Quelling Voluntary Turnover

Quelling Voluntary Employee Turnover

Samuel Berger, Martin Ellis, Samantha Harris, Ivan Ravinsen

Statistics and Research Methods for Managerial Decisions

QNT 544

Burt Hollis

November 27, 2005

Quelling Voluntary Employee Turnover

A popular business mantra quotes the quintessential CEO as stating, "My most important assets walk out the door every night, and my most important job is to be sure they all walk back in tomorrow morning."

This elucidative narrative illustrates the importance of retaining quality employees to running a successful business. Thousands of dollars and an equally hefty number of man-hours are devoted to training employees to the standard at which they can contribute positively to the organization. The knowledge these employees receive either formallyÐ'--through training programsÐ'--or informallyÐ'--through years of experienceÐ'--are of an immeasurable value. According to Bartel & Worstel (2000), companies are at risk of losing critical information by allowing individual employees to carry their knowledge and expertise out the door when they leave a company due to layoffs or other attrition. A recent Ernst & Young survey (2003) calculated that the cost of replacing a high-level employee may be as much as 150% of that departing employee's salary.

Management should never set zero percent as their voluntary- turnover goal. Quite the contrary, some degree of employee turnover is normal and beneficial in any workplace. Too little turnover of employees is tied to stagnancy in organizations; effective organizations usually both promote and benefit from a limited degree of turnover by eliminating low-caliber performers and bringing in "new blood" to facilitate innovation. The knowledge bank that new employees bring with them from previous assignments is invaluable to enhancing and broadening the organization's resources, but a "revolving door" is costly.

Employee turnover affects the bottom line of the remaining employees as well. It is a significant factor in understanding wage growth since it affects both wage growth across jobs and wage growth within the job (Michalopoulos, 2001). In the corporate sector, it has long been recognized that high employee turnover means substantial recruitment and training costs and is both the cause and effect of productivity problems (Michalopoulos, 2001). Other costs of turnover are associated with temporary staff placement, fees and training. The money to pay for these associated costs is money that is not spent on increasing the skill set or size of the paycheck of remaining employees.

Labor turnover is also correlated with overall job satisfaction. It is important to analyze labor turnover because this can impact overall productivity and is often a symptom of other difficulties. Understanding the cause of voluntary employee turnover is the first step in being able to control and manage the most costly problem to organizations.

Recent studies on voluntary employee turnover have placed the first term of five years of an employee's tenure as the most crucial (Griffeth et al, 2000). Since employees are most likely to voluntarily leave an organization during these first five years, any research into predicting and/or preventing attrition must focus on employees at this point in their employment. Focusing on this population will save time, money, and effort from being wasted on analyzing a larger number of subjects that are unimportant in the fight to quell voluntary turnover. Further, since the corporate world is exceptionally varied in number and type of industries, another resource saver would be to focus on one specific business. A narrow focus may create a less accurate sample of employees at large, but it is the only feasible way to conduct such a study.

Statistical data composes the majority of secondary sources for the collection of relevant data. The Bureau of Labor Statistics (http://www.bls.gov) publishes an assortment of data related to turnover in each industry type in the United States on its "JOLTS" (Job Opening and Labor Turnover Survey) webpage. Further secondary data sources can be used to correlate statistical data to turnover, for instance, demographic information across the spectrum of industries may reveal a link between age, gender, education, or ethnicity and turnover.

Primary data sources for finding the causes of turnover must be done within the sample chosen from the previously narrowed population. Questionnaires must contain varied types of queries. Rather than dwelling on the trite and open question of "What do you like most/least about working here," the questionnaires must seek out the reasons employees voluntarily leave an organization even if the employee does not know the reason him or herself. This is where hypotheses come in.

When researchers define their null and alternative hypotheses, they can then tailor their primary data collection and even accept or reject their null hypothesis. For instance, our null hypothesis, H0, is that relational variables are not associated with voluntary turnover, with our alternative hypothesis, H1, being that relational variables are negatively associated with voluntary turnover.

Specifically,

H0A: Network centrality is not associated with voluntary turnover

H1A: Network centrality is negatively associated with voluntary turnover

H0B: Perceived coworker support is not associated with voluntary turnover

H1B: Perceived coworker support is negatively associated with voluntary turnover.

Network centrality is defined as interpersonal contact between employees. These relationships help create a shared meaning about goals and values, and let the employees know what it means to be part of the organization. The hypothesis is based on the idea that employees with a great degree of interpersonal relationships (high centrality) are more connected with others in their organization and have greater involvement assisting their coworkers.

Perceived coworker support is defined as ". . . the care and consideration that individuals receive from other organization members" (Mossholder et al, p. 609). The basis for the hypothesis lies in the rationale that demonstrations of care and consideration lead to emotional bonds between coworkers at the same organizational level. These bonds lead to a feeling of