The Impact of Employee Turnover on the Performance of an Organization

This research study evaluates the causes of high employee turnover, how it affects the performance of an organization, and how it can be reduced. The study targets top management, senior employees, and junior employees of organizations in Australia. The research will adopt the descriptive research design and data will be collected through interviews. The data will be analyzed using SPSS and presented in tables and graphs.

THE IMPACT OF EMPLOYEE TURNOVER ON THE PERFORMANCE OF AN
ORGANIZATION
PROJECT REPORT.
[Put your full name here]
[Student number – I……..]
[Date]
[MGT726 Managerial Project]
School of Business
Faculty of Arts and Business
University of the Sunshine Coast

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Executive Summary
The main of objective of the research study is to distinctly outline the impacts of employee
turnover on the performance of an organization. The study will be done strictly in line with
the specified key objective of study; to evaluate the cause of high employee turnover in an
organization, to evaluate how employee turnover affect the overall performance of the
organization and to evaluate how high turnover rate can be reduced in an organization. The
research will adopt the descriptive research design as it intends to gather qualitative as well as
quantitative data that will outline in depth the factor that lead to high employee turnover in an
organization, thereby providing an optimal solution. The research will target majorly three
categories of participants, the top management of the organizations, the senior employees and
the junior employees of the organization. Data collection will be mainly through interview
where random interview will be conducted to the senior and junior employees of the
organization while special interview will be conducted for the top management of the
organization, to obtain the actual information that will direct the final solutions. The data will
be analysed by using SPSS and will be presented in tables and graph forms.
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Table of Contents
Executive Summary..................................................................................................................i
Table of Contents......................................................................................................................i
List of Figures............................................................................................................................i
List of Tables.............................................................................................................................i
List of Abbreviations................................................................................................................i
1.0. INTRODUCTION.........................................................................................................1
1.1. Purpose of Study..........................................................................................................1
2.1. Background and significance......................................................................................1
2.1.1 Factors that have led to the immediate management problem?...........................1
2.2.1 Why does it matter?............................................................................................1
2.2.2 Why is it worthy of investigation?.......................................................................1
2.2.3 What are the expected benefits?...........................................................................1
2.2.4 What will be the consequences of not addressing the problem?..........................1
2.2.5 Management problem...........................................................................................1
3.1. Research questions and objectives..............................................................................1
3.1.1 Objectives.............................................................................................................1
3.2.1 Research Questions..............................................................................................1
4.1. Research Boundaries...................................................................................................1
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3. LITERATURE REVIEW/THEORETICAL FRAMEWORK.....................................1
3.2. Introduction.................................................................................................................1
3.3. Significance of the study.............................................................................................1
3.4. Types of employee turnover........................................................................................1
3.4.1. Voluntary employee.............................................................................................1
3.5. How employee turnover relates to the performance of an organization.....................1
3.6. Factors that affect rate of turnover..............................................................................1
3.7. Reduction of employee turnover rate..........................................................................1
3.8. Effect of turnover on performance..............................................................................1
4. METHODOLOGY...........................................................................................................1
4.2. Introduction.................................................................................................................1
4.3. Research approach and justification............................................................................1
4.4. Details specific data collection techniques..................................................................1
4.4.1. Data collection methods.......................................................................................1
4.4.2. Research procedures.............................................................................................1
4.4.3. Table matching research objectives to methods...................................................1
4.5. Timeline for the data collection. (Using a Gannt chart.).............................................1
5. PROPOSED ANALYSIS OF RESULTS........................................................................1
REFERENCES...........................................................................................................................1
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List of Figures
Figure 1 Gannt Chart..................................................................................................................1
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Figure 2 Work experience.........................................................................................................1
List of Tables
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Table 1 timeline for Data Collection........................................Error! Bookmark not defined.
Table 2 Age of respondents......................................................Error! Bookmark not defined.
Table 3 Work experience...........................................................................................................1
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List of Abbreviations
SPSS ………………………………………………………….. Statistical Package for Social
Sciences
STD Deviation……………………………..Standard Deviation
RQ…………………………………………………………………Research Question
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1.0. INTRODUCTION
1.1.Purpose of Study
The object of the study is to distinctively outline the impact of employee turnover on the
performance of an organization and how the effects of the impact can be managed.
2.1.Background and significance.
