Analyse Staff Turnover, Its Cost and Effects on the Business and Develop Strategies to Improve Retention.

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Analyse staff turnover, its cost and effects on the business

and develop strategies to improve retention.

Subject: Human Resource Management MGT 201

Student Name: Brenda Lai (YUN-CHU LAI)

Student Number: 00038680T

Lecturer: Alison Knight

Staff turnover, or labour turnover, is a percentage of a number of employees that leave a firm in a period of time. Reasons for leaving can be voluntary, such as resignation, relocation to another company or any other personal reasons that cause the employees unable to continue the job. It may also be involuntary such as being terminated due to poor job performance, absenteeism or violation of work policies. Companies that have too low or too high turnover rate are generally inefficient and low-productive. Firms that have high turnover rate will have an overall decreasing in competency and productivity because the frequent replacement of workers as well as increasing in costs. However, it is not necessarily true that the lower the turnover rate, the better for the business. Businesses that have very low turnover rate could result in a tiring, inactive and demotivating work environment. As employees form the backbone of every organization, it is critical for managers to analyse the causes for high or low turnover rate, develop retention practices and maintain a steady, satisfied workforce.

Turnover costs for many organizations are high and can have significant impacts on the financial performance of an organization. Turnover costs can be categorized into two kinds, direct costs and indirect costs. Direct costs include recruitment, selection and training of new employees, expense of advertising positions, and costs of temporary replacement of employees. Indirect costs, which refer to loss of efficiency and productivity, can be caused by a variety of reasons such as inefficiency and lack of experience of the newly appointed employees, breakage of tools caused by mishandling of equipment by new employees, lack of cooperation and coordination between old and new employees, costs of increased supervision and support for the new employees, the time used for reading resumes and interviewing the candidates. The costs mentioned above are only general ideas that can be found in most businesses, however turnover costs can vary from different industries. For example, as a sales company, losing one sale could mean losing more than one important client at the same time. If the business is service-based, employers need to make sure they keep key employees. If employees leave, the company can face serious problems due to lack of professional services resulting in high staff turnover which could cost the business more than anything else. Smart companies pay attention to retaining of employees and minimize the act of turnover, which will then be discussed more in details in the following paragraphs.

In a human resource perspective, for most organizations the goal is to lower staff turnover, maintain consistency in the workforce and train more skilled employees. High staff turnover can be costly to the business financially and also create problems internally. Internal problems include low employee morale, low employee royalty and stressful employees. This can then lead to decrease of productivity and efficiency. On the other hand, companies that have a low staff turnover rate are generally more productive and successful. (This is not an assumption; low voluntary turnover might sometimes be a negative for organizations. Details will be discussed at the next paragraph.) Reasons being are that the employees trust each other, respect their leaders and feel a sense of belonging while working in the company. Employees in a positive and motivated work environment are normally more loyal and willing to dedicate their personal energy to the job. In addition, an organization that offers a better payroll system compared with others with similar...
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