CHAPTER 2: LITERATURE REVIEW
2.4 EMPLOYEE TURNOVER
2.4.1 Types of Employee Turnover
2.4.1.3 Voluntary turnover
Voluntary turnover rate ignores involuntary departures such as resignations, dismissals and redundancies (Brown, 2008). Figure 1 depicts the different types of turnover, that is, voluntary and involuntary turnover. Rates of voluntary turnover are high in occupations that require scarce skills, for example, science and technology and other general low-paying jobs, especially in the retail and food services (Fisher, Schoenfeldt and Shaw, 2003:754). The decision to leave a job has many causes such as a reaction to different kinds of situations. For example, personal conflict with fellow employees can cause an employee to resign, pay, better conditions, mistreatment by an employee‟s manager and sickness, as mentioned earlier, especially diseases such as HIV/AIDS and cholera can cause an employee to be unable to continue working and seek fulltime medical assistance in a hospital or at home (Fisher et al., 2003:755).
Functional turnover occurs when poor performing managerial-level employees leave an organisation thus making it possible for the organisation to recruit a more competent employee (Price, 2000). In order to maintain high productivity levels, some jobs require detailed organisational knowledge about its products, processes, systems and relevant working experience; thus, a managerial-level employee who holds this post becomes difficult to replace, either because the skill is in short supply in the marketplace or the position requires a great deal of organisation specific skills, experience or relationship building with clients that takes time to develop. Employees who can easily be replaced fall under functional
turnover and they should be encouraged to leave with accurate feedback on performance if the organisation operates under a merit system (Fisher et al., 2003:760). New managerial- level employees help initiate new projects, ideas, new product development, services and different ways of accomplishing tasks in an organisation (Grobler, Warnich, Carell, Elbert and Hatfield, 2006:125). Employee turnover also helps an organisation to improve its ineffective recruitment decisions of managerial-level employees who are not suitably qualified for the various positions (Grobler et al., 2006:125). Therefore, such employee turnover becomes functional.
Dysfunctional turnover occurs when top performing managerial-level employees leave, for instance, employees with scarce skills and high organisational knowledge of its processes and systems (Hollenbeck and Williams, 1986 cited in Taylor and Chin, 2004). Organisations that experience high turnover rates will have instability in their labour force, increased costs of hiring and lack organisational efficiency as a high number of production hours are lost as many vacancies will be left unfilled or open. Therefore, employee turnover that affects organisational productivity is dysfunctional (Grobler et al., 2006:125). This is depicted by Figure 1 above.
South African organisations that only consider general turnover statistics may end up resorting to inappropriate strategies based on an incomplete analysis of the relevant data. It is crucial for these organisations to start by identifying the type of employees who are deciding to leave. Turnover may be functional or dysfunctional depending on the quality of employee leaving in terms of their job performance and work achievements; thus, the organisation will be faced with the task of deciding whether to retain the employee or not (Fisher et al., 2003:759). Several studies have been done to discover the link between performance and turnover. It was found that managerial-level employees who perform below the expected standards are more likely to leave than the top performers in an organisation (Fisher et al., 2003:759).
According to Fisher et al. (2003:759), a more sophisticated model for evaluating turnover functionality is depicted in Table 6 below:
Table 6: Performance replaceability strategy matrix
Source: Fisher et al., 2003:759.
Table 6 illustrates how important it is to differentiate turnover situations in terms of both employee work performance rate (high, acceptable and low) and complexity of replacing them (easy, difficult) in the organisation (Fisher et al., 2003:759). In order for an organisation to attain high productivity levels it will have to make use of the different methods in each cell to discourage or encourage employee turnover. Due to the „war for talent‟, it will be difficult for South African organisations, who experience dysfunctional turnover, to replace managerial-level employees who have left the organisation. In cell A, depicted in Table 6, employee turnover is extremely dysfunctional because the top performers will be hard to replace, either because they may have scarce skills or their position needs to be filled by someone with vast specific organisation experience of its processes, policies, products, services or with good relationships with its customers (Fisher et al., 2003:759). Organisations
High
Average
Low
A. Highly dysfunctional turnover
- Retain/develop - Prepare backup
REPLACEABILITY Difficult Easy
B. Dysfunctional Turnover - Retain/develop employee
C. Dysfunctional turnover - Retain
- Prepare back up
D. Functionality depends on Cost of replacement - Retain or replace
E. Short-run dysfunctional
- Prepare replacement - Increase performance or terminate
F. Functional
- Increase performance or terminate
that are characterised by high customer contact and require strong relationships with customers, for example, attorneys and doctors usually have most of the employees found in cell A (Fisher et al., 2003:759).
