Turnover and how to stop unwanted turnover in organisation?

The competition of competent employees is increasing in Europe’s working life because workforce is getting smaller. Post-war baby boomers are reaching retirement age and the same time fertility rates among women have decreased. This means challenges for organisations when they have higher needs to retain their employees due the demographic change in population but also because turnover processes are highly expensive. Organisations need to find ways to keep their employees more satisfied and motivated, as satisfied and motivated people are more likely to keep their jobs. In this way organisations have better possibilities to retain their competent employees and avoid unwanted turnover.

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I will present next, what is meant by the term turnover. Second I will explain some means that employer can use to avoid unwanted turnover in their organisations. In the end, some conclusions follow.

What is turnover?

Turnover can be described as voluntary termination of membership in an organisation by an individual who receives monetary compensation for participation in that specific organisation (Mobley 1982). However, it is important to distinguish between the different categories of turnover, because all of it is not harmful for employer.

Turnover can be divided into dysfunctional and functional turnover and into involuntary and voluntary turnover. Dysfunctional turnover occurs when high-performing employee leaves from the organisation. It is costly for the organisation, and it can result e.g. from appealing job offer from other organisation or lack of career development possibilities in the current organisation. Turnover is functional, when low performing employee leaves from the organisation. This can have positive effects to organisation e.g. it can prevent stagnation and reinforce innovation in the organisation. Involuntary turnover takes place, when employer makes the decision to discharge the employee who is not performing satisfactorily. This can occur e.g. when an employee is not efficient enough at his work or have conflicts with other employees. From an employer’s view, involuntary turnover can be rated as beneficial, as those workers who are not performing satisfactorily are dismissed by the company itself. In the long run, the emerging costs from the termination of employment can be equated trough another employee showing better work performance. Turnover is voluntary when employee self decides to resign from the employer for which one is working. It can result e.g. from appealing job offer from other organisation or lack of career development possibilities in the current organisation. Voluntary turnover can be seen to be harmful to the employer, because it is not the employer who decides about employees’ leaving the jobs and therefore often competent and productive worker can be lost. Organisations should strive to avoid dysfunctional turnover, the situation that competent employee leaves the organisation because he is not satisfied to the current situation or his possibilities in the organisation. Keeping employees more satisfied or motivated to their work, might be answer to retain employees.

Means how employer can retain employees – concentrating to motivating employees?

To gain a salary can be seen as the most important reason why individuals work. Money is needed to pay apartment, food, clothes and transport. Intriguing question is, why people who have suddenly got a huge amount of money continue working, even when they don’t actually need to? Concept of motivation helps to clarify this. Motives consist of inner states that energise, activate and direct behaviour of the individual as he or she strives to attain a goal or acquire an incentive. Motivation concerns the factors that pull or push us to behave in certain ways and it is made of three components. First one is the direction; what the person is trying to do. The second one is effort; how hard is the person trying and the third one is persistence, how long the person continues trying. Motivation can be divided into extrinsic and intrinsic motivation. When a person is intrinsic motivated he is acting because of the task that he is doing is challenging or fun and completing the task brings him pleasure. Motivation is extrinsic when the task is done solely because of rewards, especially material ones (e.g. pay, bonuses).

Rewards systems in organisations can help to attract, retain and motivate people in the desired direction. In human resources management, reward policy encompass all activities connected with compensating the employees for the effort they put in achieving organisational goals. Compensation includes wages, bonuses, benefits, praise, recognition, esteem and self-competence. Rewards can be divided into two groups of components. The first, intrinsic components refers to non-financial factors such as feelings of recognition, achievement, responsibility or personal growth. They can be used when work and work environment is designed the way that employee is able to to achieve these components in his work. The second, extrinsic components consists of financial incentives (money and other benefits) that originate from sources outside the individual. Its main purpose is to influence the employee attitudes and behaviour but as well control labour costs and maintain efficiency. Extrinsic components can use payments that are given because of good performance of the employee, team or the whole organisation. (McKenna, 2012.) However, it is important to consider, how these achievements are celebrated. For example celebrating these together in teams may foster sense of belonging to the organisation and influence to attachment to organisation. A cafeteria plan can be useful tool when the aim is to plan competitive extrinsic reward system for employees. It is a plan that allows staff to choose from a variety of benefits to formulate a plan that best suits their needs. Its options may include health and accident insurance, cash benefits, tax advantages and/or retirement plan contributions. However, there is some research evidences that whereas extrinsic rewards are useful in the short run, in long run non-financial incentives may be more effective in motivating employees. According to Barr, reward systems may contribute to employee attraction, employee retention and employee motivation. Retaining employees, organisations have to make sure that they offer their employees satisfactory monetary benefits (salary, bonuses) which are competitive when compared to external employment market. In addition, importance of each employee’s contribution to organisation need to be recognised. In organisations, attention should be guided to motivating employees also with intrinsic components, e.g. giving praise about well done work and offering possibilities to development and more responsibility.

