Factor Contributing to High Employee Turnover
Service plays a crucial role in the developed countries and it is a growing economic driver in developing countries. Since it offers more work opportunities than product based commodities, the service sector has been taken seriously in Malaysia as it is the key driver towards its growth. The main focus of this study is to look at the service industry that faces a major problem of employee turnover. In a much smaller scope; the focus would be on employee turnover in the hotel, retailing, call center, kitchen department which had not been explored quite significantly. The study would attempt to discover aspects which actually perceived by the employees as important for them to retain employment in the service sector.
The exit of low performing employees is beneficial to an organization. However, the exit of important and valuable human resources from the organizations leads to loss of the knowledge possessed by the leavers, and also has a huge effect on the cost of operation, as a result of the high cost of filing the positions that are vacant. The total costs of employee turnover are hard to measure, in particular the effects on the organization’s culture, employee morale and social capital or loss of organizational memory. Hence, turnover contradicts the benefit that should have derived by organizations when they spend scarce resources attracting, selecting, socializing employees, and developing and retaining performing employees (Wright & Bonett 2007).
Turnover can be defined as the rate of change in the working staff an organization during a defined period. There will be voluntary and involuntary turnover intention. Practitioners can differentiate between instances of voluntary turnover, initiated at the choice of the employee and those involuntary instances where the employee has no choice in their termination (such as long term sickness, death, moving overseas or employee-initiated termination). Typically, the characteristics of employees who engage in involuntary turnover are no different from job stayers. However, turnover can be predicted and controlled by the construct of turnover intent.
The problem of employee turnover in service sector (eg; Security Force, Customer Service, Call Centre people which all these people are working in private sector) which was highlighted in mass media, has lead to an alarming issue of increased employee turnover rates in a number of private organizations in Malaysia. It has also become a major issue to company’s top management as it can be directly related to organizational ineffectiveness. The ineffectiveness could be in terms of lowering in productivity and also in terms of the cost incurred in the organizations for direct investments in human capital, recruitment and manpower training.
Another factor of turnover is the idea that there is controllable versus uncontrollable turnover. Controllable turnover does not include things such as death or retirement (Van der Merwe & Miller, 1975). Turnover for purposes of studying the potential correlation to organizational stress, strain and coping refers to “individuals who voluntarily leave organizations” (Price, 1977).
During this century, a variety of conceptual models for the turnover process have been developed. Organizational support theory has received a lot of attention in its examination of the employee-employer relationship (Eisenberger, Huntington, Hutchison, & Sowa, 1986; Rhoades & Eisenberger, 2002). Turnover has been defined as “the degree of individual movement across the membership boundary of a social system” (Price, 1977). Besides, turnover can be refer to a person who has voluntarily “quit” or “resigned”, or it can be used to refer to an individual who has involuntarily “retired”, “died”, been “laid off”, or “dismissed” (Price, 1977).
Mobley (1977) developed a model of employee’s turnover decision process that begins with the evaluation of one’s current position and eventually leads to either voluntarily quitting or staying through a process of evaluation. The evaluation process examines job satisfaction or lack of, the expected costs of leaving one’s current position, as well as the existing alternatives. The intention to leave occurs immediately before one actually either leaves the current position or stays (Mobley, 1977).
Therefore, study in factor contributing to high employee turnover in service sector can help the organization to make an adjustment on their current policies and procedures as an effort to retain employees from leaving the organization. In addition, the results of this study will help organization make a better decisions concerning the importance of supervisory behavior by giving them information about how pay , promotion, work itself and supervision influence employees’ perceptions on turnover intention.
2.0 LITERATURE REVIEW
2.1 Definition of Turnover Intention
Denvir and McMahon (1992), defined labor turnover as “the movement of people in and out of employment within an organization”.
Eade, (1993), defined employee turnover either voluntary or involuntary. Correspondingly, on the basis that people leave an organization for multitude of reasons that may not be management related.
