Why Organization Should Be Concerned With Labour Turnover

Why Organization Should Be Concerned With Labour Turnover Any business needs a source of labour to function. This axiom applies equally whether we rely solely on a basic economical model of the firm, with labour as one of the four factors of production (Bannock, Baxter and Davis 1988), or a Marxist account, which emphasises labour power (Marx 1867 / 1946: 169), or subscribe to more complex models of organizations, which place importance on intellectual or human capital and the importance of knowledge management (Harrison 1999: 409-412). To establish the need to manage resourcing, we do not need to refer to any given context, it follows apriori from any view of an organization. Even if organizations of the future have virtual employees, they will need to manage them as a resource. When an employee leaves, this can have a variety of effects that not only impact on the organization, but also the individual employee and wider society (Mobley 1982: 15-31). These can be positive or negative (Mobley 1982; Hom and Griffeth 1995: 13-33), and a great er understanding of the process of labour turnover can increase the degree to which organizations and employees within organizations can influence these effects (Dalton, Krackhardt and Porter 1981; Dalton, Todor and Krackhardt 1982). In addition to the management of resourcing being an a priori concern, there is a posteriori justification for studying this phenomenon. Current explanations of employee turnover fail to offer either predictive or explanatory power (Aquino, Griffeth, Allen and Hom 1997). Despite an enormous literature on turnover in organizations (Price 1977; Mobley 1982), there is as yet no universally accepted account or framework for why people choose to leave (Lee and Mitchell 1994). This prohibits understanding the phenomenon after the event, yet neither is there an accepted means of assessing the likelihood of an individuals deciding to leave in the future (Terborg and Lee 1984), which prohibits prediction of turnover. 1.2 Voluntary and involuntary turn over: We use turnover to mean voluntary cessation of membership of an organization by an employee of that organization. This answers Prices call to make voluntariness explicit, which is important as it is in instances where the employee controls the leaving process that organizations and theorists have an interest in turnover. This definition also refers to cessation of membership (Mobley 1982: 10), but it should be acknowledged that from a more institutional or organizational perspective, turnover may also include accession or entry. The scope that a voluntary / involuntary dichotomy offers for classifying the phenomenon enables directed, systematic research (Price 1977). Particularly where turnover is thought to be associated with a factor (such as organizational commitment), or to be preceded by a psychological state (such as intent to quit), drawing the distinction between voluntary and involuntary turnover is important, otherwise assessment of such a relationship in terms of all organ ization leavers will be flawed. Involuntary turnover may occur for reasons which are independent of the affected employee(s), such as the (real or perceived) need to cut costs, restructure or downsize. Inclusion of these cases in a study of organization leavers, will mean any relationship between turnover and a personal characteristic will be significantly diluted. Even where involuntary turnover occurs for reasons associated with an individual employee (such as poor performance), it is likely these cases are more representative of the wider sample of organizational members in relation to the processual dimension of a decision to leave than any sub-sample of organizational leavers would be. Where an instance of turnover is genuinely voluntary, this instance represents the exercise of choice and is the result of a decision process. To this degree, the set of instances of involuntary turnover (where employees have been forced to leave) is likely to be more representative of the totality of organizational members than the set of instances of voluntary turnover (where employees have chosen to leave). To the extent that turnover involves leaving, instances of voluntary turnover also represent a purer social phenomenon, as they catalogue where individuals have chosen to terminate a significant relationship. By way of contrast, in involuntary instances, because these are in some sense owned by an abstract entity (the organization), a relational aspect to turnover namely cessation of membership, is lost. Instead other more impersonal considerations such as (remotely defined) utility prevail. In terms of the nature of social science research, study of involuntary turnover is likely to focus on consequential and extrinsic aspects, rather than intrinsic characteristics.We accept that in reality the apparently straightforward dichotomy between voluntary and involuntary turnover has limitations (Vandenberg and Nelson 1999). For example, records of instances of turnover may misrepresent the extent to which a turnover decision was voluntary. Where exit interviews are conducted, interviewers may not wish to press too hard when questioning an employee, it is also possible that they will not wish to record details that would cast the organization or the employee in a bad light (Campion 1991). The employee may have similar motives for being reticent about their reasons for leaving, and added to this they may have concerns about the extent to which full and frank disclosure could harm their prospects of receiving a favourable reference. All of these factors may muddy the putatively categorical voluntary / involuntary distinction. In 1969, Samuel called for organizations to have in place their own definitions of turnover and voluntariness in order to help them plan resource-related issues. 