Need theories of motivation are based on the idea that there are psychological needs, probably of biological origin that lie behind human behaviour. When the needs are not met individual experience tension which one try to put right. The best known theory is Maslow’s (1943) hierarchy of needs. Maslow proposed that individuals try to progress up the hierarchy of needs in the following sequence: physiological needs (food, drink, sex), safety (need for physical and psychological safety), belongingness (need to feel attachment to persons), esteem (to feel of being valued or respected, how worthwhile or confident person feels) and self-actualisation (need to fulfil one’s potential). Only when the lower need is fulfilled e.g. physiological need, taking a step up to the next level of hierarchy is possible. All of the Maslow’s need, expect self-actualisation, can be fully satisfied. In Maslow’s theory especially belongingness, esteem and self-actualisation are needs that be can considered in the work context; how to affect them to retain employees. The belogningess-need is important motivator of behavior when there is need to belong to a group of workers, for example the opportunity to give and receive friendship, understanding or compassion in the workplace and to be accepted by colleagues. The employer could try to support activities that will strengthen good relations at work to retain employees. For many employees the atmosphere of the workplace is very important and people might stay longer at work because of good relationships at workplace, even if the other aspects of work would not be that satisfying. Self-esteem includes the need for self-respect and self-confidence, the need to achieve something worthwhile as a result of performance, to be fairly independent at work and the need to perform duties in competent manner. Self-esteem from others include recognition as a result of efficient job performance, the need to be appreciated by colleagues for own contributions and a need to establish a reputation and certain status at work. To retain employees employer could try to serve employees meaningful job tasks and offer possibilities to independent work methods. Also it is crucial important that employer gives feed-back of good job outcomes so that employee knows that his job is meaningful and appreciated in the company. Employer should also take care that if a person’s accomplishments are good, one should be able to have possibilities to higher status or reputation, in other words job development possibilities and appraisals. Self-actualisation imply to self-fulfilment derived from achievement following the successful accomplishment. When possible the employer should offer challenging tasks to its employees that they could use their competence fully. These are some of the methods that could help to retain employees.

Herzberg et al. (1959) examined job-satisfaction in their studies by interviewing over 200 accountants and engineers. They found that there is two aspects to job satisfaction, which can be clarified from two basic needs. The first aspect is, hygiene factors, need for safe work environment which consists of e.g. good salary, safe work and positive relation to boss. This aspect does not handle the work itself, but conditions around it. The other aspect is, motivator factors, the need for personal growth and development which consists of personal achievements, recognition and responsibility. This aspect has most to do with work content itself. When thinking about job satisfaction and job dissatisfaction both of these aspects have their own role. Hygiene factors are related to job dissatisfaction. For example if an employee has low salary, unsafe work environment and negative relationship to boss, the employee will be dissatisfied. However, if salary is good, work environment is safe and the employee has good relationship to his boss, it does not mean that one is satisfied and one have higher work motivation. However, motivator factors are related to job satisfaction. If the work is challenging and employee feels joy because one thinks that one masters the work, is employee satisfied. If the work is not challenging, developing, and joy is not experienced of mastering tasks because, they are too simple, person is not necessarily dissatisfied, but person is not satisfied either. Herzberg’s theory have used in working life a lot as a starting point to method job enrichment which is method that utilises the view of motivator factors. Herzberg argues that job enrichment is important for intrinsic motivation and it is continuous managing process. If the theory of motivator factor holds, managers should not only offer hygiene factors for employees to avoid dissatisfaction, but also provide factors that influence to the work itself so that employees would feel satisfaction to their work. According to Herzberg job enrichment methods in organisations could be following. Employee should be make responsible for his own efforts so that every employee would feel that his job is important and meaningful. Employee should get feedback from his work and every employee should be able to decide own working tempo when it is possible. In addition, every employee should have control of the resources which is used in his work. The work should have enough challenge for the employee that it can utilise the ability of the employee. If employee shows increasing levels of ability, when compared to his tasks, he should be given more responsibility. However if a job cannot be designed to employee’s full abilities then it is important to consider, whether to replace the employee with one that has lower levels of skills. If person’s abilities can not be fully utilised, there will be problems with motivation.

Also in organisation’s recruitment and selection processes it is important to pay attention to employee’s motives and goals for the future. If the applicant has the same values than the ones in the organisation and his long term career goals are compatible to possibilities that organisation can offer in long-run, the possibility to retain that employee is better than if there is no development possibilities for the applicant in the organisation. Career path possibilities and moves should be communicated to the applicant and current employee clearly, because one of the main reasons for turnover are that it is seen that there is no development possibilities in the company.

Conclusions

Organisations should strive to avoid dysfunctional turnover, the situation that competent employee leaves the organisation because he is not satisfied to the current situation or his possibilities in the organisation. Keeping employees more satisfied or motivated to their work, is answer to retain employees. Attention should be  paid to recruitment and selection processes and especially from career development perspective. In addition, reward systems that organisation uses; how competitive they are when compared to external employment market and how intrinsic components are taken into consideration, should be taken into account.

To avoid organisation’s turnover, it is important to consider higher needs of employees e.g.; How well employees can build self-confidence at work, how self-actualisation needs of employees are met and how employee can interact with colleagues at work, what kind of development possibilities organisation offers to its employees, can employee fully use his skills and competences at work and how good performance is recognised, appraised and celebrated in organisation and how feedback is given. Barely concentrating on work environment and salary is not not enough to retain employees. Securing motivator factors can be crucial to avoid dysfunctional turnover and job enrichment methods can work as an answer to retain employees.

Sources:

Arnold, J. & Randall, R. (2016) Attitudes at work. In Work Psychology. Understanding Human Behaviour in the Workplace. Chapter 6.

Arnold, J. & Randall, R. (2016) Approaches to work motivation and work design. In Work Psychology. Understanding Human Behaviour in the Workplace. Chapter 7.

Peterson, S.L. (2004). Toward a Theoretical Modell of Employee Turnover: A Human Resource Development Perspective. Human Resource Development Review, Vol. 3, September, 209-227.

Hom, P.W., Mitchell, T.R., Lee, T.W., Griffeth, R.W. (2012). Reviewing Employee Turnover: Focusing on Proximal Withdrawal States and an Expanded Criterion. Psychological Bulletin, Vol. 138, No. 5, 831–85.

 

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