According to Tett and Meyer (1993) and Rumery (1994), the turnover intention refers to the conscious and deliberate willfulness of the workers to leave the organization’. Vandenberg and Nelson (1999) defined intention to quit as the ‘individual own estimated probability (subjective) that they are permanently leaving their organization at some point in the near future.
According to Bigliardi, Petroni & Ivo Dormio (2005) intention to leave refers to individuals’ perceived likelihood that they will be staying or leaving the employer organization. Employees with high withdrawal intentions from the organization subjectively assess that they will be leaving the organization in the near future (Mowday, 1982). Intention to depart from an occupation is a much more difficult decision than to leave a job (Blau, 2000).
Meanwhile, Souza-Poza & Sousa-Poza (2007) define ‘intend to leave’ as the reflection of the (subjective) probability that an individual will change his or her job within a certain time period and is an immediate precursor to actual turnover.
According to Steers & Mowday (1981), individuals’ turnover decision generally has been characterized as rational choices individual make regarding their current job and organization.
Park & Kim (2009) added, a worker’s intention to leave an organization include mere thoughts of quitting the organization (thinking and quitting), and statements by the worker that he or she actually wants to leave the organization (intent to leave). Nevertheless, behavioral intention to quit has found to be strong predictor of personnel turnover across industries and theoretically is believed to be important antecedent to turnover. Turnover intention is the final stage before the actual turnover takes place. Arnold & Feldman (1982) supported to the idea that turnover intention is the final cognitive variable immediately preceding and having direct casual impact on turnover.
Bigliardi, Petroni & Ivo Dormio (2005) indicated that turnover is motivated by the dissatisfaction of the individual with some aspect of the work environment (including the job, co-workers or organization) or the organization with some aspect of the individual, such as poor performance or attendance. Hence, an employee with high withdrawal intention to leave the organization might finally leave his or her occupation.
Carmeli (2005) also pointed out that withdrawal intention is identified as a strong predictor of an employee’s actual turnover (Mobley, 1982; Mobley, 1978).
Rossano (1985) defined turnover as voluntary termination of participation in employment from an organization, excluding retirement or pressured voluntary withdrawal by an individual who received monetary compensation from the organization. Turnover is considered as a bad sign for the organization as it involves considerable visible and hidden cost. It was considered as a part of economic development and globalization of the economy.
Newstorm & Davis (1984) had recognized that high turnover at any organizational levels constitutes a waste of human resources. In today’s changing world of work, reasonable levels of employee-initiated turnover facilitated organizational flexibility and employee independence, and they can lessen the need for management layoff. This study is important as it contributes to the managers to know better about their employees’ satisfaction level.
3.0 PROBLEM STATEMENT
In the era of globalization, turnover is a persistent problem in organizations and it is common in every type and size of organization and at every organizational level. Employee turnover is a serious issue especially in the field of human resources management. It is very costly for an organizational and the cost is due to termination, advertising, recruitment, selection and hiring. When an employee leaves an organization, the ability of the remaining employees to complete their duties may be affected. Job satisfaction has been identified as an important factor in the working lives for all occupational groups. Employees who have satisfaction in their job are more likely to be committed to their organizations and decreased the intention of quit from the job. Klang Valley was occurred one of the highest number of new job registrants and active job registrants in Malaysia. The figures showed (refer appendix) the increased number of job seekers reflected that they are looking for a new job which can satisfy them where they highly commit with organizations. From this study, it indicate that job satisfaction is significantly correlated with continuous commitment and will affect the decision of employees whether want to continue or quit from a job. For contributing to the further understanding of these related terms, the task of this study is to examine the relationship between job satisfactions toward turnover intention among service sector employees in Malaysia. The study tries to identify problem arising like pay, promotion, the work itself and supervision which lead to dissatisfaction among employees in service sector and possible high turnover. Therefore, to reduce the turnover intention of employees, the organization must find the factors that caused the turnover intention and affect the job satisfaction of workers.