Employee turnover refers to the rate at which an organization losses employees or gains
employees, and how long employees tend to join or leave the organization (Holtom,
2016). Employee turnover can be caused by factors that can stem from both the
organization as well as from the employees. (Call, 2015) When employees leave an
organization, the employer must of a necessity incur a certain amount of indirect or direct
expenses.
2.1.1 Factors that have led to the immediate management problem?
According to (Dane, 2014) the most prevalence cause of high employee turnover rate in
organization includes, reduced employee morale at the work place, employees not being
flexible with work and family balance. Also, according to (Jopppe, n.d.), high employee
turnover in organization is caused by poor leadership in the organization as well as poor
pay by the organization to the employees. Another thought eloquently put forth by
(Armstrong, 2012) states that high employee turnover rate in organization is caused by
employees seeking to find much better working environments so as to further their
professionalism.
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2.2. 1 Why does it matter?
Properly weighing all the evidences put forth by scholars and from real experiences for
the organizations, it is substantial that high employee turnover in an organization has a
negative (Call, 2015) impact to the overall performance of the organization. According to
(Dane, 2014), a higher percentage of the organization prefer retaining they key employees
to effect productivity within the organization while the organization the hire new
employees tend to recruit employees which higher work experience to boost the
productivity of the organization.
2.2.2 Why is it worthy of investigation?
According to (Saridakis, 2016) the cost of employee turnover can be overwhelming as
collectively the staggering amount of the expense organization would otherwise use pay
its work force. Also (Holtom, 2016) clearly points out most of the companies find out that
employee turnover rate can be limited when employee morale is boosted while the impact
on low paying jobs cost employers less replacement of employees than the high paying
jobs. This makes it worth of investigation as it will give a clear and decisive decision on
how to deal with actual impact of employee turnover in the organization.
2.2.3 What are the expected benefits?
According to (Gray,2009) low employee turnover in organization leads to high
productivity of the employees as the key employees will be retained in the organization
and by doing the same thing over and over again the employees are more likely to get
used to the daily routine of the organization, this will in effect enhance faster
implementation of the organizations’ set objectives. (Call, 2015), clearly points out that
reducing high employee turnover by the employer will result to tremendous success of
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the organization financially, productive wise and it will be more competitive in its
respective area.
2.2.4 What will be the consequences of not addressing the problem?
One of the most un-admirable consequence of high employee turnover clearly shows that
many organization has cease form operation, this was due to delay or totally ignoring the
problem. According to (Jopppe, n.d.), staff turnover is costing Australia millions of
Australian dollars in reduced efficiency.
2.2.5 Management problem
The research study is supposed to distinctively outline the impact of employee turnover
on the performance of an organization and how the effects of the impact can be solved.
Researchers have shown that low employee turnover to a great degree have led to
improvement of organizational performance (Strain,2016), other research have concurred
with them while putting forth statements, showing that by reducing high employee
turnover in an organization, the productivity have shot up in a proportional manner.
According to (Borysenko,2015) the efficiency of any organization has been to a larger
degree threatened by huge expenditure incurred on selection and recruitment of new
employees in order to replace the work force gap.
3.1.Research questions and objectives
The main objectives of the study is to answer the following research questions.
3.1.1 Objectives.
1. To evaluate the causes of high employee turnover.
2. To evaluate how employee turnover affects the performance of an organization.
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3. To evaluate how high employee turnover can be reduced in an organization.
3.2.1 Research Questions.
What are the cause of high employee turnover in an organization?
How can high employee turnover be reduced in an organization?
How does the rate of employee turnover rate affect performance of an organization?
4.1.Research Boundaries.
The research will be most prevalently applicable within Australia, it will span both small
and big organizations. The key organizations being, government institutions, established
private institutions, government parastatals, both private and public academic institutions,
and establishing institution both in the public and private sectors.
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3. LITERATURE REVIEW/THEORETICAL FRAMEWORK
3.2. Introduction.
Employees contribute to the part of valuable resources that notify, shape and provide effect to
policy. Consequently, any variation in human resources takes a role on the organizational
performance. As a result, the idea that the workers turnover affects the performance of an
organization is widely rooted amongst managers (Armstrong, 2012) its management
continues to remain a challenging issue in
Organizations plan (Call, 2015). Several researchers, academics, psychologists and
consultants have widely researched about employee turnover and its subsequent effect on the
performance of an organization. (Armstrong, 2012). It is a dynamic omnipresent process in
organizations (Phillip, 2009) and the backgrounds of worker’s turnover and the factors
causing the status quo has been widely studied (Mathis, 2009)
Given the move toward a knowledge-based economy, the extent to which changes in
organizational performance are attributed to employee turnover rate is the subject of
increasing interest (Dane, 2014). Various studies present different results on the consensus of
the subject (Armstrong, 2012). So as to add to this bulk of research, the main aim of this
work is to distinctively outline the impact of employee turnover on the performance of an
organization and how the effects of the impacts can be managed.
