STRATEGIC STAFFING: HIGH TURNOVER ISSUES
The issue
All types of businesses and industries can be affected by turnovers. By having a staffing issue, companies will incur huge financial loss due to not addressing their large turnovers. Industries like fast-food, nursing, and education tend to have the highest turnover rates. The following topics will be addressed: the causes of turnovers in companies and industries, the different types of turnovers, the cost and effects of these high turnover rates, and the various ways to help reduce or even eliminate high turnovers for companies and businesses now and in the future. Having a high turnover rate can adversely affect a company and its employees in different ways. With the regular need to hire and train new workers, it is easy to diverge from its mission and the original vision of the company. Having a more effective means of prediction and prevention in an organization can help alleviate the high number of turnovers in an organization; this is highly valuable to organizations because the cost of replacing an employee can be extraordinary. “According to the BLS (2012, 2015), the overall annual turnover rate for all industries in the USA from 2001 to 2006 was 39.6 percent, with the 2015 average being 25 percent” (Kristin Malek, et al, Journal of Hospitality and Tourism Insights). Industries that have high turnovers are hurting by putting themselves in a position of having to pay millions of dollars to try and replace the lost labor. Another cost that must be faced is the talent they will lose when a highly talented worker leaves the workforce, which can be harder to recover from. As discussed in class and in the book, the best a company can try to achieve is by having an optimal turnover that produces the highest long-term levels of productivity and business improvement. Excessive turnover decreases the overall efficiency of the company and comes with a high price tag. Having high performing employees with talent and leadership potential leave the company can cost more than a simple monetary loss for that company. Understanding the effects of losing a high number of employees serves as a motivator to work toward reducing the turnover rate for higher profits and a more appealing work environment. The goal of every type of business is to have a low turnover rate for their high performing employees. By keeping the highest performing employees with the most talent or highest potential in the company, this will save money and keep competitors from gaining their lost talent. Companies suffer most from turnovers during the first two years of work by newly hired employees. As time progresses, the risk of losing newly hired employees lowers, but keeping them at the new position is the most critical time for the company. “Over 50 % of people recruited into an organization will leave within two years. One in four of new hires will leave within six months” (Sarah K. Yazinski, Strategies for Retaining Employees and Minimizing Turnover). It is important to understand the causes and different types of turnovers in order to find ways to prevent further loss of money and talent. By understanding the causes of positions being left by employees, companies are better able to devise a plan to help fix the root issue.
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THE CAUSES OF TURNOVERS
It can be hard for a business to find exactly what could be causing their high turnover rate. Due to so many different reasons why an employee may be quitting a position, it can be difficult to fix the issue. Some of the reasons why employees may leave could be that they feel undervalued, challenged, affected by poor management, or not well compensated. These reasons could cause them to leave the firm, possibly working at a rival work force, resulting in the company having high turnover. Without challenging work or a clear path to personal and professional growth, an employee may look to another company where those desires can be met. Still, even with interesting work and numerous opportunities in the company they may leave, if the pay is low and benefits are non-existent, a high performing employee may choose to accept an offer elsewhere in order to make more money or enjoy company perks. Another cause of turnover in the firm can be due to the company hiring a lot of entry-level employees who do not plan to stay in the position for very long. An additional cause of turnovers is having poor management in place. Poor management can mean a lot of things ranging from illegal activities, having sexual harassment cases or incidents, and having unnecessary micromanagement. If employees feel like they do not receive any praise for their deeds or if they hate the idea coming to work for the company, they are going to start looking for other jobs at a different company. Competitors offering more is also a cause of turnovers. This does not necessarily have to mean overtly financial through salaries, although it can. Competitors can offer employees a more flexible schedule to better meet their needs. These competitive perks and better benefits can definitely be appealing to employees. When looking at the competitor, companies must be aware of what is being offered to their workers beyond the standard hourly rates and competitive salaries. These additional perks and privileges, such as memberships to gyms or being able to telecommute to work, are going to cause employees to leave for the competitors, which will decrease the employee retention rate in a company. “Work Environment: If working conditions are substandard or the workplace lacks important facilities such as proper lighting, furniture, restrooms and other health and safety provisions, employees will not be willing to put up with the inconvenience for long time” (Journal Of Humanities And Social Science). As stated, not having proper working conditions for employees may cause them to leave due to their unwillingness to deal with the work environment. These examples are a few causes of turnovers in companies. They could and do play a factor in employees leaving, but many different and sometimes non work-related reasons could be the reason for their leave.