1.3 Avoidability: Voluntary turnover may be classified as avoidable (Abelson 1987; Campion 1991). In other words, is it a case of employee instigated turnover which could have been prevented. This classification is useful per se, as it can indicate the global scope for future planned intervention. For example, where an organization is able to identify that the bulk of voluntary turnover is beyond their control e.g. where voluntary turnover is a result of relocation by a spouse or partner, they may profit better from initiatives which seek to manage turnover post hoc, rather than spend on theorised preventative measures (e.g. increasing salary levels). 1.4 Measurement: Turnover is often not measured in a sophisticated enough manner to enable discrimination between cases where employees have chosen to leave, and cases where they have had to leave for reasons out of their control. Often organizations use a relatively crude measure of turnover such as below: (Marchington and Wilkinson 1996) ______Leavers in year_________ X 100 Average number employed in year This does not distinguish the cases where people left because they were dissatisfied, from cases where people left because of ill health or where they retired, or where they were made redundant. Yet measurement of turnover needs to be sophisticated enough to enable those responsible for resource planning to identify various categories of leavers (Worthington 1992: 278; Forbes and McGill 1985: 11-12). This is because any single-figure measure of turnover will be inadequate in so far as it treats all those who leave as an homogenous group. 1.5 Employee turnover factors: The factors that have been identified in context of the employees turnover are, Expectation not met Mismatch between the person and the role Mismatch between the person and the culture of the firm Insufficient opportunities for growth and advancement Insufficient recognition or appreciation Problems with direct manager Dissatisfaction with pay Stress Lack of work life balance Loss of confidence in the firm, particularly leadership Expectation not met In met expectation model by (Porters and Steers in 1973) the main factor behind the leaving activity of the employees in any organization is Expectation not met. In this model it is quite cleared by the writers that if an employee find his/her expectations wrong after joining the organization, which he/she had created about the employer before entering into it, then he/she immediately discouraged intrinsically and as a result going for search of alternative employers who are matching to his/her expectations of a work life. Such kind of expectations could be of any kind like it could be of working conditions, salary, career development, career growth, compensation and benefits, autonomy, time flexibility etc. The model describes this that the employees before entering into the company created a net of high expectations from their employers but if any or some of those expectations are damaged after joining the organization then the ultimate effect come up in the form of employees disco uragement which led them to leave the organization of similar category they are looking for. Mismatch between the person and the role In (P-O fit model by Kristof in 1996) the main reason defined against high turnover issue in the organizations is the Mismatch between the person and the role. According to the research work performed by Kristof, the incompatibility among the personal skills and the job requirements results frustration in employees. As the work required to be done by the employees requires specific skills and if the employees lacking in those skills then ultimately the effect will be to the employer and as a result the employer will get after the employee again and again which makes the employee irritated and an internal motivation to switch the job will force him to do so. Similarly, the research work explained in quite detail that such kind of differences occur across the organization quite often when the job specification and description is not communicated properly to the employees. Mismatch between the person and the culture of the firm The major factor behind the high turnover among the employees of any organization which is Mismatch between the person and the culture of the firm. The model is describing it in very much detail that the surroundings are creating a great impact on the human beings output. The more the friendly and challenging the environment will be the more a person will be able to perform up to his/her maximum level of output. Reference: Employee Turnover Problem Faced by Telecom Industry in Pakistan Insufficient opportunities for growth and advancement The Organizational Equilibrium Model is very well known and recognized researchers, named,(March and Simons in 1958) describing an other important factor related to the dissatisfaction of the employees which is Insufficient opportunities for growth and advancement. The model is specifically focusing on the pre-entrance expectations of the employees towards their employers. Because not in every case it istrue that according to employee the value is money rather in current era, as described in (P-O fit model by Kristof in 1996) the less organizational culture of opportunities are playing a major role in de-motivating the employees and leading them to move to the competitions (sometimes at less financial benefits). Insufficient recognition or appreciation (Lee and Mitchells Unfolding Model in 1996) explains important factor-insufficient recognition or appreciation. According to the researchers this factor actually forcing the employees to move out of the organizations, if, their efforts are not recognized very well by the employer. Whenever an employee going after to perform some task, assigned by the management, he/she always looking towards the management for getting some rewards from them for creating intrinsic motivation for him/herself. Problems with direct manager Sometimes the employers are very much efficient in providing excellent organizational culture which led their employees to remain with them for longer terms. But, still, the employees are not feeling comfortable in remaining there in the organizations. (Hulin in 1995) identified the reason for such kind of problems facing by the employers. Hulin described a very important factor-Problems with direct manager in a model, named, Attitude-with drawl behavior Model in 1995. The same factor is also identified by the (Chen et al. in his Organizational Citizenship Model in 1998) in which, he showed agree ness with lot of outcomes of the Hulins model. They both actually tried to focus on the importance of the behavior of the supervisors/ managers with their subordinates. According to their point of view, if you stressing the ego of the human beings then it is to be quite obvious that they will move to defensive mode against that particular person who is the main source behind that stress. But in an organization they could never come up with such behavior against their managers so consequently they decided to move away of the organization. Lack of work life balance (Lee Mitchells Unfolding Model in 1996) and (Beach Mitchells Image Theory in 1988) defining a very critical factor- Lack of work Life Balance behind high turnover in the organizations. As every personal in the world have his/her, own, life to which he/she want to give proper time other than work life. So whenever employees found any conflict in between both lives they prefer to move somewhere else where they could avoid such kind of conflicts. 1.6 Costs of Turnover: Analyses of the costs associated with turnover yield surprisingly high estimates. The high cost of losing key employees has long been recognized. However, it is important for organizations to understand that general turnover rates in the workforce can also have a serious impact on an organizations profitability, and even survival. There are a number of costs incurred as a result of employee turnover. These costs are derived from a number of different sources, a few of which are listed below. Recruitment of replacements, including administrative expenses, advertising, screening and interviewing, and services associated with selection, such as security checks, processing of references, and, possibly, psychological testing. Administrative hiring costs. Lost productivity associated with the interim period before a replacement can be placed on the job. Lost productivity due to the time required for a new worker to get up to speed on the job. Lost productivity associated with the time that co workers must spend away from their work to help a new worker. Costs of training, including supervisory and co worker time spent in formal training, as well as the time that the worker in training must spend off the job. Costs associated with the period prior to voluntary termination when workers tend to be less productive. In some cases costs associated with the communication of proprietary trade secrets, procedures, and skills to competitive organizations. Public relations costs associated with having a large number of voluntary or involuntary terminations in the community spreading gossip about the organization. Increased unemployment insurance costs. Reference:www.sigmaassessmentsystems.com/articles/empturnover.asp 1.7 Model of Employee Turnover: The goal of effective management of turnover dictates that a high level of sophistication, and thereby particularity, needs to be achieved by organizations in order to selectively influence the turnover process. Voluntariness may need to be defined differently for each organization (Samuel 1969) and measurement of turnover may need to be at a level of detail far greater than that currently employed by many organizations (Campion 1991). Additionally, even where problems in costing turnover (Cheng and Brown 1998; Hom 1992) can be resolved, there remain inescapably problematic aspects to determining relationally defined aspects such as avoidability (Abelson 1987) and functionality (Dalton et al. 1982). In the light of these contingent complications, the aim of a comprehensive theory of turnover can seem unrealistic. This aim seems further complicated if an attempt to predict turnover behaviour is our goal, although as( Lee and Mowday 1987) point out, although researchers tend to emphasi ze prediction as a criterion in judging models, we should not lose sight of the importance of understanding as a goal of scientific enquiry. The phenomenon of turnover is of interest to organizations and theorists because it is significant (Price 1977), potentially costly (Mobley 1982) and relatively clear cut (Porter and Steers 1973). It also describes the end result of a decision process (Lee and Mitchell 1991). All these characteristics also indicate that the phenomenon is likely to attract interest from modellers. The framework of study includes three different models based on various factors that are assumed to have a strong effect on employees turnover intention. First model is presented in Fig.1. It includes three sets of independent factors: demographic, controllable, and uncontrollable. Turnover intention is the dependent factor in this model. Turnover intention has been used very often in past researches. (Fishbein and ajzens1975) theory of attitude postulates that the best predictor of individual behavior will be measure of his intention to perform that behavior. (Shore and martin 1989) noted that turnover intention is an appropriate dependent variable because it is linked with actual turnover. (Price and mueller 1981) even recommended the use of turnover intention over actual turnover because the latter is more difficult to predict as there are external factors that affect turnover behavior. Moreover, turnover intention may be a better barometer of management practices than actual turnover. For example, it is possible that, despite high turnover intention, actual turnover is low because of high unemployment in an industry. The low turnover in this cas e, may mask the poor management practices. Employee Turnover model fig 1 Factors Age Gender Education Tenure Income Level Job Category Turnover intension Uncontrollable Factors Perceived Alternative of Employment opportunity Job Hopping Controllable Factors Pay Nature of Work Supervision Organizational commitment 1.8 Industry Analysis MOBILINK ® PAKISTAN Vision Statement: To be the leading Telecommunication Services Provider in Pakistan by offering innovative Communication solutions for our Customers while exceeding Shareholder value Employee Expectations. Reference: (http://www.mobilinkgsm.com/about/vision.php) Mission Statement: To be