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Employees Turnover: Can be a serious obstacle to productivity, quality, and profitability at firms of all sizes

EDITORIAL - businesssandesh.in

All businesses, large and small, have some way of keeping track of their finances. Businesses are constantly looking for more ways to keep expenses low. One factor that is often overlooked, however, is the cost of employee turnover. High employee turnover can cost a company more than they might realize in the long run.

This report explains some causes of high employee turnover, who it affects the most, and ways companies can decrease employee turnover in order to cut hidden costs.

Employee turnover occurs when employees voluntarily leave their jobs and must be replaced. Turnover is expressed as an annual percentage of the total workforce. For example, 25 percent employee turnover would mean that one-quarter of a company's workforce at the beginning of the year has left by the end of the year. Turnover should not to be confused with layoffs, which involve the termination of employees at the employer's discretion in response to business conditions such as reduced sales or a merger with another company.

The severity of turnover varies widely by type of business and the economic health of the region where companies are located. Innovative high-tech companies and the most successful manufacturers frequently experience low turnover rates while fast-food restaurant managers expect turnover to be as high as 50 to 75 percent. As another example, coal mining companies in sparsely populated regions experience lower rates of turnover because there are few other job opportunities. 

WHAT IS EMPLOYEE TURNOVER? 

Employee turnover is a ratio comparison of the number of employees a company must replace in a given time period to the average number of total employees. A huge concern to most companies, employee turnover is a costly expense especially in lower paying job roles, for which the employee turnover rate is highest. Many factors play a role in the employee turnover rate of any company, and these can stem from both the employer and the employees. Wages, company benefits, employee attendance, and job performance are all factors that play a significant role in employee turnover. 

Causes of Employee Turnover

There are several factors that cause high turnover within companies. This report will focus on voluntary turnover, because voluntary turnover is something that companies are more able to control. Employees voluntarily quit for several reasons, specifically:

There are several factors that cause high turnover within companies. This report will focus on voluntary turnover, because voluntary turnover is something that companies are more able to control. Employees voluntarily quit for several reasons, specifically:

                         

• pay is too low
• lack of benefits
• tasks are too repetitive
• circumstances listed above such as family, school, or moving
• poor management
• lack of advancement
• burnout
• Compensation package differences Job and employee skill mismatch: the job may be less or more satisfying and challenging according o the employee.
• Inferior facilities, tools, etc
• Less recognition
• Less or no appreciation for work done
• Less growth opportunities
• Poor training
• Poor supervision
• Less work and life balance practices

The performance of the organization - an organization perceived to be in economic difficulty will also raise the specter of impending layoffs. Workers believe that it is rational to seek other employment.

The organizational culture - much has been written about organizational culture. It is sufficient to note here that the reward system, the strength of leadership, the ability of the organizations to elicit a sense of commitment on the part of workers, and its development of a sense of shared goals, among other factors, will influence such indices of job satisfaction as turnover intentions and turnover rate.

The characteristics of the job - some jobs are intrinsically more attractive than others. A job's attractiveness will be affected by many characteristics, including its repetitiveness, challenge, danger, perceived importance, and capacity to elicit a sense of accomplishment. A job's status is also important, as are many other factors. 

EFFECT OF EMPLOYEES TURNOVER

High turnover can be a serious obstacle to productivity, quality, and profitability at firms of all sizes. For the smallest of companies, a high turnover rate can mean that simply having enough staff to fulfill daily functions is a challenge, even beyond the issue of how well the work is done when staff is available. Turnover is no less a problem for major companies, which often spend millions of dollars a year on turnover-related costs. For service-oriented professions, such as management consulting or account management, high employee turnover can also lead to customer dissatisfaction and turnover, as clients feel little attachment to a revolving contact. Customers are also likely to experience dips in the quality of service each time their representative changes.