4.0 FACTOR CONTRIBUTING TO HIGH TURNOVER IN SERVICE SECTOR
There may be several factors involved why an employee leaves their job. It could be a voluntary turnover where the employees choose to leave. Some of these reasons include better career opportunities, increased compensation, and boredom with current tasks. Involuntary turnover occurs when employees are asked to leave for reasons including poor performance or inappropriate behavior. Turnover has both monetary and non-monetary consequences. These costs include separation processing, recruitment, new-hire training, lower productivity, loss of revenue and team morale. What creates high turnover differs across industries; it is always going to higher in retail, catering, hotel, call center etc when compared to banking, because a high percentage of employee’ in hotel, catering, retailing, restaurants and call center are students or travellers, taking short-term positions in order to earn before moving on. The traditional constraints such as long working hours, antisocial working hours, low pay, unstable, seasonal employment, low job status also make employment within service industry especially in Retailing/Hotel sector appears unattractive to many employees. Thus, it can be said that the retailing/hotel industry clearly has more volatile labor movement and high labor mobility. These problems also arise and become so rampant in many organizations especially in Klang Valley and turnover rate is significantly higher in the hotel industry compared to other service sector
Other factor that caused to employee high turnover is job dissatisfaction. High turnover and low productivity are the biggest indicators of job dissatisfaction. Employers aware of these signs earlier implement strategies that support improvements to working conditions, job training and leadership development — all primary factors that contribute to job dissatisfaction and thus high turnover and low productivity.It's a common source of frustration for many organizations. There are some common reasons for this lack of stability. One effective way of looking at the problem is to examine why employees tend not to quit and instead remain committed to the organization. Committed employees who remain in an organization feel that they have a lot of control over their own destinies within the company. They feel that their voices, opinions, and ideas are valued and taken into consideration when decisions are made. They do not experience the same sense of isolation and detachment experienced by employees who feel uncared for and under-valued. My experience in working with few organizations mostly in service sector such as Retailing, Hotel and Shipping Industry has shown me that those who spend a significant amount of time training their employees have fewer turnovers. While training sessions may be perceived as too expensive and time consuming, the payoff in lowered turnover, high morale, and greater productivity is well worth the effort and time invested.
On the other hand, satisfied employees have a strong sense of understanding about what is expected of them. Management communications are clear and frequent about expectations and goals. Everyone understands the mission. Employees are strongly encouraged to ask for clarification of unclear job performance requirements.
Committed and satisfied employees speak of a sense of fairness that they perceive a lack of favoritism, and avoiding the perception that "some are more equal than others."
Contrary to what some employers might believe, salary and benefits, although important, are not the main reasons that employees are satisfied and remain committed to their job. Instead, they say they feel that their employer truly cares about them. This sense of caring needs to be demonstrated from the top all the way down to the employee's immediate supervisor. While many organizations have a very kind and caring CEO, the value of the caring boss is greatly diminished if the employee experiences a strained relationship with his or her immediate supervisor. Often the weak link of the supervisory level goes unnoticed by top management although it produces dissatisfaction severe enough to promote a high turnover rate. Dissatisfied employees may have difficulty in communicating their unhappiness to upper level management because of the gate keeper role of their supervisor. There are many other factors that contribute to high employee turnover in service sector such as: 4.1 Employee motivated by higher pay
Every now and again some of the organizations or managers who seem to think that their staff should be doing more than they are paid for and expect that they will work longer hours and give up their breaks to get the job done, usually without any form of reward or positive feedback. No matter how much someone loves their job and loyal in their organization, if they are being offered with a better offer they will likely consider leaving. By keep tagging on what compensation is being offered by the competitors, this is an effective way for any organization to ensure that they are offering comparable benefit packages. In addition to traditional “pay and benefit” compensation, some companies also opt to offer additional incentives such as on-site fitness rooms or day care, discounts on services or travel, and employee assistance programs.
4.2 They’re bored
High-performing workers need to feel that they are being challenged and are moving forward in terms of professional growth and development. Thus, employer has to allocate some time to discuss with their employees and be proactive in discussing career and succession plans with them.
4.3 Poorly managed
A bad boss can make any employee miserable. Even if the staff is completely committed to the organization, if their immediate supervisor or manager creates an uncomfortable work environment they may consider leaving.