the leading mobile service provider in Pakistan, providing the best quality services for the maximum number of customers, the best working environment for our employees and top value for our shareholders. Objectives: To be No. 1 in all its mobile businesses Continue to capture more market before competitors arrive. To increase market share up to 70% this year To achieve turnover of 20% in 2007 To provide customer with best value for spending and service at low cost Reference: Employee Turnover Problem Faced by Telecom Industry in Pakistan Market Share: With the monthly additions average around 2.5 million subscribers, 2007 has been a phenomenal year for the mobile market growth in Pakistan Mobilink is pioneer of GSM technology in Pakistan and is market leader in mobile Communication. Mobilink has got huge market share of 62%.It portfolio remain in stars for last 5 years or so. Mobilink has market penetration of more than 2.3% per year. It has 2.5 million users. Mobilink Jazz has 85% share of prepaid. Due to large market share and high profitability it helps to expand the business. Reference: http://telecompk.net/2007/10/01/mobile-market-2007-mobilink-at-top/ 1.9 Employee turnover factors involved in mobilink pakistan The factors that have been identified in context of the employees turnover a Mobilink ® Pakistan. are: Employees at Mobilink often look for alternative jobs The alternative of job is positively related to employee turnover (hulin et al,1985; steel and griffeth,1989). The importance of this factor increases in the context of Pakistan telecom industry because there are more competitors and opportunities for finding jobs with other employers are in great number. The presence of number competitors in this industry may be a reason for the employees to perceive that they can easily find jobs in the market. Given the labor market conditions and number of jobs available in market, may potentially be a major reason of employee turnover. Employees expectations about Mobilink are not met In met expectation model by (Porter Steers 1973) it was discussed that if the expectations of employees about their job are not met, they become dissatisfied and it eventually makes up the turnover intention. Employees were asked various questions about their expectations about Mobilink before they joined it and the level to which these expectations were met. Employees are not satisfied with the training opportunities and training effectiveness. Training is very important in employees growth and career development. If employees are not provided with sufficient training opportunities and relevant training contents, then they dont see growth in their career and this phenomenon creates dissatisfaction among employees. As a result, they think to find some job where they hope they can get enough training opportunities for their career development (March Simons 1958) Organizational Equilibrium Model). Employees at Mobilink were asked about the training opportunities and training effectiveness. The collected information will help to find out the significance of this factor in employee turnover at Mobilink. Employees are not satisfied with the amount of help they get from supervisor and fellow workers. Employees satisfaction with supervision and with the help they get from co-workers is negatively associated with employee turnover (Debrah,1993). Supervisors attitude with subordinates is very important in organizational context. It is commonly believed that employees dont leave the job, they leave the bosses. The help from peers and co-workers also plays a very important role in organizational commitment. Employees are tied in strong bonds if the overall culture in an organization is helping and friendly. On these theoretical justifications, it was very important to find out the significance of employees satisfaction with the amount of help they get from supervisors and fellow workers in Mobilink. Employees are not satisfied with the growth opportunities One of the major motivation for employees to work with any organization is the growth and advancement opportunities they are provided. (In organizational equilibrium model, 1958, March Simon) discuss that insufficient opportunities for growth and advancement prove to be dissatisfying for employees. This hypothesis will help us to identify that whether or not employees are satisfied with the growth opportunities at Mobilink. Employees do not have a good work-life balance. Lack of work-life balance is a source of employees dissatisfaction (Lee Mitchells Unfolding Model 1996). If after the job, employees are not left with enough time to spend with their families and for their personal activities, they are de-motivated and this fact forces them to think about leaving the job (Beach and Mitchells Image Theory 1988). In present conditions of competition among different employers in telecom sector, there is a possibility that employees are being stretched to give maximum output and this may cause a misbalance between the work and employees personal life. 1.10 Strategies to minimize employee turnover: Strategies on how to minimize employee turnover, confronted with problems of employee turnover, management has several policy options viz. changing (or improving existing) policies towards recruitment, selection, induction, training, job design and wage payment. Policy choice, however, must be appropriate to the precise diagnosis of the problem. Employee turnover attributable to poor selection procedures, for example, is unlikely to improve were the policy modification to focus exclusively on the induction process. Equally, employee turnover attributable to wage rates which produce earnings that are not competitive with other firms in the local labour market is unlikely to decrease were the policy adjustment merely to enhance the organizations provision of on-the job training opportunities. Given that there is increase in direct and indirect costs of labour turnover, therefore, management are frequently exhorted to identify the reasons why people leave organizations so that appropria te action is taken by the management. Extensive research has shown that the following categories of human capital