TYPES OF TURNOVERS
There are six different types of turnovers to beware of in the workforce. There are voluntary, involuntary, dysfunctional, fictional, avoidable, and lastly unavoidable turnovers. Voluntary is when the employee is the one who is leaving the organization on his or her own initiative for personal or business-related reasons. There are different methods that can be used to display this. The first can be given by a written letter or in-person resignation, not showing up for the position, failing to return from an approved leave time, and retirement from the organization. This is the most common type of turnover out of the six. It has a negative impact on morale, productivity, and company revenue. The next type of turnover is involuntary. This is when an employee is asked to leave by the organization. Involuntary turnovers can be due to the following: the employee not meeting the standard work performance that is set by the company, the worker having some type of injury that has caused him or her to become disabled, the company having to downsize or merge with another company due to an acquisition, or the death of the worker. Another type of turnover is functional and dysfunctional. Functional turnover is when the organization removes the employee due to him or her having poor performance. Dysfunctional turnover is when the organization must unwillingly let a high performing employee go due to other causes. The last two types of turnovers are avoidable and unavoidable. Avoidable is when a company knows the main cause why the employee is leaving but does not try to fix the underlying issue. This can be causes such as low pay, the employee not feeling appreciated, and not being able to balance work with life. Unavoidable turnover is when an employee leaves and the organization could not do anything to stop the leave. An example of this would be an employee sending in a resignation letter due to having a terminal illness or having to relocate because of a spouse’s new job. By knowing the differences among each of these types of turnovers, it is easier to classify the cause of the turnover. Familiarizing oneself with these types of turnovers may help the employer fix the issue is something is happening unknowingly within the company. The first step in finding a way to lower the turnover rate in an industry is to determine whether the issue is work-related or personal.
Cost of high turnovers
Having a high turnover can cost the organization money, which can sometimes be an extraordinary amount. The talent that leaves can be almost impossible to replace in the industry, which is the real loss that can be felt by the organizations and by the community the organization is based in. “The cost of turnover is an important economic issue because about one-fifth of workers voluntarily leave their job each year and an additional one-sixth are fired or otherwise let go involuntarily” (Heather Boushey and Sarah Jane Glynn, CAP). With people leaving jobs due to work issues or personal reasons, problems may arise for the industries needing them to remain in the workforce. For example, “…the UK is now facing a situation where 1 in 5 nurses is aged 50 or older. At the same time demand for a skilled, experienced nursing workforce is growing as skill shortages also affect other medical and health professions…”(North, N., Rasmussen, et al, New Zealand Journal of Employment Relations). Many new hires in the nursing workforce are leaving due to being underpaid and overworked, causing hospitals to spend more money to retain and hire organizations to look for new nurses that have the proper training in order to fill the growing demand. “…it is costly to replace workers because of the productivity losses when someone leaves a job, the costs of hiring and training a new employee, and the slower productivity until the new employee gets up to speed in their new job.” (Heather Boushey and Sarah Jane Glynn, CAP). Every time a worker leaves the workforce unexpectedly, the company that they worked for must spend money to look for the right person that has the proper education to fill the spot. They must have training sessions that will cost the employer time and money, and then they must wait until the employee is able to work without the need of constant supervision. As employees work in a company, they gain priceless experience that cannot be bought. During the time working at the company, they begin to pick up more duties that were not originally a part of the position when they were first hired. Having a single employee be able to work and handle multiple positions in the company can save the company money. However, when these kinds of employees leave, it causes not only a loss of talent in the company but also, most importantly, requires the company to hire multiple workers to replace a single experienced worker that was able to accomplish much due to years of experience. The loss of these kinds of employees takes years for an organization to be able to replace and even longer to recover. “Nearly 70% of organizations report that staff turnover has a negative financial impact due to the cost of recruiting, hiring, and training a replacement employee and the overtime work of current employees that’s required until the organization can fill the vacant position” (Sarah K. Yazinski, Strategies for Retaining Employees and Minimizing Turnover). Even more so, all these costs can rapidly eat away the employer’s funds and hurt the overall profits of the company due to them having to train and hire new people constantly. When an industry regularly has a huge number of people leaving within a short period of time, it can cause financial problems for the company. This can have long term effects such as affecting reputation of the company or industry, causing an unending need to hire and train workers to replace the ones that have quit, and hurting the growth of the company and its ability to expand.
