Employee Retention And Profitability: A Critical Analysis

Research Aim

The study of the research focuses upon the critical analysis of the employee retention and profitability of the company that are listed from dirty top ASX companies. The major aspects illustrates the importance of employee turnover or in other words the importance of retention of employees as well as its subsequent effect upon the profitability of the companies (Ahammad, Tarba, Liu & Glaister, 2016). There exist factors that influence the employee retention and hence singer profitability due to the impact of changes in employee retention is a major aspect of concern to be researched. The implication of the research study lies in identifying the effectiveness of employee retention in order to ensure profitability companies.

The major objective of the research can be highlighted as follows:
1. To incorporate the effectiveness of employee retention upon the profitability of Companies.

The research question can be incorporated as follows:

1. How employee retention does renders its effect upon the profitability of a company?

The review of literature incorporates the importance of employee retention and how it is being found to influence the profitability of any organization based on other secondary sources that has executed their research and revealed their findings on the related aspects of employee turnover and labor inputs followed by their impact upon profitability. Different journals, articles, books and online sources are effectively reviewed on this respect to fetch out the relevant findings on the aspect of employee retention and its impacts upon the profitability of companies.

According to Kumar & Pansari, (2016) the aspect of profitability is a matter of concern for any company. Every company significantly delves into the aspects of profitability and the factors that affect it. Employee retention is one of the factor which affects profitability significantly the reason that the willingness of the employees to engage towards the company’s performance impacts up on the profitability of that company. The productivity gas increases when the employee engagement takes place by willingness of the employees. It is being highlighted in the paper, that the overall productivity company is clearly dependent upon the employee engagement and the commitment of the employees towards enhancing the company’s performance in terms of productivity which as a consequence raises the profitability.

According to Kundu & Gahlawat, (2016) the profitability of the company is ability to all competitive advantage in the market by that particular company through raising the efficiency of its deployed products and services into the market. Notably, the paper highlights of fact that to execute the objectives of enhancing efficiency it is important that the employees of the company should work based on their optimal ability and obedience towards the company rather than forced obedience. This will increase the involvement of the employees as well as will lessen employee turnover. Since the employee retention increases the company will be able to utilize the skilled labor force overtime for the long run. This will ensure the stability of the company and hence profitability will be positively impacted.

Research Question

According to Prentice, (2016) employee retention has number of implication towards the profitability of any organization. It may happen that the impact of labor inputs effects organizational profitability however improving the retention of employee’s insurance customer loyalty, raises organizational profitability secures organizational objectives in the long run. Paper highlights of at that it is important to be able to keep the bottom line of any organization healthy strengthen wear engagement towards all the factors cute car seat ability of any organization. It was depicted by the paper 26% of high revenue employee raises the employee engagement by nearby 20 % on an average.  Understand for any organization that highly engaged employees with a company earns nearby 13% terms for the company. The paper revealed the fact that the revenue growth percentage is accompanied by fashion more engagement by the employees. However disengaged employee’s impacts the revenue growth negatively by monotonically decreasing the revenue growth by 15% which makes it lower than the industry average. Notably, profitability of organization are results of the effort of the employees and to ensure employee involvement commitment towards organizational objectives it is important to maintain effective employee retention. This will not only raise the employee engagement but also will be the major factor that influence the employee turnover by retaining more number of skilled employees.

According to Simons et al., (2017) the amount of profit loss due to theft or shrinkage gets reduced if the employee retention gets increased. Notably it was being found that nearby 27% drop in the shrinkage of profit as compared to the business unit takes place when there is 25% list of employee retention huge amount of money. The paper highlighted that employee turnover has twofold impact upon profitability. Firstly in replacing an employee can cost one and half times of the salary while once an employee has been replaced the new employee consumes a period of time to adjust with the organizational rules and to become productive. Profitability depends not only on the sales of the goods and services new employee is able to generate greater amount of revenue with respect to per unit of cost that is being incurred by the organization for retaining that employee. Hence the importance lies as highlighted by the paper in focusing on efficient labor Input and maintaining an organizational culture that motivates employees towards their work followed by raising the productivity as well as profitability.