Cell B, as depicted in Table 6, is comprised of top performers who can be replaced easily. The incidence of turnover in cell B will be dysfunctional but it will not cause a high negative impact to organisational productivity. Organisations should persist in implementing employee retention strategies in order to reduce intentions to leave by these top performers. However, in cell B, organisations should refrain from using complex management development systems and expensive talent retention methods as they will not be necessary because the top performers in cell B will easily be replaced (Fisher et al., 2003:760).
Cell C, depicted in Table 6, is populated by employees who perform acceptably well and are difficult to replace. Their departure from the organisation will result in organisational production or productivity being disrupted, hence their turnover is dysfunctional. Effective succession planning in cell C is crucial because when the acceptable performers leave the organisation they may not easily be replaced. The level of disastrous disruptions in the organisation‟s operational activities would be avoided by doing so. Organisations should make effective retention efforts towards acceptable performers so that they reduce their intentions to leave the organisation (Fisher et al., 2003:760).
Cell D represents acceptable performers who can simply be replaced when they leave the organisation. Even if employee turnover in this cell is functional, it is all based on the amount of money spent on recruitment and development of a replacement. Thus, if it is more likely that the replacement will perform better than the current incumbent, then the organisation can withdraw from providing special efforts to retain acceptable performers in cell D (Fisher et al., 2003:760). Acceptable performers, who show a high level of potential, may be trained to enhance their performance levels. For example, in organisations such as call centres, the tasks employees are supposed to do are simple and repetitive, hence training is not costly, new recruits are easy to find and employees quickly become bored and tired with their jobs within a short period of time (a month or year). Thus, organisations such as call centres encourage employee turnover as new employees have a tendency of being more highly motivated than their co-workers with long tenure records (Fisher et al., 760).
Table 6 depicts cell E and F with employees who are poor performers. In both cells, organisations should aim to fully utilise their performance appraisal and remuneration systems to boost their employees‟ performance to reach satisfactory levels. Efforts to help
increase cell E and F employee‟s performance may work on some of the employees and if the efforts do not have a positive impact on the employees then turnover becomes functional. Cell F employees, who are low performers, may be dismissed if all the legal dismissal requirements have been adhered to by the organisation. Employees who perform below standard in cell E, who are not easy to replace, may be retained by the organisation until their replacements have been found if their performance does not increase to the required levels (Fisher et al., 2003:760).
Thus, South African organisations that clearly distinguish functional and dysfunctional turnover will be able to retain high performers and average performers. As depicted by the model above, dysfunctional turnover is disastrous to organisations, especially when its key managerial-level employees are leaving. The organisation loses its intellectual capital, that is the knowledge that could be used to develop its products and services and thereby improve its business operations. Exit interviews play a crucial role in investigating the incidence and reasons associated with employee turnover. They help provide information on the reasons why managerial-level employees‟ are leaving and by doing so the organisation will be able to take corrective measures to address the problem areas that are identified (Dibble, 1999 cited in Harpur and Sutherland, 2002:34). Employees who are difficult to replace should be provided with necessary retention policies in order for South African organisations to reduce their intentions to leave. However, an organisation‟s retention efforts may be negatively affected by unavoidable resignations.
As depicted in Table 6, avoidable turnover takes place when managerial-level employees are not happy with their current jobs or employers (Loquercio, 2006:4). Avoidable resignations can be a result of job dissatisfaction, uncompetitive remuneration packages, conflict with co- workers or immediate manager and many other factors that can cause employee resignations in organisations (Loquercio, 2006:4). According to Grobler et al. (2006:126), avoidable turnover can be calculated as follows:
Avoidable turnover rate = Total separations - Unavoidable separation Average number of employees
Thus, avoidable turnover can be controlled by the organisation. For instance, managers can be held responsible for high turnover rates in their respective departments by the organisation. A high avoidable turnover rate signals that the organisation‟s retention efforts are not effective and the organisation needs to address policies that could improve the work environment.
Unavoidable resignations are dissimilar to avoidable resignations as organisations cannot avoid them. For example, family relocation, family matters, poor health or death may cause unavoidable resignations over which the organisation has no influence (Loquercio, 2006:4).
Thus, some of the reasons that lead to high intentions to leave and dysfunctional turnover will be discussed in the next section.