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Effects And Causes Of Employee Turnover

1533 words - 7 pages

EFFECTS AND CAUSES OF EMPLOYEE TURNOVER INTRODUCTION “Employee turnover is the ration of organizational members who have left during the period being considered divided by the average number of people in that organization "Price 1977. “A company's greatest asset is not its financials, buildings, equipment or services- a company's most important asset is its employees”. (Susan Kaplan-Williams) Employees are company’s intellectual capital. They not only bring their skills and talents, they also bring ideas, creativity, innovation, commitment and desire to learn. They are self-motivated even before they begin working for an organization. That motivation stems from the need to provide a home, ...view middle of the document...

It is therefore should be every organization’s strategic goal to retain and take care of its most important asset “its employees. There are substantial variations in turnover levels for different industries. In retailing around 19 per 100 employees leave each year, whilst in hotels, restaurants and pubs this figure is around 38 per 100 employees (Cully, 1999). Equally, this will also affect the judgment of your potential investors. Organizations have continued to ignore this fact and are now finding themselves losing their skilled and talented employees to other organizations or their competitors.

LITERATURE REVIEW “Frequently managers refer turnover as the entire process associated with filling a vacancy: Each time a position is vacated, either voluntarily or involuntarily, a new employee must be hired and trained. This replacement cycle is known as turn over "Woods 1995. Organizations with poor working conditions, undesirable jobs, wage and salary inequities and restricted opportunities for advancement can predict a high level of labour turnover, (Raymond 1995). Organizational stability has been shown to have a high degree of correlation with low turnover. Indications are that employees are more likely to stay when there is a predictable work environment (Zuber, 2001). Likewise, the inverse of the relationship has also been found to be true. In organizations where there was a high level of inefficiency there was also a high level of staff turnover (Alexander et al, 1994). Potential negative consequences of employee turnover include operational disruption, demoralization, negative public relations, personnel costs, strategic (Beam, 2009).

Companies incur direct and indirect expenses, which include the cost of advertising, headhunting fees, human resource costs, loss of productivity, new hire training, and customer retention, every time they have to replace an employee. These expenses can add up to anywhere from 30 to 200 percent of a single employee's annual wages or salary, depending on the industry and the job role being filled. (Beam, 2009). "While lower paying job roles experience an overall higher average of employee turnover, they tend to cost companies less per replacement employee than do higher paying job roles. However, they incur the cost more often. For these reasons, most companies focus on employee retention strategies regardless of pay levels." (Beam, 2009). While many leading companies place more effort in employee retention, most are clueless. They accept employee turnover as a normal part of doing business. High turnover organizations spend a substantial amount of resources on recruiting and replacing their workforce, while smart organizations invest in employee retention. Research has shown that it is getting more difficult to attract and keep the right employees. Many businesses and industries are desperate to find ways of finding and retaining employee with the right skills and attitude. “There is going to be...

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