Literature Review

According to Popli & Rizvi, (2016) the bottom line employees of any organization exhibits direct interaction with cross potential clients and hence they needs superior training to maintain and cultivate and effective employee customer relationship. This in the long run heads the organization to with their consumers at a low cost way up able to reach superior results due to effective engagement of their employees. The employees of the organization becomes effective resource to promote of the organizational activities as well as its products and services. The employee’s works optimize objective by minimizing both human cost as well as financial cost by maintaining a better quality of relationship with their customers to exchange of word of mouth in their workplace or through exchange of information in online platforms.

According to Erickson, (2015) the aspect of profitability can only be raised if the managerial, operational as well as financial plans are implemented by the bottom line of execution of this plans. A company should be cautious enough in order to retain is still employees and ensure their effective grievance management this will not only fulfill individual grievances of employees but also will make them feel that they are important to the organization this will raise the willingness of the employees and will motivate them towards working. Photo organization and hence the organizational objectives of maximizing its profitability will automatically get raised.

According to Terera & Ngirande, (2014) the budgets that are being prepared by various companies should become effectively accomplished if and only if employees a dedicated towards optimizing their performance. The performance of the employees thus plays an important role in ensuring the performance of the organization is optimized. Notably, every organization set focus in announcing profitability how many lacks in understanding the employee needs and fulfilling their requirements. This was the willingness of employees to work for the company and demotivate them towards leaving the job. Organization should be much taking care of the employee needs fulfilling the requisite necessities of them. In return the employees will become motivated as well as will try their best to work for the company.

According to Ritesh & Mehrotra, (2017) depending upon the choice various companies to restore profitability, the factors that affects it, varies. By emphasizing on this issue the paper highlight the importance of employee retention and the labor input should be capitalized with proper specification us job rules. This time the job rules and the commitment of the employees and their willingness to work for that, the profitability of the company will face upheavals and downfalls. Most importantly the paper reflected upon the fact that, it is important can help the skill of the employees is necessary to facilitation of training programs which will ensure that the expertise employees a maximum. Moreover, the employees will find that exist career growth find opportunities to get motivated towards their employed activities for the organization. Thus the organization will have to separately for dancing the motivation of the employees and ensure employee retention rather the employees will wheeling the work of the company for maximizing individual objectives of career prospects as well as for the organizational prospective to maximize profitability.   

The methodology that is being developed on the basis of the companies undertaken to investigate mission of employee retention with the profitability of those companies. The annual reports are being followed as well as value is given in accumulating information regarding the net profit and turnover of employees (Beynon et al., 2015). Descriptive research design with quantitative research approach and positivism is the fundamental methodology that are being followed in order to collect information in the form of processed data and incorporate them to reach significant results.

The process of data analysis is executed based on summarizing the operational status and financial performance of the companies undertaken for the research. The collected data is of 2015-16 and hence they are further been analyzed based on statistical tools of measuring significance among employee retention and profitability of the companies.

Table 1: List of 30 ASX companies

Number of Companies	ASX Listed Companies	Employee turnover (%)	Net profit
1	Adelaide Brighton	21.3	11.4
2	AGL Energy Ltd	26	2.0
3	Aristocrat LeisureStrong Buy	31.4	-8.8
4	Als Ltd	23.6	6.8
5	Atlas Arteria Ordinary Stapled Securities	16.3	21.4
6	Amcor Ltd	16.9	20.2
7	AMP Ltd	21.5	11.0
8	Ansell Ltd	16.6	20.8
9	ANZ Banking Group Ltd	18.2	17.6
10	APA Group Units FP Stapled Securities	20.8	12.4
11	Ausnet Services Ltd	12.1	29.8
12	ASX Ltd	14.6	24.8
13	Alumina LtdStrong Buy	22.1	9.8
14	Aurizon Holdings Ltd	20.1	13.8
15	Bendigo and Adelaide	21.8	10.4
16	BHP Billiton Ltd	29.7	-5.4
17	Boral LtdStrong Buy	25.4	3.2
18	Bank of Queensland	13.7	26.6
19	Bluescope Steel Ltd	21.8	10.4
20	Brambles Ltd	14.1	25.8
21	Carsales.com Ltd	40.2	-26.4
22	Commonwealth Bank	38.9	-23.8
23	Coca-Cola Amatil	42.1	-30.2
24	Challenger Ltd	42.2	-30.4
25	Charter Hall Group Stapled Securities US Prohibited	38.1	-22.2
26	Cimic Group Ltd	42.8	-31.6
27	Coles Group	40	-26.0
28	Computershare Ltd	43	-32.0
29	CSL Ltd	41.8	-29.6
30	Cochlear Ltd	42.2	-30.4

Employee Turnover vs. Profitability

It is been seen that the employee turnover has a pattern of change which has a trending impact upon that of the net profit of the 30 ASX listed companies. This initiates the inquisition related to examining the existing relationship between the employee turnover as well as that of the net profit of the companies and how they are influences each other (Alsglobal.com, 2016). The data also reveals that the proportion of change in the net profit is dependent on many factors for the 30 ASX listed companies. However, employee turnover has also an impact that cannot be overlooked.