ways to reduce turnovers
Being able to understand why employees are leaving and knowing the cost they incur when they do leave is a big step in finding a solution to the problem. Sometimes it is not so easy to find out why workers are leaving. One of the ways to help find the cause of the leave is to conduct an exit interview for the leaving employee. During the interview, they can be asked why they are leaving the position to help the company gain insight as to why they may be leaving. By having this type of feedback, the firm can gain information on how to improve the working conditions for their current and future employees. Another way to gain information on an employee’s reason for leaving is to ask him or her to fill out an employee satisfaction survey in order to help the company understand the problem. Once the issue is found, steps can be made to help reduce and possibly eliminate the loss of high performing workers in the labor pool. A step to help achieve this is by having a retention strategy. Having a strategy in place to keep workers from leaving can make the company look more attractive to new applicants for the future. In the long term, the smaller number of employees who leave will require fewer newly hired workers, which will save the company money and, with time, start to attract highly talented workers. Developing a retention plan that addresses the causes of turnover can improve the retention of critical employees and ones that are in key positions in the company. Another way to keep high talented workers is by having the managers give workers challenges to keep them at the peak of their abilities and to make sure that they are appreciated at work. Having clear career paths in the company is a way to keep workers interested. Workers need to know where they can go with enough hard work and time invested in the company. This can help reduce turnovers by showing that they are not working at a dead-end job. Employees see that they can become a bigger factor in the company’s success. This gives a goal and future for the worker. Having better bosses in the workspace is one of the best retention strategies a company can have. Bosses can have a direct impact on worker turnover rates. “…studies have shown the importance of managers on an employee’s workplace environment through employee relationships with their managers, management quality, management style and priorities and manager’s concern for their employees.”( Kristin Malek, et al, Journal of Hospitality and Tourism Insights). Having an environment that is welcoming, respectful, and trusting can make coming to work a much better experience for the employee. By having a good manager in the company, it can reduce the stress of the worker and help increase their commitment to the company. Managers represent the company, so it is important for managers to show interest in the new hires and treat new hires with respect. Employees are less likely to sue the company if they are treated well. “It has been found that with the increase of perceived availability, support and benefits of training that there was a similar increase in affective commitment and lower turnover rates” (Kristin Malek, et al, Journal of Hospitality and Tourism Insights). Giving employees work flexibility can help improve the retention rate, by letting them be able to find a schedule that is right for their life style. It can help them balance work and life. “It’s important to match work/life benefits to the needs of employees. This could be in the form of offering nontraditional work schedules” (Sarah K. Yazinski, Strategies for Retaining Employees and Minimizing Turnover). One of the ways a company can help give flexibility is to implement job sharing. This allows more than one person to fill a single job position. Each person has a part-time position that allows him or her to split the hours, responsibility, pay, holidays, and benefits, depending on how many hours they work each week. Another way is to have flextime. This can help work around the workers’ schedules if they are unable to work a normal nine-to-five job by letting them work a weekend instead of a week day, take a shorter break so they can leave early, or let them work four ten-hour days. Lastly, telecommuting is another great way to give employees the option of working from home instead of having to work on site for their job. Highly qualified recruits tend to favor companies that offer this type of deal, and it gives current workers a way to work while being able to deal with children or be able to attend college classes. As an additional result of reducing turnover and the cost of turnovers, it can sometimes help save the company money. Being able to provide competitive wages and benefits is one of the quickest ways to ensure that they do not leave, but it needs to be well explained what the benefits of working at your business can provide when compared to any other organization. “Offering things like competitive salaries, profit sharing, bonus programs, pension and health plans, paid time off, and tuition reimbursement sends a powerful message to employees about their importance at the organization”(Sarah K. Yazinski, Strategies for Retaining Employees and Minimizing Turnover). Having benefits like gym memberships and access to services such as child care can be a great way to attract new hires and keep them once they begin working for the company. One final way to help keep workers from leaving is by having managers in the company rewarded when they are able to keep top performing individuals from leaving. This type of reinforcement will cause managers to actively engage workers who are under their control. Companies may reduce their turnover rates by implementing one of these strategies.
