What Employers Must Know About Employee Turnover
hen organizations offers vacancies and certain industries
an applicant a job, and are badly hit. In other words,
the individual accepts, the labour pool is drying up. No
it is reasonable to suggest that longer is there a bottomless pit
both parties are confident that of workers ready to knock on
this is the best decision. Among employer’s doors! The growth rate
the questions are why do of the workforce has been
steadily declining since the
25% of new starters resign within 1970s. Both the U.S. Census
six months of joining an Bureau and a report from Andersen
organisation? Consulting indicate that the
workforce will begin to
50% of new starters leave within experience a negative growth rate
two years? beginning in the year 2015.
Despite the ever changing Workers in the 25 to 44 year old
economic landscape, the issue of age category; traditionally the
employee retention is remains. source of executive talent, are
The labour shortage that plagues already diminishing. Front-line
employers at the height of an managers and supervisors are
economic boom will not disappear. increasingly hard to find.
It can only be temporarily off Information technology jobs are
the radar now and then, but it going to remain vacant.
will always come back and at Unfulfilled job offers in the
times, be even stronger. food industry and healthcare
Regardless of the performance of field are driving human resource
the economy, the fact is that professionals to distraction. The
there are not enough quality outlook is an ever increasing
people equipped with the right competition for fewer qualified
skills to fill all the jobs workers. This will necessitate an
enormous emphasis on the need to recruiting and replacing an
retain these workers. Sadly, only endless stream of workers due to
a few organizations are ready to the continuous turnover of their
meet this challenge. employees. As the labor pool
shrinks, employers must focus on
Incidentally, employers say they creating a work environment that
want loyal, motivated employees lets people work productively and
who will stay committed to their effectively and makes them feel
organization. However, they good enough to stay.
threaten these workers with
layoffs and insult them with a Employee retention is the key to
work environment where people competitiveness and strategy for
have to work longer hours and in any organization. Employees
some cases, taking up the slack represent investment in hiring
of two or more people. The and training, and employees have
emphasis on short-term profits the knowledge and experience to
and shareholder return has make a business operate.
shattered the concept of the Employees are also part of
"lifetime job" especially in systems which may be upset by a
Japan. As a result, today’s departure. However, retention is
workers know that their employers far more complicated than simply
see them as expendable so why trying to keep all employees -
should they give their best to an indeed very high retention may
organization that may lay them even be undesirable.
off when profits go south?
Measurables of Employee
Furthermore, these employers who Retention.
see workers as expendable and not
loyal tie up enormous amounts of Consequently, employees need to
time, money, and energy in feel valued and feeling valued
appears to influence their employees who are valued by their
intentions to remain with an employers. Nevertheless, there
employer (Scott, 2002). It was are also challenges and issues
also mentioned that while related to retaining employees
traditionally it has been found such as high employee turnover,
that job dissatisfaction is the cost of retention, asymmetric
cause of turnover, the causal information and agency cost.
process is not well understood.
Thus, retention of talented High Employee Turnover
employees can be one of the many
sources of advantage for an In normal circumstances, demand
organization. Sigler (1999) did for engineers tends to be
mention that if it were reasonably high, thus allowing
measurable a company would keep them to jump from one employer to
each employee: another relatively easily. Recent
figures revealed that engineering
1) whose contribution produces a departments in the aerospace
positive risk adjusted profit for industry have experienced
the firm. turnover rates of 15 per cent in
2000 and 2 percent in 2001. In
2) who will also have a more 2001, it was due to the depressed
positive influence on the firm global economy of that year
than any employee hired to (Applebaum, S.H. et al., 2003).
replace him or her (taking into Another industry that is facing
account the cost of hiring the similar high percentages of
new employee). employee turnover is the
healthcare industry.
Employee retention programs are
directed at productive, A relatively high turnover has
well-trained and experienced characterized senior posts in the
National Health Service (NHS) in employees’ performance may
the United Kingdom since 1991 complicate an organization’s
(Scott, 2002). As a result, it endeavor to retain productive
has been admitted that the employees (Sigler, 1999). It was
strategic stability of the also mentioned that without
organization was at stake. Thus, adequate information an
the NHS has always had a shortage organization may not be able to
of well trained and effective distinguish productive workers
managers. from non productive ones. Thus,
employees often may take credit
Cost of Employee Retention for the successes and finger
point failures to other
Whenever any talented employees employees. This is known as a
leave an organization, it will be moral hazard problem.
detrimental for the company’s Incidentally, companies may
future. Among some of the reasons reward or punish employees for an
given are dissatisfaction, organization outcome for which
underpaid or unmotivated. On the they had no impact (Sigler,
other hand, while trying to 1999).
retain talented employees,
organizations are faced with Insufficient information in this
demands such as higher wages, area may also lead to poor
poor interaction among coworkers, “performance-based selection.”
non compliance to organizational Better employees may move to
practices and superiors’ other organizations due to better
directions. offers thus increasing employee
turnover and replacement cost. In
Asymmetric Information most cases, poor performing
employees are more likely to stay
The lack of information about the in their current position.
Without adequate information, rationality which is a type of
employees with outstanding asymmetric information where both
performance were not rewarded. As the superior does not know the
a result, the difference between information for which to ask from
non productive and productive the employee and the employee
workers will be too small and does not know what to provide.
they will end up receiving the Therefore, Sigler (1999)
same or nearly the same highlighted that productive
compensation and perks. In workers cannot distinguish
addition, there is another themselves from non productive
phenomenon known as bounded coworkers.
About the Author:
Jerry Hall has an interest in Finance, Business and Technology related subjects. If you are interesting in finding out more information on winning at interviews please visit this successful Career Change Website: http://CareerChange.smartreviewguide.com
Read more articles by: Jerry Hall
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