Motivations to Manage Turnover

1. Economic Trends • Directly related to economic conditions ∙ Unemployment rate Feb. 2010: Nation 9.7% Iowa 6.7%• Turnover high when unemployment is low• Turnover low during poor economic times

2. Demographic Trends• Retirement patterns• Low number of workforce entrants• Next generation may prefer to work fewer hours

3. Changing Employment Patterns

∙ Shorter job tenures• Ages 18 to 32: 8.6 jobs• Overall, employees changing jobs every 4 years

Motivations to Manage Turnover 4. Normal Voluntary Turnover?

● Fortune Magazine’s 100 Best Companies (next 2 slides)● Company rate/level may not be ideal anyway (AZ

Council)•1.6% month (Dec.), 2.7% (Aug)• 13 - 20% / year now normal• Some industries and low level service: 100 - 140% normal

5. Need to Consider Customer SatisfactionSears also linked T/O to customer satisfaction

▲Stores w/high customer sat: 54% turnover▲Stores w/low customer satisfaction: 83%

turnover

6. Need to Manage (but not eliminate) Turnover▪ Who is quitting? ▪ What are the replacement costs?

7. Need to Reduce High Replacement Costs (next slide) ▪ Direct ▪ Indirect

Turnover Rates Among Fortune 100’s Best

Potential SavingsCompany1 Number of

Employees (US)

Turnover Rate

Estimated Turnover Cost per employee2

Reducing Turnover 1%

Savings / year

Merck 39,489 9% $7592 $2,765,000

Cerner 2,953 14% $8000 $240,000

Charles Schwab

18,863 12% $8329 $1,512,000

MBNA America

Bank

16,960 15% $4800 $1,000,000

Average US Company

10,000 15.6% $5000 $500,000

Notes:

1. Based on Public Data from Fortune Magazine’s 100 Best Companies to work for January 2001.

2. Estimated Turnover Costs Calculated at 20% of most common entry level salary ($42,940) as provided in note 1.

Fortune 100 Firms with Consistently Low Voluntary Turnover

Company 2008/09/10 Best Companies Rank

2008/09

% Turnover

S.C. Johnson 27/81/83 2/2

Herman Miller 96/89/97 3/5

Alcon Laboratories 60/74/- 3/3

Cisco Systems 6/6/16 4/5

General Mills 69/99/90 4/4

Devon Energy 48/13/20 4/4

SAS Institute 29/20/1 5/3

Mayo Clinic 59/63/55 5/5

Fortune

Turnover Rates: Mental Health Jobs

Human Resource Assistant

Secretary

Maintenance Worker

Driver

Therapist

Cook

Case Manager

Teachers

Behavioral Health Technician

Teachers Aide

Supervisor

Clinical Director

Accountant

HR Manager

Controller

Executive Director0

6033

100

6016

92

4740

340

27

200

36

14

66

0 50 100 150 200 250Annual Turnover Rates

TURNOVER COSTSBased on Entry Level Salary of $47,097

Replacement Acquisition - Direct hiring costs $1098 - Other hiring costs 693

Replacement Training - Pre-assignment 2833 - Learning curve 795 (see learning curve graph)

Other costs - Unabsorbed burden 2,549 - Lost profit contribution 1,452

TOTAL $9,420

*Entry level salary of Fortune 500 employee (2010 figures)

0

20

40

60

80

100

1 25 50 75 100

Employment Duration (Days)

Per

cent

of

Stan

dard

Pro

fici

ency

Att

aine

d

Hypothetical Learning Curve for New Hires

TURNOVER COST EXAMPLES BY

COMPANY AND POSITION

Company

State govt, (LA)

Machine works

Insurance

Software

Hospitality

Fast-food chain

Position

Protective services (police, wildlife & fisheries, guards)

Salaried MachinistHourly Machinist(both journeyman)