Some employees often voluntarily leave a job due to the relationship that they have with their direct managers. As human beings we need routine, structure and consistency. Generally, an employee can settle for average wages and routine or even highly stressful work if the work relationships are positive and motivating. Without that relationship element, employees will have a intention to leave the company. By understanding the common reasons for high employee turnover, company will be able to protect their business from a similar fate. Employees who are well-compensated, challenged, engaged and properly managed will likely be loyal, productive members in the organization for years to come.
4.4 Lack of Training
There is nothing more demotivating than being asked to do a job and not being given adequate training. Some people have the ability to be a fast learner, but they are the exception. The value of training continues to be ignored by most managers. New-hire orientation and skills training are two required components of job preparation for which employers are responsible. Job preparation begins with the initial step in training during new-hire orientation. Employees who start new jobs without any kind of orientation or training are often unaware of workplace policies and processes that would benefit their job performance. Additional training throughout the employment relationship keeps employee skill sets up-to-date and enables a more productive and efficient workforce. When employees lack the training necessary to become more productive, their performance suffers and they will either leave of their own choice for jobs that provide training and employee support or they will be terminated for poor performance.
4.5 Poor Working Conditions
Employees must have the necessary tools to perform their duties. This includes the proper equipment, machinery and computer technology as well as adequate lighting, work space and ergonomically-correct seating. Poor working conditions due to physical elements lead to low productivity and overall job dissatisfaction. The latter, particularly when left unaddressed, leaves employees feeling unappreciated and they ultimately leave.
4.6 Ineffective Leadership
Leadership training, employee development and professional-level seminars and workshops demonstrate the employer’s interest in tapping current human resources for higher-level roles within the organization through promotion-from-within policies and succession plans. Ineffective leadership results from employers’ failure to provide support for employees who demonstrate skill and interest in promotional opportunities. Promoting employees without the benefit of basic leadership training puts the employer at risk for high turnover and low productivity. It’s similar to setting the supervisor up for failure and it jeopardizes employee-supervisor relationships. For example, an employee receiving a promotion based on job competency alone may not have the skills necessary to manage employees who now report to him/her. Leadership training and employee development can help the new supervisor understand how to balance her dual responsibilities – managing department functions and managing people. Without leadership training, however, the supervisor can fail because he/she did not receive the training needed and employees who report to him/her suffer because of potentially poor employee-supervisor relationships. Even if someone has been trained to do a specific job, they are usually working as part of team. They are alongside people with complementary roles, who together deliver a process or solution. It might be a marketing department or a team running a restaurant - the principle is the same. If team lack strong leadership they will not function well, which will lead to disagreements and relationship breakdown.
4.7 Workplace Conflict
Employees involved in workplace conflict — especially when management or human resources fails to investigate or resolve the issues — leave for other employment or simply become disengaged employees whose performance suffers. Unresolved workplace conflict has a risky effect on employee morale. Employer precautions include enforcing workplace policies that support fair employment practices and implementing a process for employees to report incidents that often rise to the level of workplace conflict, such as sexual harassment or bullying.
4.8 Employee Communication
Employers who communicate regularly with employees lessen the risk of creating a workforce that feels undervalued and unappreciated. Keeping employees informed about organizational changes, staffing plans and fluctuating business demands is one way to ensure employees remain with the company. Neglecting employee concerns about job security through lack of communication or excluding employees from discussions that can affect their job performance, such as policy or procedural changes, negatively impacts the way employees view their employer. Their views transform to dissatisfaction and finally low productivity due to low morale and disengagement that may contribute to high employee turnover.
Meanwhile, Hezberg’s (1973) theory is based on two basis types of needs: 1) the need for psychological growth or motivating factors and 2) the need to avoid pain or hygiene factors. The motivating factors constitute elements like achievement and advancement. These are positive elements that contribute towards job satisfaction and motivation. Hygiene factors such as company or organizational policies, quality of supervision, working condition, salary, relationship with peers and subordinates, status and security are negative elements that could cause dissatisfaction at work. In Hezberg’s theory, job satisfaction and job dissatisfaction is totally separate dimension. Therefore, improving a hygiene factor such as working conditions will not make people satisfied with their needs, instead it will only preventing them from being dissatisfied. Generally, Malsow’s and Hezberg’s theories emphasize the importance of individual in organization to advance. The advancement indirectly will change individual’s needs. In consequential, it will help individuals to put extra effort to continuously achieve their needs and satisfaction. Studies have consistently reported that job satisfaction is one of the factors or reasons for employee intentions to leave the organization (Price, 2001).