3.3. Significance of the study.
According to (Call, 2015) there is a necessity to examine the impact of worker’s turnover in
an Organization. The aim of this work is to enlighten managers to distinguish between
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increased employee turnover that causes a problem and the level of employee turnover that is
optimal in an organization. This work seeks to make employee turnover rate a self-
determining variable rather than a determinant variable.
3.4. Types of employee turnover.
3.4.1. Voluntary employee
This occurs when a member of an organization willingly abandons the organization. If the
employer dismisses the employment contract, employees leave an organization involuntarily.
(Armstrong, 2012) Emphasizes on the need to differentiate between voluntary and the
involuntary turnover as the sources, consequences and regulators of decisions that affect
turnover. Alternatively, reasons that the effects of lack of retention of employees in an
organization is the same. Moreover, replaceable turnover that has functional employee
originates from termination as a result of replaceable or substandard employee performance
whereas dysfunctional turnover arises from disappearance of workers with unique skills
(Gartenstein, 2018 ).
3.5. How employee turnover relates to the performance of an
organization
Turnover leads to dysfunctional organizations. (Saridakis, 2016) As a result of interfering
with operational developments and giving unwarranted responsibilities on other remaining
members. According to the research done on human resources point of view, aggregate
workers turnover reduces organization-specific human resource, which then affects the
production method.
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3.6. Factors that affect rate of turnover
Micromanagement.
This is one of the main reason why worthy employees abandon their jobs. Large
turnover rate is normally experienced when managers don’t permit employees to do
their work.in this scenario, managers control almost everything that happens in their
section because they don’t believe that employees can handle their responsibilities
without supervision. Consequently, worthy employees quit their jobs after having a
feeling that their careers are subdued by micromanagement
Communication
Employees need to be given periodic feedback from their managers after performance
review. This enables them to improve over time. Lack of feedback causes workers to
search elsewhere for occupational opportunity where they feel the chances of growth is
greater (Hollingsworth, 2009).
Leadership.
Employees shift into administrative positions because they execute their work well. This
does not mean that a promoted employee has the administrative skills to manage and
motivate other employees (Ledlow, 2011). When employees abandon their jobs at the
same time may be a sign that workers aren't getting along with a new leader. Regular
meetings between managers and employees to discuss duties and the work environment
could ease conflicts and help companies retain employees
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Salaries
Workers usually anticipate to share in their organization's successes, often when
increased productivity upturns profits. Employees appreciate remuneration increases
(Lal, 2009), but increases won't accomplish greatly if significant supervision problems
continue. For instance, managers who expect workers to work great extents of overtime
might only chase away worthy workers who desire more subjective time.
3.7. Reduction of employee turnover rate
 Recognize employees who accomplish their work
 Reward employees with the amount of remuneration that they deserve
 Help employees to Learn and Develop as they work in the organization by providing
helpful feedback after performance review.
 Give employee more room and flexibility for them to finish their tasks. Instil
confidence in them and build your (managerial) trust in their abilities
3.8. Effect of turnover on performance
Most researchers see turnover to be bad and hence treats it as a dependent variable and
think it ought to be reduced (Robert, n.d.). However, Rajbhandari 2016 suggested
looking Turnover as a self-determining variable and suggested a theoretical test to the
idea that the entire organizational turnover is not functioning well. (Spell, 2014). The
relationship between turnover and performance of an organization is a U-shaped
inverted curve. Low -moderate levels of turnover overly increases the performance of an
organization by introducing fresh blood and better trained workers. However, such
advantages reduce as turnover grows. Any additional turnover beyond certain turnover
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limits increases the cost than the advantages hence negatively affecting the performance
of an organization.
The tentative implication of the (Argote, 2013) argument is that the connection between
turnover and organizational performance is that of a U–shaped inverted Curve. Low-
moderate limits of turnover bring overall benefits to organizational more so in terms of
performance by bringing in fresh blood and better-skilled employees. Above some level
of turnover, any additional turnover imposes more costs than benefits and thus
detrimentally affects performance (Kokemuller, 2017).