Manager

Project LeaderSystems engineer

Hotel front desk-MiamiHotel front desk-NY

Store Manager

Counter Person

Cost

$25,000

$102,376$ 58,564

$ 79,672

$ 32,160$ 34,365

$ 5688$ 11609

$ 20,765$ 1,204

Source: Bulletin to Management, 6-17-99, Kepner & Tregoe, Jan. 1999 (Saratoga Institute Turnover Costing Model), SASHA Corp 2007

Forms of Turnover• Nonvoluntary:

Employer controlled (layoffs, terminations, downsizing)

• Voluntary: Employee controlled (quits, retirements)

• Gray Area: (spouse relocation, child/elder care problem, exit reporting problems)

000

50

200

55

030

00000

1510

10

0 5 10 15 20 25 30 35

Percent of Voluntary Leavers

Primary Reason For Leaving In Nursing SampleReasons Unknown

Personal Reasons

Death

Retirement

Poor Health

Temporary Position

Completed Prescribed Service or Course

Geographic Factors:Job Too Far, Leaving City

Family Illness or Home Duties

To Stay Home

To Attend School

Pregnancy

Marriage

Enter Military Service

Unsatisfactory Work Hours

Work Too Difficult; Misunderstanding of Duties

General Job Dissatisfaction

Present Wages Inadequate

Other Employment

Analyzing Forms of Turnover Among Nurses from A

Managerial Perspective: Organizational Level

Turnover14.6%

Voluntary87%

Involuntary13%

Functional42%

Dysfunctional58% (7.37% rather than 14.6%)

Turnover Measures

1. Separation Rate # of employees who left during period = avg. # of employees during period X 100

a. Jan. 1 - 20 employees 7 quit and are replaced, 2 new hires Jan 31 - 22 employees

7/(20 + 22)/2 = 7/21 = 1/3 = .33 .33 x 100 = 33%

b. Growth scenario Feb. 1 - 22 employees 16 new hires, 7 quit & are replaced Feb. 28 - 38 employees

7/(22 + 38)/2 = 7/30 = .23 or 23%

Turnover Measures (Continued)

II. Instability Rate # of initial employees who leave during a period = # of initial employees X 100

a. Jan.: 7/20 = .35 or 35%b. Feb.: 7/22 = .32 or 32%

III. Wastage Rate # of new employees who leave during a period = # of new members X 100

a. Between Feb. 1 & 28, 8 new hires quit: 8/16 = .50 or 50%

IV. Avg. Length = Sum of length of service for each employee of Service # of members

Predictors of Voluntary Turnover

1. Age Turnover

(around ρ = -.14)

Length of service ▪ side bets ▪ health insurance less problematic

if coverage is continuous

3. Sex & family size Men & women quit at similar rates ↑ # of dependents → ↓ T/O 4. Pre-employment predictors:

▪ prior turnover behavior ▪ others in Barrick & Zimmerman

Predictors of Voluntary Turnover

5. Personality▪ Conscientiousness (ρ = -.20)▪ Emotional stability (ρ = -.18)▪ Agreeableness (ρ = -.25)▪ Extraversion (ρ = -.04) [zero]▪ Openness (ρ = .10)▪ Self-confidence (B&Z)▪ Decisiveness (B&Z)

6. Union presence

7. Attitudes (job satisfaction, organizational commitment; see upcoming Hom Griffeth model)

8. Pre-employment interventions (e.g., RJPs)

Providing Job Candidates With Accurate and Complete Information About the New Job Reduces Turnover

8.5

22.4

15

19

33.8

6

11.1

21.1

33.1

35

27

50

11.5

40

0 10 20 30 40 50 60Turnover Rates

Control Group

RJP Group

Sewing Machine Operators

West Point Cadets

Telephone Operators

Insurance Agents

Bank Tellers

U.S. Marines

Nurses

Predictors of Voluntary Turnover 9. Work group size

10. Job enrichment

11. Task repetitiveness

12. Considerate leadership

13. Stress

14. Perceived job availability

15. Withdrawal behaviors: Lateness (rho = .06) and absenteeism (rho = .33)

16. Job performance (low performers quit more than high performers but low and high performers quit more than avg. performers)

