaving the company. On the other hand, dysfunctional turnover occurs when high performing employees leave the organization. Additionally, avoidable turnover describes the turnover organizations can prevent, for instance, when employees leave due to poor working conditions or low wages. Unavoidable turnover is the inevitable leaving of employees for reasons such as death or illness (Bilau et al., 2015).
The issue of employee turnover has been a concern for organizations for decades (Bilau et al., 2015; Hom et al., 2017; Huffman et al., 2014; Nawaz & Pangil, 2016; Sumbal, 2018). A high employee turnover rate may indicate a staff who is not satisfied with their workplace or is just simply unhappy. This can pose a challenge for organizations. Factors that contribute to high employee turnover are numerous and it is critical that the leaders be able to identify the variables that drive a high employee turnover rate. The literature highlights the factors that influence high employee turnover.
Kanwal and Majid (2013) reported that the 80 out of 100 employees from the banking industry shared that the factors that led to them leaving their jobs were unsatisfactory compensation, long working hours, lack of rewards and recognition, and poor communication. Similarly, a study undertaken by Khan and Aleem (2014) revealed that 200 physicians, supervisors, nurses, and accountants stationed at a medical institution agreed that a low level of job satisfaction was the reason behind the increase in the turnover rate. Other factors that were shared were low wages (AlBattat et al., 2014), lack of upward mobility, poor working conditions, and the heavy workload. In another study conducted by Chen et al., (2016), it was divulged that 161 hotel workers were displeased with their wages, job conditions, career advancement, training and communication with bosses.
Comparatively, Korsakienė et al., (2015) presented another study that included 143 individuals employed by information technology corporations in Lithuania. The participants were asked to comment on the reasons that fuel the decision to leave their present employer. The findings were as follows: 65.4% replied monetary rewards; 62.6% blamed leadership issues; 58.9% disclosed that it was a lack of advancement; 55.1% lamented the lack of training; 47.7% said lack of variety of tasks; 45.8% responded poor co-worker relationships; 43% replied work life balance issues; 42.1% said self-realization; and 42.1% expressed that the lack of recognition would cause them to leave.
In like manner, Soundarapandiyan and Ganesh (2015) explored the employee turnover phenomenon using interviews and questionnaires. The study reported the following elements involved in employee turnover: poor supervision, dissatisfaction with compensation packages, sporadic scheduling, and emphasis placed on quantity rather than quality, job insecurity and ineffective performance appraisal systems.
The crux of the matter is that all organizations should consider employee turnover. Employees are an asset (Alkahtani, 2015) to all organizations; therefore, retaining employees should be a priority (Kot-Radojewska & Timenko, 2018). Furthermore, HRD units should be mindful of all the drivers and strive to retain the best workers (Pathak & Srivastava, 2017).
In the context of HRD, employee turnover can be “detrimental” in that it can stunt an organization's growth, development and performance (Alshanbri et al., 2015; Anvari et al., 2014). The review of the voluminous literature about employee turnover disclosed both negative and positive consequences (Ampomah & Cudjor, 2015; de Mesquita Ferreira & de Aquino Almeida, 2015; Surji, 2013).
Employee turnover is expensive (Alkahtani, 2015; Choudhary, 2016; Figueroa, 2015; Ugoani, 2016; Wang et al., 2014). Employers can spend millions of dollars on employee turnover costs annually. After loosing an employee, an organization will have to consider recruitment, advertisements and training expenses. Recruiting, hiring and training a new comer may total 50% to 200% of the employee's annual salary (Leider et al., 2016). According to Shahin (2014), it takes 250% of a worker's salary to replace that worker. Additionally, if an employee is dismissed, the company may have to bear gratuity, separation packages or vacation payments. Phillips and Connell (2003) encapsulated from studies they conducted a listing of turnover costing for types of positions in the workforce (see Table 1). The positions are outlined by category starting with the entry level to middle management. The percentages represent how much it would cost an organization to replace an employee.
Table 1. Turnover Costs Summary
Another negative effect of employee turnover is low productivity (Buzeti et al., 2016; Li & Jones, 2013; Liu et al., 2015) as the replacement is learning the new position, acclimation takes time. This low productivity can effect the organizations competitive edge (Kwon & Rupp, 2013). In that, the customer service element of the business can be suffering as a result of customers not receiving the product or services that were promised to them. In addition, anytime a high performer leaves an organization, that employee takes with them all knowledge (Buzeti et al., 2016), skills and abilities. This results in a gap that the organization has to remedy. The loss of the high performer can leave an environment that is not so motivating, resulting in employees with a low morale—they, too, become over worked employees. While the organization looks to replace the employee who left, the worker who remains is given extra tasks (Terera & Ngirande, 2014). To the organization this may seem as an increase in profits (Nikravan & Frauenheim, 2014) but low employee morale may result from becoming burnt out. Eventually the employee leaves the company to look for a job that is less demanding. Ali et al., (2014), Roche et al., (2015), and Weaver (2015) all concured that costs, low productivity, low morale are negative consequences of turnover.