Conclusion
Having a high turnover is a problem in human resource management (HRM). It is a staffing issue that is causing companies to spend countless dollars hiring new workers and replacing lost workers who possessed critical talents in the company. With so many new hires leaving after only a short time, companies are incurring a high financial burden. Finding the root cause of the issues related to high employee turnover can be difficult. Having surveys and exit interviews can help executives understand what is happening in the workspace and provide the company with possible solutions. A poor work environment can only be tolerated for so long. Having poor leaders, not paying enough, not feeling appreciated, and having other businesses draw away workers can be a cause for a high turnover rate. Knowing and understanding the different types of turnovers that affect businesses is the first step in developing a plan to combat these issues. There are many different ways to help fix these staffing issues: having the workplace be fun and challenging to the employee, having the manager test employees’ abilities and talents so that their workplace is not dull, and showing workers the possibility for growth within the company to motivate them to strive for those higher paying positions. Having better managers who help create a pleasant work environment is a major way of increasing the employee retention rate since managers are the first people a new hire will encounter in the company. Highly talented people who want the freedom of working in a nontraditional environment are more likely to seek employment with companies who offer various work incentives. Offering work incentives to current employees within a company can also reduce the number of turnovers. Also, giving employees perks that other companies do not have can keep workers from leaving, resulting in a lower turnover. Last but not least, rewarding current managers for keeping top performers can give them an incentive to keep an eye out for talented workers. Employees leaving will always happen, but being able to lower the total amount of people leaving the company and being able to keep the top performers in the company is a good way to reduce the cost that comes with having a high turnover rate. By implementing any number of these strategies, management can reduce turnovers in the working industry.
References:
Kristin Malek, Sheryl Fried Kline, Robin DiPietro, (2018) “The impact of manager training on employee turnover intentions“, Journal of Hospitality and Tourism Insights, Vol. 1 Issue: 3, pp.203-219, https://doi.org/10.1108/JHTI-02-2018-0010 Permanent link to this document: https://doi.org/10.1108/JHTI-02-2018-0010
IOSR Journal Of Humanities And Social Science (IOSR-JHSS) Volume 11, Issue 5 (May. – Jun.2013), PP 57-61e-ISSN: 2279-0837, p-ISSN: 2279-0845.www.Iosrjournals.Org Link to document:https://s3.amazonaws.com/academia.edu.documents/32109447/J01155761.pdf? 3DEmployee_Turnover_in_banking_sector_Empi.pdf
Sarah K. Yazinski, August 03, 2009. Strategies for Retaining Employees and Minimizing Turnover, University of Scranton: https://hr.blr.com/whitepapers/Staffing-Training/Employee-Turnover/Strategies-for-Retaining-Employees-and-Minimizing-
North, N., Rasmussen, E., Hughes, F., Finlayson, M., & al, e. (2005). Turnover amongst nurses in new Zealand’s district health boards: A national survey of nursing turnover and turnover costs. New Zealand Journal of Employment Relations, 30(1), 49. Retrieved from https://search-proquest-com.libproxy.troy.edu/docview/213508444?accountid=38769
Heather Boushey and Sarah Jane Glynn. (November 16, 2012). Center for American Progress: There Are Significant Business Costs to Replacing Employees. Can be retrieved from: https://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf
O’Connell, Matthew & Kung, Mavis (Mei-Chuan. (2007). The Cost of Employee Turnover.. Industrial Management. 49. 14-19. Retrieved from: https://www.researchgate.net/publication/211392097_The_Cost_of_Employee_Turnover
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