Labor Market:•Unemployment•Knowledge of Other Jobs

•Relocation Costs

Satisfaction Influences:•Job Complexity•Role Stress•Group Cohesion•Compensation•Leader-Member Relations•Met Expectations•Negative Affectivity

Commitment Influences:•Procedural Justice•Attraction of Internal Roles•Job Security•Job Investments•Extra Organizational Conflicts•Conditions of Job Entry•Commitment Propensity

Job Satisfaction

Organiza-tional

Commitment

Job-Seeking Costs & Benefits: Turnover Costs & Benefits

Shocks

Decisions to Quit

Job Search

Evaluate Alternatives

Resignation

Hom-Griffeth Model of Turnover

POSSIBLE POSITIVE CONSEQUENCES OF TURNOVER

1. Displacement of poor performers

2. Increased satisfaction among stayers

3. Infusion of new knowledge/technology via replacements

4. Facilitate organizational change

5. Increased internal mobility opportunities

6. Decrease in other “withdrawal” behaviors

7. Opportunities for cost reduction

RECOMMENDATIONS FOR INCREASED UNDERSTANDING OF TURNOVER

1. Focus on occupational differences (more understanding of blue collar turnover needed)

2. Separate voluntary from non-voluntary turnover

3. Study turnover in the context of economic conditions and historical changes (e.g., new generations of employees, dual career families, new employment patterns of more frequent job changes).

PRACTICAL STRATEGIES FOR MANAGING TURNOVER1. Hire more carefully

2. Use pre-employment interventions (see example)

3. Promote job satisfaction

4. Promote job autonomy through job enrichment

5. Use small work groups

6. Reduce task repetitiveness

7. Improve human relations skills of supervisors

8. Reduce stress

9. Promote organizational commitment (e.g., career counseling;

side bets)

10. Emphasize person/job fit

11. Address non-work sources of turnover (e.g., elder care,

EAPs)

Comparison

Groups

Turnover

Rates (%)

Number of

Leavers (No. of

New Employees

Per 100)

Turnover

Cost per

Leaver ($)

Total

Turnover

Costs ($)

Control 17 17 6,018 102,306

RealisticJob PreviewRecipients

5 5 6,018 30,090

CostSavings(Difference)

72,216

Based on public accounting firm case study, 1999

Practical Application of a Control Group Evaluation

Demonstrating Cost Savings of RJP Retention Strategy

Four “Do’s and Don’ts” for Managing Turnover

• Don’t fail to make the business case for managing turnover—Do provide cost/ benefit data

• Don’t fail to approach turnover strategically--Do plan to attract & retain talent independent of market conditions

• Don’t just throw money at the problem—Do realize that compensation is often not the most important determinant of turnover

• Don’t ignore employee priorities—Do appreciate that employees first loyalty is to their own careers & that their assessment of prospects in and outside of your company will drive their turnover behavior.

Source: Bulletin to Management, Sept. 26, 2002

Wright & Bonett (2007)

• Job sat & Ψ well-being (PWB) as predictors of T/O

• Why examine in a highly paid sample?• Authors assert that job sat is a good but

insufficient predictor of T/O. Meta-analysis suggests ρ = -.19 (p. 143). Weakness due to presence of moderator variables.

• What is a moderator variable?

Moderator Variables ∙When the relationship between two variables depends on a third variable (level of, presence or absence)

∙When a combination of two things becomes super- predictive or the presence of a third factor makes a difference: time spent shopping w/spouse Marital satisfaction

Gender

(True for women, not true for men)

∙ What moderator is proposed to affect relations between job satisfaction and turnover? How does it work?

Job Satisfaction ↓Voluntary Turnover

PWB

(Such that the relationship will be weak or zero when PWB is high & more strongly negative when PWB is low)

∙ Why is PWB thought to have this effect?