A common tenet among HR practitioners is that employee turnover has negative implications on organizational effectiveness. Others argue that it can in fact yield benefits for an organization (Surji, 2013). When a new worker joins the organization to replace a non performer (Kesner & Dalton, 1982; Zhang, 2016) that left, that individual can bring new knowledge, skills and abilities with them (Kesner & Dalton, 1982). The organization has an opportunity of remaining current and on the cutting edge by employing someone who is innovative. The company can also use this instance to focus on promoting the high performing employees who chose to stay and getting rid of complacency.
Another positive consequence is the company being able to reduce labor cost (Kesner & Dalton, 1982). Salaries of the new employees can start at entry level, benefit costs like insurance and pension plans can be decreased. Employee turnover also allows the hiring of a diverse staff. For example, if the organization has a greater percentage of males on staff, turnover here can result in hiring females.
Additionally, employee turnover presents an opportunity for the organization to for restructure as well.
Notably, researchers have suggested that student enrolled in colleges or universities are clients or customers (Bailey, 2000; Giroux, 2009; Singh, 2002). Similarly, others described higher learning institutions as businesses (Cottom et al., 2018; Taylor, 2017). Like the leadership of other businesses or organizations, the issue of employee turnover has gained the attention of academicians. Higher learning institutions, in particular, have realized that it is critical to retain faculty and other personnel. Chakrabarti and Guha (2016) declared that attraction and retention of high valued employees are a big concern of every company. Erasmus et al., (2015) confirmed that, “Talent retention and employee turnover are major concerns for higher education institutions (HEI's) because they are losing highly qualified staff to the private sectors and other HEI's that are able to offer better rewards and benefits (p. 32). To put it another way, voluntary employee turnover can be problematic for educational leadership, large amounts of money and time is invested in the recruitment, hiring and training of the employees. While examining the sources of employee turnover, Jain (2013) observed that Gillespie et al., (2001) relayed that Australian universities reported an increase in stress on the job due to budget constraints, heavy work load, poor leadership, job insecurity, a lack of a recognition system, role erosion, role overload, lack of resources and role ambiguity.
A case study conducted by Issa and Adebola (2014) encompassed 10 academic support staff and three employees from the human resource department. The data collection instruments were observations, interviews and document reviews. The study discovered that unhappy workers lead to employee turnover. The issue of the length of time spent replacing employees who left was mentioned by the participants. They described turnover as a 'disruption;' “High staff turnover affects the smooth running of institutions” (Butali et al., 2013, p. 50).
Masum et al., (2015) also examined employee turnover at the tertiary level in Parkistan. The researchers utilized surveys and personal interviews to ascertain data from 346 faculty members employed with 10 universities in Bangladesh. It was revealed that, compensation packages, lack of supervisory support, job security, lack of training and development opportunities, and no team cohesion were factors that influenced faculty to leave the university. Career growth, working conditions, organized policies were what satisfied them enough to stay with an organization.
In the same way, Bibi et al., (2017) surveyed 330 persons employed with the Parkistanian public university. The results reported were that, compensation, promotional opportunity and the work environment would effect employee loyalty.
Butali et al., (2013) investigated the effect of turnover on organizational performance in a University of Science and Technology. After utilizing a questionnaire, interviews, analyzing documents and completing observations it was found that employee turnover indirectly caused an increase in unsatisfied customers, low staff morale, low productivity, reduced revenue, created a working environment that becomes mistake 'prone.' gaps in team cohesion and deterioration of an organization's social dynamics, a flawed communication system and an everything-is-not-okay message spread rapidly.
Organizational effectiveness is the concept that describes an organization's capability to achieve its business targets (Mitchell & Sevilla, 2011; Oghojafor et al., 2012; Thibodeaux & Favilla, 1996). The McKinsey 7-S framework in Figure 3 was created by Tom Peters, Robert Waterman Jr. and Julien Phillips in the 1980s. These consultants were assisted by Richard Pascale and Anthony G. Athos (Ravanfar, 2015). This McKinsey 7-S model is a tool used for determining if an organization is in fact achieving their goals. The seven interrelated components are separated into two categories: Hard Ss:strategy, structure and systems and Soft Ss:style, staff, skills and shared vision. The theorists postulated that if an organization is performing well, all seven of the elements need to be streamlined and boltered.
Figure 3. McKinsey 7-S Framework (Pitt Koufopoulos 2012)
The tenet stressed the necessity of having employees who are knowledgeable, skilled and productive. It also highlighted that human resource managers ought to ensure that recruitment, training, motivation, incentives are the order of the day so as to ensure employee commitment and organizational success (Mandhanya, 2015; Ravanfar, 2015).