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4. METHODOLOGY
4.2. Introduction
This section describes the research design adopted by this study during data collection,
techniques and sample methods that were used.
4.3. Research approach and justification
The research adopted the descriptive research design as the research intends to gather
qualitative as well as quantitative data that will best outline in depth the factors that lead
to management problem, the worth of conducting an investigation on management
problem, the benefits expected when the management problem is ultimately solved and
the consequence that the organization has to incur if the management problem is not
properly addressed. Descriptive research according to (Holtom, 2016) includes fact
finding enquires and also the surveys, the major objective of descriptive research is to
obtain in details the state of affair as it really exists at the present time in a given
organization. According to (Call, 2015), descriptive research design refers to design for
obtaining data concerning the current states of affairs that best describe how things really
are with respects to the condition and the respective variables.
4.4. Details specific data collection techniques
4.4.1. Data collection methods.
The research will adopt questioning methods in data collection. Questioning method aid
in collecting more reliable and more accurate data since the questions will be answered
by the respondent freely without being influenced, according to (Mathis, 2009).
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4.4.2. Research procedures.
The researcher will collect secondary data as well as primary data. The primary data will
be collected at the source while the secondary data will be obtained from references that
have been published as journals and reports.
4.4.3. Table matching research objectives to methods.
1 Research
Objective
2 Data Collection Method/
Technique
3 Specific research questions
or sources
4 RO1: To evaluate
how employee
turnover can be
reduced
effectively in an
organization
5 The researcher will conduct a
survey in two organizations
where certain participants will
be the employees of the two
respective organizations will be
selected at random, this will aid
to establish the root cause of
employees quitting the
respective organizations.
6 RQ2: How can high
employee turnover be
reduced in an organization?
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7 RO2: To evaluate
the causes of high
employee
turnover.
8 The researcher will conduct a
primary research on the two
organization, where the mangers
of the respective organizations
will be interviewed. The
researcher will also select some
more participants form the
employees at random for short
interview, this will enable the
final findings to have both
perspectives form the
employees and the managers.
Additional research material
primarily published literatures
such the journal and reports will
be thoroughly review to get
more credibility to the final
findings.
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10 RQ1: What are the cause of
high employee turnover in
an organization?
11 RO3: To evaluate
how employee
turnover affects
the performance
of an
organization.
12 The researcher will conduct a
primary research on the two
organizations so as to establish
the correlation of the final data.
The managers of the respective
organizations will be
interviewed to ascertain the
13 RQ3: How does the rate
of employee turnover rate
affect performance of an
organization?
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actual effect findings.
Additional secondary research
will be done by reviewing
different literatures to strongly
establish the final findings.
4.5. Timeline for the data collection. (Using a Gannt chart.)
Table 1: Timeline for Data Collection
Task Start Date Complete Days End Date
Collecting data from first
organization 05/21/18 3 05/23/18
Collecting data from second
organization 05/24/18 3 05/26/18
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5/21/18 5/23/18 5/25/18 5/27/18
task 1
task 2
05/23/18
05/26/18
TIMELINE FOR DATA COLLECTION
Axis Title
task 1task 2
Start Date 5/21/185/24/18
Completion days 33
End Date 05/23/1805/26/18
Start Date
Completion days
End Date
Figure 1 Gannt Chart
5. PROPOSED ANALYSIS OF RESULTS
In this section both Qualitative data and quantitative data are generated. A descriptive
statistic s data analysis method will be used to analyse the information collected using
closed questions. A software called Statistical package for Social Sciences (SPSS) will
be used to produce data that will be used for the next scrutiny of data.
Version 17 of SPSS Version has descriptive features that help in variable reply
comparison and produces a flawless indication of reply frequencies. The information
will be prepared, coded, classified for all the variables of examination and then
scrutinized by the use of descriptive method e.g. percentage mean and Standard
deviation. The relationship between the research variables. Will be carried out using
Pearson correlation method. Presentation of outcome will be done using tables due
to their user friendliness, ability to show response frequencies and percentages of the
replier’s’ views on the effects of employee turnover on an organizations' efficiency.
A case study of a company of choice will be done .A qualitative data scrutiny will
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be executed on the information gathered using open ended interrogation techniques
where personal opinions on the impact of employee turnover on the organizations’
efficiency are given by the respondents.