management factors provides a core set of measures that senior management can use to increase the effectiveness of their investment in people and improve overall corporate performance of business: Employee engagement, the organizations capacity to engage, retain, and optimize the value of its employees hinges on how well jobs are designed, how employees time is used, and the commitment and support that is shown to employees by the management would motivate employees to stay in organizations.. Knowledge accessibility, the extent of the organisations collaborativeness and its capacity for making knowledge and ideas widely available to employees, would make employees to stay in the organisation. Sharing of information should be made at all levels of management. This accessibility of information would lead to strong performance from the employees and creating strong corporat e culture (Meaghan et al. 2002). Therefore; information accessibility would make employees feel that they are appreciated for their effort and chances of leaving the organisation are minimal. Workforce optimization, the organisations success in optimizing the performance of the employees by establishing essential processes for getting work done, providing good working conditions, establishing accountability and making good hiring choices would retain employees in their organisation. The importance of gaining better understanding of the factors related to recruitment, motivation and retention of employees is further underscored by rising personnel costs and high rates of employee turnover (Badawy, 1988; Basta and Johnson, 1989; Garden, 1989; Parden, 1981; Sherman, 1986). With increased competitiveness on globalizations, managers in many organizations are experiencing greater pressure from top management to improve recruitment, selection, training, and retention of good employees and in the long run would encourage employees to stay in organisations. Job involvement describes an individuals ego involvement with work and indicates the extent to which an individual identifies psychologically with his/her job (Kanungo,1982). Involvement in terms of internalizing values about the goodness or the importance of work made employees not to quit their jobs and these involvements are related to task characteristics. Workers who have a greater variety of tasks tend stay in the job. Task characteristics have been found to be potential determinants of turnover among employees (Couger, 1988; Couger and Kawasaki, 1980; Garden, 1989; Goldstein and Rockart, 1984). These include the five core job characteristics identified by (Hackman 1975) and (Oldham 1980) skill variety, which refers to the opportunity to utilize a variety of valued skills and talents on the job; task identity, or the extent to which a job requires completion of a whole and identifiable piece of work that is, doing a job from beginning to end, with visible results; task significance, which reflects the extent to which the job has a substantial impact on the lives or work of other people, whether within or outside the organisation; job autonomy, or the extent to which the job provides freedom, independence, and discretion in scheduling work and determining procedures that the job provides; and job feedback, which refers to the extent to which the job provides information about the effectiveness of ones performance (Tor et al., 1997). Involvement would influence job s atisfaction and increase organizational commitment of the employees. Employees who are more involved in their jobs are more satisfied with their jobs and more committed to their organization (Blau and Boal, 1989; Brooke and Price, 1989; Brooke et al., 1988; Kanungo, 1982). Job involvement has also been found to be negatively related to turnover intentions (Blat and Boal, 1989). Job satisfaction, career satisfaction, and organisational commitment reflect a positive attitude towards the organization, thus having a direct influence on employee turnover intentions. Job satisfaction, job involvement and organisational commitment are considered to be related but distinguishable attitudes (Brooke and Price, 1989). Satisfaction represents an affective response to specific aspects of the job or career and denotes the pleasurable or positive emotional state resulting from an appraisal of ones job or career (Locke, 1976; Porter et al., 1974; Williams and Hazer, 1986). Organisational commitment is an affective response to the whole organisation and the degree of attachment or loyalty employees feel towards the organisation. Job involvement represents the extent to which employees are absorbed in or preoccupied with their jobs and the extent to which an individual identifies with his/her job (Brooke et al., 1988).The degree of commitment and loyalty can be achieved if management they enrich the jobs, empower and compensate employees properly. Empowerment of employees could help to enhance the continuity of employees in organisations. Empowered employees where managers supervise more people than in a traditional hierarchy and delegate more decisions to their subordinates (Malone, 1997). Managers act like coaches and help employees solve problems. Employees, he concludes, have increased responsibility. Superiors empowering subordinates by delegating responsibilities to them leads to subordinates who are more satisfied with their leaders and consider them to be fair and in tu rn to perform up to the superiors expectations (Keller and Dansereau, 1995). All these makes employees to be committed to the organization and chances of quitting are minimal. 1.11 Conclusion Statistical analysis prove that Mobilink employees have sufficient perceived alternatives for jobs, employees dissatisfaction with the performance management system and employees bad work-life balance, have proven to be valid. Whereas other hypotheses, employees expectations about Mobilink are not met, employees are not satisfied with the training opportunities and training effectiveness, employees are not satisfied with the growth opportunities and employees are not satisfied with the amount of help they get from supervisors and fellow workers, proved to be invalid. So, on the basis