On the other hand, during a time of high unemployment and financial uncertainly employee turnover will drop as people are worried about their jobs and find it more difficult to get another one. However, this covers the problem of high turnover, and when the economy picks up these organizations will struggle as a large proportion of their workforce move on almost simultaneously.
This study of turnover literature identifies a range of factors that have been shown to be consistently linked to turnover. These include organizational commitment, job satisfaction, alternative opportunities and intentions to quit. Evidence on the role of pay is still somewhat inconclusive, although keeping pay in line with market rates is certainly critical to retaining staff. Workforce turnover is well recognized as an issue of critical importance to the workforce. Lack of employee continuity and organizational stability, the high costs involved in the induction and training of new staff, and organizational productivity are some of the challenges that arise as a consequence of turnover. Based on the aforementioned factor as above, it can be concluded that the findings also implied that the job satisfaction and job characteristics of skill variety, task identity, task significance, autonomy and feedback, tend to decrease if employees experience high level turnover intentions. The other important issue in this study was to assess the contribution of other factors as mentioned earlier that create high turnover and the effects of the factors on turnover intentions. The study also found that job satisfaction, working environment and lack of proper training had more significant effect on turnover intentions than from job characteristics. This result suggests that most of organization should be able to address problems pertaining to job satisfaction in order to overcome turnover intentions. Among the aspects that need to be given priority in addressing turnover intentions in the study are job satisfaction and job characteristics of employee in organization. The study also suggests that when employees perceive their organizations as having greater concern on their job satisfaction and aspects of job characteristics the emotion of employees will be more positive. Finding of this study also suggests that the positive emotion will be yielded if employees perceived as being taken cared by management with regards to their job characteristics and job satisfaction. Ultimately this will develop and increase level of loyalty and commitment to the organization. Findings of this study would help the organizations to understand and formulate strategies and program to overcome turnover problem as well as to ensure efficiency, effectiveness and high productivity in organization. Consequently, the study suggests that organization should consider some aspects that have been identified to be related and have affected the turnover intentions by having proper motivation to them. Therefore, it is an initiative towards a greater understanding of organizational attitudes and behaviors particularly on employees’ intentions to leave the company.
Organizations invest a lot on their employees in terms of induction and training, developing, maintaining and retaining them in their organization. Therefore, managers at all costs must minimize employee’s turnover. Although, there is no standard framework for understanding the employees turnover process as whole, a wide range of factors have been found useful in interpreting employee turnover. Therefore, there is need to develop a fuller understanding of the employee turnover, more especially, the sources- what determines employee turnover, effects and strategies that managers can put in place minimize turnover.
Another step towards understanding turnover within an organization is to determine whether retention difficulties are caused by internal or external factors. While the role of labor market conditions in causing turnover may preclude the use of targeted human resource strategies, this information may be useful in analyzing to what extent turnover is due to outside factors. However, although tight labor markets affect an employer’s ability to attract and retain staff, looking outwards at the local labor market cannot be a substitute for understanding what is going on within the organization. There are few strategies on how to avoid the employee turnover and retain the employee effectively:
6.1 Retention strategies
The retention strategies outlined here are based on organizational-specific initiatives. One of the problems with organizational-case studies is that their experience may not be generalizable, given that the causes of turnover and the resulting strategies are likely to be specific to a particular organization, a site or even a particular group of employees. Another problem is that where a combination of measures are used (which is often the case) it is very difficult to attribute success to one particular element of the strategy. Nevertheless, some common practices can be drawn from these experiences that appear to be successful in helping to improve retention.