Employee turnover may impact an organization's effectiveness (Ampomah & Cudjor, 2015). Turnover can cause an organization to become disruptive, reduce its outputs and can greatly affect the bottom line (Ahmed et al., 2016). They contended that employee turnover is linked to organizational effectiveness in a way that turnover may have damaging effects on services rendered. While companies are waiting for replacement workers, productivity suffers (Surji, 2013). Valuable time is wasted and more errors are made due to unexperienced amd untrained employees. Inevitably, the waiting not only impacts the quality of service, but may brings about gaps in meeting the demands of the customers. Futhermore, unsatisfied customers lead to an increase in customer complaints.
Businesses who are able to attract, hire, motivate and retain employees are in a better position to sustain their competitive edge (Anvari et al., 2014). It is critical that organizations focus on the needs of their human capital, employee commitment and working conditions (Ahmed et al., 2016).
While this work focused on secondary data to provide a look at the determinants, consequences, trends of employee turnover and its implications on the effectiveness of an organization, the findings provided support that employee turnover is an issue that some organizations face. However, the findings are limited and not representative of all higher education institutions. The findings also presented implications for HR practioners. HR units can use the data to make informed decisions pertaining to retention strategies. With that said, the researcher agrees that there are areas which call for future research as it relates to employee turnover in an academic setting. The following studies can be conducted for advance scholarly endeavors about employee turnover:
To investigate faculty's perception of employee turnover. This would provide insight into what professors' views are regarding employee turnover. Educational leaders can then use the data to enhance retention strategies.
To explore the relationship between age, sex, training, compensation and employee turnover. This study can be conducted to determine if there is a correlation between employee turnover and the aforementioned variables. The data collected can also provide feedback that prove valuable when informing intervention systems.
To examine factors of employee turnover in a public versus private tertiary institution. Comparing results from this research may account for the effects of turnover as it relates to physical environment, culture, processes, resources and leadership. Data collected can also fill gaps that may exist in understanding employee turnover in public and private higher education institutions.
To assess the impact of employee turnover on student achievement and retention. It is recommended that a qualitative study be conducted using focus groups that will allow students/ participants to share views, opinions, ideas and feelings. Attitudes, feedback and themes may also be yielded in this type of study, thus providing answers education leaders can use when designing, developing and implementing a retention model.
Prior to the start of the study, the researcher was of the opinion that employee turnover was an issue experienced by those HR practioners in the business industry and assumed that since universities are prestigious, have structure, allows career advancement and established salary scales they were immune to employee turnover issues. The researcher believed faculty remained until death and later learned that various organizations experienced the performance gap.
A key takeaway for the researcher was that support and guidance are necessary when conducting research. Support is needed from colleagues or family members when completing studies. Work like this cannot be done alone. There were many times when colleagues were asked to read over this article for content and grammatical issues. The researcher realized that collaborating with professors with publishing experience was an asset. The paper cannot be kept a secret. A second, third and fourth pair of eyes are needed to provide the kind of feedback needed to generate a superior paper. It is important to maintain this type of network that would prove beneficial to produce quality academic articles.
Another takeaway was that using secondary sources while it is quick, flexible and inexpensive it is also time consuming. It takes time to collect, analyze and interpret the sources. The researcher now has a better understanding of the intricacy of using them. All research is rigorous, challenging, time consuming and a professional growth opportunity.
Lewin (1951) advised that an organization should identify factors that drive the unacceptable current situation. He postulates that the performance gap should be identified with the intention of addressing and evaluating the changes. As highlighted in this article, employee turnover can be disruptive, expensive and pose a performance gap for an organization. Consequently, Educational leaders must identify the reasons for employee turnover and seek to mitigate them.
The aim throughout this project was to uncover the determinants, consequences, trends in academia and the implications on organizational effectiveness, while heightening the awareness of the issue of employee turnover. The results provided support that organizations should do what it can to mitigate employee turnover. With the price attached to replace workers, HRD practitioners should seek to lessen performance issues that interfere with organizational effectiveness. Training, motivating employees, robust compensation and benefit systems, supervisory support, career advancement, adequate working conditions, organizational structure and resource supply are all critical components of the approach to attract, attain and retain employees. Hence, universities, particularly the HR unit should remain on the cutting edge as it relates to incorporating these aspects into the strategic plan. They ought to look at best practices and employ what other higher education institutions are doing to keep their faculty and staff.
Moreover, a shared vision on the leadership part should be established to ensure that the organization maximizes its talent pool. The work should begin now to revamp policies and procedures; existing structures should be evaluated so as to move toward the re-engineering of the institution. This will promote sustainability.