(a) Conservation of Resources Model

(b) Research finding: Job Sat Job Perf

■PWB high, stronger positive ■PWB low, weaker positive PWB

Wright & Bonett (2007)

• What was the sample?• Measures?

· Vol T/O 20% annually, lag (T2) 2 years. Others T1

· Job perf measured by supervisory assessment

· PWB, job sat measured by employee surveys

• Review correlations in Table 1

• What role did job sat and PWB play in predicting T/O? Was the hypothesis supported? Review Table 2 and Figure 1

Wright & Bonett: Implications

• Do you get more “bang for the buck” when you hire those high in PWB?

• Authors point out firm is losing very best and worst performers (as also suggested by Steele et al.). How can that be addressed?

• Notes potential “halo effect” limitation.

Barrick & Zimmerman• Can “people problems” like turnover be avoided

by selection using dispositional factors (e.g., personality)?

• How well do RJPS do, using evidence-based management? (Tries to build on its success)

• What is biodata and why are some forms not used? What types of biodata are hypothesized to predict turnover? (H1-H3)

• What are pre-employment factors known as “clear purpose” and “disguised purpose” predictors?

Barrick & ZimmermanRe-worded Hypotheses (so supportive correlations will be negative in direction)

• H1: ↑ Prior Tenure → ↓ Turnover• H2: ↑ Were Referred → ↓ Turnover• H3: ↑ Friends & Family → ↓ Turnover• H4: ↑ Intent to Stay → ↓ Turnover• H5: ↑ Desire for Job → ↓ Turnover• H6: ↑ Self Confidence → ↓ Turnover• H7: ↑ Decisiveness → ↓ Turnover

Order of Entry #1 Order of Entry 2

Step Step Step Step Step Step

1 2 3 1 2 3

Biodata

Disguised

Purpose

ClearPurpose

Clear Purpos

e

Disguised

Purpose

Biodata

Adjusted R .29 .33 .33 .18 .22 .33

Change (∆) in R

--- .05 .01 --- .06 .11

Upshot: Biodata best predictor, even when considered last (order #2). Clear purpose measures not useful when entered last; too transparent. Disguised purpose measures helpful in both entry orders (.05 and .06).

Revised Table 2 Using Combined Samples

Barrick & Zimmerman• Table 3 just an alternate statistical methodology. Table 4

indicates that use of these measures would not result in adverse impact on protected subgroups.

• Practical implications: Biodata indicators examined here, along with “disguised purpose” measures of self confidence and decisiveness predict turnover as well as RJPs.

(RJP: ρ = -.09; R2 =.01 vs. adj. R =.33 (Table 2) which yields adj. R2 = .11)

• The value may be in combining biodata and personality with job factors (like job sat) to reduce turnover.

Hausknecht et al. (2009)

• Included because it repositions the turnover topic to a discussion of employee retention

• Why are “blanket” retention policies problematic?

• What retention factors are hypothesized to retain high performers?

Hausknecht et al. (2009)

• What retention factors are hypothesized to retain high performers?

• What would low performers cite?

• What retention factors were hypothesized to retain hourly employees (H2)?

• What would managerial and professional employees cite?

Hausknecht et al. (2009)

• What was the sample?

• How was job performance measured?

• Were the hypotheses supported?

Findings were mixed. Not sure I care!

Hausknecht et al. (2009)

• More interested in the top reasons for retention: job sat, extrinsic rewards, constituent attachments, org commitment, org prestige.

• And appreciation of targeted strategies: High performers & non-hourly cited advancement opportunities & org prestige as most important for staying. Low performers & hourly cited extrinsic rewards as most important for staying.

Holtom et al.

• Article rich in practical suggestions and examples of retention

• Emphasis is on aligning the retention strategy with the business strategy

• Reinforces Hausknecht article in asserting that the reasons people quit are distinct from the reasons people stay

• What is the “overlooked” reason they believe people stay and how can it be increased?