MANAGING EMPLOYEE TURNOVER AND RETENTION

ABSTRACT

We all subscribe to the adage that it is cheaper to keep a current customer than to acquire a new one. The same premise applies to employees. Recruiting new employee is a time consuming and expensive exercise that directly affects an organisation’s bottom-line. Excessive employee turnover in an organisation is a prime indicator that something is not right in the  employee  environment.  This  research  is  designed  to analyse and determine the most effective ways of retaining the best and brightest employees(s). With the help of the sum collation of results from Questionnaires, Observations, Interviews and Surveys carried out solely for this work, the researcher analysed major retention strategies and in doing that,  analysed  various  opinions  of  employees  on  why  they leave a company, why they stay and what can be done to save them and the organisation at large. The researcher noted that a small amount of turnover is healthy because long – tenured employees generally have higher salaries and new employees bring  new  ideas,  as  such  recommends  that  organisations should create multifaceted models/strategies to keep critical employees in the organisation.

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Employee retention has always been an important focus for human resource managers. Once a company has invested time and money to recruit and train a good employee, it is in their best interest to retain that employee, and further develop and motivate him so that he continues to provide value to the organization.

In today’s competitive labour market, there is extensive evidence that  organisations  regardless  of size, technological advances, market forces and other factors are facing retention challenges. Excessive turnover in an organization is a prime indicator that something is not right in the employee environment. Employers must also recognize and tend to what is in the best interest of their employees, if they intend to keep them. When a company overlooks the needs of its employers and  focuses  only  on  the  needs  of  the  organization,  staff turnover often results.

The term ‘employee turnover rate’ as used in this research effort excludes layoffs, reduction in workforce, and completion of temporary assignments. Furthermore, Fitz-enz (1997) states that the average company loses approximately $1million with every 10 managerial and professional employees who leave the

organisation. Managerial and professional employees were categorised as ‘exempt employees’ (see definitions section).

The researcher identified the following four internal sources considered in determining the cost of an employee turnover (a) cost of termination (b) cost of hiring and training replacement (c) the vacancy cost until the job is filled and (d) the loss of productivity with new hires.

1.2  STATEMENT OF THE PROBLEM

The   organisation   has   been   successful   at   maintaining   a relatively low turnover ratio but the employees who left the company   included   some   of   its   critical   employees,   thus presenting a significant challenge. The results of this research effort  potentially  could  be  used  as  a  model  for  guiding employee retention in other large, complex organisations.

1.3 OBJECTIVES OF THE STUDY

The main objective of this study is to determine the factors that significantly influence employees’ decision to remain employed in an Organisation and the reasons for choosing to leave the same Organisation. Also, the researcher seeks to:

(a) Analyse the importance of retaining critical employees.

(b) To examine how employee retention practices can be more effective by identifying, analysing and critiquing employee motivation theories

(c)To  establish  a  relationship  between  employee  motivation and employee retention.

1.4  RESEARCH QUESTIONS

The following research questions were selected to describe the factors that influence employees’ decisions whether or not to remain employed with the corporation and possible reasons for choosing to.

        Does   the  Organisation   have  strategies   of   Retaining

Employees?

           What  Employee  retention  strategies  are  used  by  the corporation to retain its critical employees?

        What is your assessment of these strategies?

           How do the employee retention practices help to achieve the strategic business objectives of the corporation?

        What are the benefits associated with the  corporation’s

Employee retention strategies?

           What are the Challenges of the Organisation’s retention strategies?

1.5 SIGNIFICANCE OF THE STUDY

With low unemployment rates and high turnover, many organisations  are  faced  with  high  performing  employees deciding to leave for better opportunities elsewhere. Subsequently, such  organisations  often  are  having difficulty attracting and retaining employees with the appropriate skills, and  are  having  to  invest  significantly  more  resources  to maintain a skilled workforce.

In addition to employees having to perform the additional tasks for missing employees, productivity may also be jeopardised in the process (Dobbs, 1999). Also, the learning curve of each new employee varies with each individual’s prior experience, education, training and other factors. Thus, this learning curve should be considered in assessing the impact of employee turnover on the productivity of a company’s workforce.

While many organisations cite employee retention as a major concern   and   one   which   has   significant   impact   on   the productivity and competitiveness of organisations, there is little evidence to show that organisations have developed strategies to retain their high impact performers. With the increased competition for top talent in today’s workforce and the changes in the business world, Sethi & Pinzon(1998) suggested that organisations   should   consider  creating  new   multi-faceted models to keep their best and brightest employees.

1.6  SCOPE OF STUDY

This study will be contracted on UAC’s Fast Foods otherwise known as MR BIGGS; our questionnaires will be restricted to the workers of this Fast Foods chain only.

1.7  LIMITATIONS

Time  was  the  greatest  limitation  to  this  research  which hindered long term outcome objectives.   Money was also a major limitation.

The   non-cooperative   attitude   of   some   of   the   selected employees for the study was also a major limitation.

1.7  DEFINITION OF KEY TERMS

Employee Motivation: The term motivation derived from the

Latin  word  ‘movere’,  meaning  to  move  (Kretiner&Kinicki,

1998). Motivation represents those psychological process that cause  the  arousal,  direction,  and  persistence  of  voluntary actions that are goal oriented (Mitchell,1982, p.81). Motivation as defined by Robbins (1993) is the willingness to exert high levels of effort towards organisational goals, conditioned by the effort’s ability to satisfy some individual need.

Voluntary Turnover: Voluntary termination of an individual’s employment  with  a  given  company  (Tett  &  Meyer,  1993, p.262)

Critical Employee: A critical employee was defined as anyone necessary  to  the  success  of  the  organisation,  considered talented and skilled, had outstanding performance, and whose departure would have a significant impact on the organisation.

Exempt Employee: An exempt employee is one who will not be paid overtime and is paid a flat salary rather than on an hourly basis.

Turnover Rate: The turnover rate is the percentage of employees who have separated from the company. The calculation is the number of employees who have voluntarily left their positions divided by the total number of employees in the organisation.

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