Some organization or companies often take a general approach aimed at fully engaging with staff. This may encompass a wide range of measures such as: i) Improving recruitment procedures to ensure candidates receive a realistic impression of the company and the job. ii) supporting new recruits during the critical first few weeks in the job iii) providing clear career paths, interesting work and support for personal development iv) considering work-life balance issues v) keeping pay in line with appropriate market rates vi) offering an attractive employee benefits package vii) creating a pleasant working environment viii) Communicating and consulting effectively with employees.
6.2 Understanding turnover
From my point of view, differentiating avoidable and unavoidable turnover can help organization to understand voluntary turnover more fully. Avoidable reasons include employees leaving to find better pay or working conditions elsewhere, problems with management or leaving for better career opportunities. Unavoidable reasons - which are beyond the organization’s control - include, for instance, an employee having to move because of relocation by a spouse or leaving to fulfill family or caring responsibilities.
If an organization can identify that much of its voluntary turnover is unavoidable it may profit better from initiatives that seek to manage turnover after the event rather than expend resources on implementing preventative measures. On the other hand, if the bulk of turnover is avoidable this offers the potential for targeted intervention. However, if managers assume the turnover problem to be largely unavoidable, they may fail to recognize turnover as a symptom of underlying problems within the organization.
6.3 Measuring turnover
To gain an accurate perspective of internal causes of turnover, it is useful to look at both quantitative and qualitative information. To identify underlying reasons for turnover, qualitative information on the reasons why employees have left is necessary. It is important employers have an understanding of their rates of labor turnover and how they affect the organization’s effectiveness. Depending on the size of the business, understanding the levels of turnover across occupations, locations and particular groups of employees (such as identified high performers) can help inform a comprehensive retention strategy. By understanding the nature of the turnover problem an organization can decide whether to adopt targeted retention initiatives, for example at particular sites or groups of employees, or to manage overall levels so that there is sufficient labor supply.
6.4 Resignation rates
Another way of measuring turnover is to base turnover rates on voluntary leavers or resignation rates only, thus excluding employees who have left for other reasons such as retirement, redundancy, dismissal or redeployment to another part of the organization. However, turnover rates on voluntary leavers can also have its drawbacks because it does not indicate how many staff needs recruiting to cover those employees who have left because of retirement or voluntary internal transfers. One solution is to record separate turnover rates for voluntary and involuntary leavers. Wastage rates can also be used for specific groups of employees or different business units, which allow an organization to detect differences in turnover within different parts of the organization. Overall figures tend to cover potentially significant differences in turnover within an organization. For example, high turnover in one area of the business could produce the same overall rate as a small number of leavers distributed evenly across the organization, but the actions required to deal with these situations would be quite different. Examining turnover by department can identify any local issues or possible problems concerning particular line managers or to monitor turnover among groups of employees with scarce skills. Wastage rates can also be applied to employees with a certain length of service (eg less than one year) which can help pinpoint ineffective recruitment, selection or induction processes.
6.5 Exit interviews and surveys
Organizations typically obtain qualitative information on turnover through exit interviews and surveys. However, it is important to appreciate that the reasons people give for their resignations are frequently untrue or only partially true. The use of exit interviews is widespread yet they can be unreliable, particularly when conducted by someone who may later be asked to write a reference for the departing employee. Where exit interviews are used it is best to conduct them a short time after the employee hands in their notice. The interviewer should be someone who has not had direct responsibility for the individual (ie as their line manager) and who will not be involved in future reference writing. Confidentiality should be assured and the purpose of the interview explained. Alternative approaches involve the use of confidential attitude surveys which include questions about intention to leave and questionnaires sent to former employees on a confidential basis about six months after their departure.
Throughout my working experience, I feel that retail industry is a tough where i found that job stressors (eg; work overload, job ambiguity) are the factors that trigger the chain of psychological states that lead to intention to quit. From my point of view, supervisor support can reduce the impact of stressors on psychological states and intentions to quit. Monitoring workloads and supervisor-subordinate relationships by management may not only reduce stress but increase job satisfaction and commitment to the organization.