Conclusion

It can be concluded that the research will encourage in understanding the prevailing scenarios regarding employee retention and profitability of any organization. Review of the 30 ASX enlisted companies will help in to emphasis on this aspect of employee retention as well as incorporating the effective measures that will be beneficial for raising the company’s performance as well as the overall productivity and profitability of any organization.

References

Ahammad, M. F., Tarba, S. Y., Liu, Y., & Glaister, K. W. (2016). Knowledge transfer and cross-border acquisition performance: The impact of cultural distance and employee retention. International Business Review, 25(1), 66-75. https://www.sciencedirect.com/science/article/pii/S0969593114000912

Alsglobal.com, (2016). Available online at: https://www.alsglobal.com/-/media/als/resources/myals/investor-documents/2016-annual-report.pdf.  [Accessed on 20 December 2018]

Ansell.com, (2016) Available online at: https://www.ansell.com/en/About/Investor-Center/Annual-Reports.aspx. [Accessed on 20 December 2018]

Beynon, M. J., Jones, P., Pickernell, D., & Packham, G. (2015). Investigating the impact of training influence on employee retention in small and medium enterprises: a regression?type classification and ranking believe simplex analysis on sparse data. Expert Systems, 32(1), 141-154. https://onlinelibrary.wiley.com/doi/abs/10.1111/exsy.12067

Erickson, R. A. (2015). Communication and employee retention. The International Encyclopedia of Interpersonal Communication, 1-10. https://onlinelibrary.wiley.com/doi/abs/10.1002/9781118540190.wbeic239

Kumar, V., & Pansari, A. (2016). Competitive advantage through engagement. Journal of Marketing Research, 53(4), 497-514. https://journals.ama.org/doi/abs/10.1509/jmr.15.0044

Kundu, S. C., & Gahlawat, N. (2016). Effects of employee retention practices on perceived firm and innovation performance. International Journal of Innovation and Learning, 19(1), 25-43.https://www.researchgate.net/profile/Subhash_Kundu/post/Could_someone_please_mention_some_important_works_in_the_area_of_employee_retention_and_machine_learning_HR_analytics/attachment/59d650d779197b80779a98e8/AS:[email protected]/download/IJIL190102+KUNDU.pdf

Popli, S., & Rizvi, I. A. (2016). Drivers of employee engagement: The role of leadership style. Global Business Review, 17(4), 965-979. https://journals.sagepub.com/doi/abs/10.1177/0972150916645701

Prentice, C. (2016). Leveraging employee emotional intelligence in casino profitability. Journal of Retailing and Consumer Services, 33, 127-134. https://www.sciencedirect.com/science/article/pii/S0969698916301266

Ritesh, A., & Mehrotra, R. (2017). Innovative attributes of employee relationship management and its impact on retention in software industry. Employee Relatsh Manag, 6(1), 37-43. https://www.voiceofresearch.org/doc/Jun-2017/Jun-2017_11.pdf

Simons, T., McLean Parks, J., & Tomlinson, E. C. (2017). The Benefits of Walking Your Talk: Aggregate Effects of Behavioral Integrity on Guest Satisfaction, Turnover, and Hotel Profitability. Cornell Hospitality Quarterly, 1938965517735908. https://journals.sagepub.com/doi/abs/10.1177/1938965517735908

Static.macquarie.com, (2016) Available online at: https://static.macquarie.com/dafiles/Internet/mgl/com/atlasroads/investor-resources/asx-releases/2018/2018-08-30-alx-asx-release-fin-report-30-june-2018.pdf?v=3. [Accessed on 20 December 2018]

Terera, S. R., & Ngirande, H. (2014). The impact of rewards on job satisfaction and employee retention. Mediterranean Journal of Social Sciences, 5(1), 481. https://www.mcser.org/journal/index.php/mjss/article/view/1925