Role of HRM is often overlooked in managing employee engagement and communication during employee separations. Who leaves, how they are treated during the exit, what the cause or nature of the exit is, and how remaining employees perceive this all impacts LT sustainability of the org.
Time, money, and resources invested in recruiting, training, and maintaining employees is lost when employees exit a firm. disrupt the org’s ability to produce and maintain the right quantity/quality of talent derail org’s focus on larger strategic issues.
Retail sector has high turnover levels, with very few long-tenured employees. in the hospitality industry, one in every five employees leaves the company in any given year
Turnover: termination of an individual’s employment with an orgpermanent or
The most common reason for termination downsizing or restructuring activity, followed by a desire to find new challenges, then ineffective leadership.
Voluntary turnover: employee initiated termination of employment, usually quits or retirement.
Involuntary turnover: employer initiated, usually dismissals/layoffs. Employee has little or no say.
Employee exits from a firm are usually a mix of voluntary and involuntary turnover.
As an employee gains tenure in a company, his likelihood of quitting/getting dismissed/laid off is significantly reduced. people in management and administration-related positions are less likely to be laid off
Personality characteristics of employees who get laid off in relation to those who quit are opposite.
Higher education reduces the likelihood of lay off, but increases the probability of quitting.
Employees in the goods industry are more likely to experience a layoff
Employees in the service industry are more likely to voluntarily leave their job (quitting)
The Cost of Turnover
Temporary and permanent rates of employee separation affect 30-40% of employees annually.
Turnover rates vary by industry (construction, consumer services industries have highest turnover in Canada, while public services has the lowest), by size of the company (smaller orgs have higher turnover), and by age (older = less likely to experience turnover).
> 50% of Canadian orgs admit that they experience difficulties recruiting and retaining talent.
Some companies are in a constant search for talent, like supermarkets, where the industry-wide turnover rate for courtesy clerks or cashiers is 300% each cashier works for 4 months
The challenge is that the cost of turnover ranges from 150-250% of salary impact on customer loyalty can be 2-3x the direct cost of loyalty
Direct costs of turnover = easier to estimate given that they are more visible, while indirect costs associated with turnover are often overlooked, but are still considerable (lost productivity).
There are four main components associated with the cost of the turnover:
Separation costs: cost of exit interviews, admin functions, and separation/ severance pay
Vacancy costs: cost incurred of increased overtime, use of temp. workers, loss of sales
Replacement costs: cost of recruiting/hiring a replacement (interviews, testing, admin/travel)
Training costs: formal and informal training (performance differential of replacement)
Quitting, resignations, and retirements specific and immediate challenge to success. departing employees migrate to competing firms and create situations where their knowledge, skills, and abilities developed within the firm can be used to disadvantage the firm unanticipated challenges of replacing and retraining employees. predictors of voluntary turnover:
(1) low organizational commitment
(2) low role clarity
(3) low tenure
(4) high role conflict
(5) low overall job satisfaction. age and marital status were negatively correlated with voluntary turnover education was positively correlated with voluntary turnover (more educated = more likely to quit)