Table 2: Age of respondents
Column1 Frequency
Percentage
(%)
18-20 yrs. 5 8
31-40 yrs. 25 43
41-50 yrs. 16 32
51 yrs. and above 6 17
Total 52 100
0
20
40
60
80
100
18-20 yrs 31-40 yrs 41-50 yrs 51 yrs and
above
Total
5
25
16
6
52
8
43
32
17
100
Demographic Chart showing age of respondents
Frequency Percentage
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The figure above confirms that majority (43%) were in the middle of 31-40 years, 32%
ranged in ages 41-50 years, 8 % between 18-30 years & 17 % of the respondents were
within the age bracket of 51 years and over. This demonstrated that many of the
interviewee were old & had remained in the company for a greater time period hence they
knew the problems that made majority of the workers to abandon the organization.
Table 3: Work Experience
16
WORK
EXPERIENCE
%
frequency
16 yrs. & above 21
11-15 yrs. 24
6-10yrs & 26
less than 5 yrs. 29

17
21
24
26
29
WORKING EXPERIENCE
16 yrs & above 11-15 yrs 6-10yrs & less than 5 yrs
Figure 2 Work experience
The figure confirms that many employees (29%) had a working experience of less than 5
years, 26% had 6-10 years,24 % had 11-15 years, 21 % had 16 years & above . This
proves that most of the interviewees had great work experience & indeed they had
experienced the effects of workers turnover on the company’s performance.
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REFERENCES
Armstrong, M., & Armstrong, M. (2012). Armstrong's handbook of human resource
management practice. [Online]
Available at: http://www.worldcat.org/title/armstrongs-handbook-of-human-resource-
management-practice/oclc/1002574226
[Accessed 25 04 2018]
Argote, L. (n.d.). Organizational Learning [recurso electrónico]: Creating, Retaining
and Transferring Knowledge.
Borysenko, K. 2015. What was management thinking? The high cost of employee
turnover. TLNT: management and HR [Online]
Available at: https://www.tlnt.com/what-was-leadership-thinking-the-shockingly-high-
cost-of-employee-turnover/
[Accessed 25 04 2018]
Call, M. N. A. P. R. a. W. J., 2015. The dynamic nature of collective turnover and unit
performance: the impact of time, quality, and replacement.Academy of Management
journal,58(4).. [Online]
Available at: http://amj.aom.org/content/58/4/1208.short
[Accessed 24 04 2018].
Dane, E. a. B. B., 2014. Examining workplace mindfullness and its relations to job
performance and turnover intention. Human Relation, 67(1). [Online]
Available at: http://journals.sagepub.com/dio.abs/10.1177/0018726713487753
[Accessed 23 04 2018].
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Gartenstein, D. 2018. Causes and effects of high and low staff turnover. Chron[Online]
Available: http://smallbusiness.chron.com/causes-effects-high-low-staff-turnover-
33939.html
[Accessed 25 04 2018]
Gray, C. Tangible benefits of reducing turnover. [Online]
Available at: http://smallbusiness.chron.com/tangible-benefits-reducing-turnover-
21668.html
[Accessed 25 04 2018]
Hollingsworth, K., 2009, Lack of feedback leads to performance problems and
employee turnover. [Online]
Available: https://www.bizjournals.com/dayton/stories/2009/09/14/smallb2.html
[Accessed 25 04 2018]
Holtom, B. a. B. T., 2016. A model of turnover-based disruption in customer services.
Human Resource Management Review, 26(1). [Online]
Available at: https://www.sciencedirect.com/science/article/pii/S10534882215000522
[Accessed 23 04 2018].
Jopppe, G., n.d. Role of human resource management in career development,
International Journal of Personal Management, May(2010) Issue. s.l.:s.n.
Kokemuller, N. 2017. The effects of high turnover in companies. AZcentral [Online]
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Available: https://yourbusiness.azcentral.com/effects-high-turnover-companies-
2173.html
[Accessed 25 04 2018]
Lal, J., & Srivastava, S. (2009). Cost accounting. New Delhi: Tata McGraw-Hill.
Ledlow, G. R., & Coppola, M. N. (2011). Leadership for health professionals: Theory,
skills, and applications. Sudbury, Mass: Jones and Bartlett.
Mathis, R. L., 2009. Human Resource Management. Thirteenth Edition ed. s.l.:Joseph
Sabatino.
Phillip, L., 2009. Employees' Turnover and organization efficiency, Journal of
Management. Volume 22 ed. s.l.:s.n.
Rajbhandari, S. (2016). A Study on the Relationship between Employee's Job
Satisfaction and their on Job Performance: In Business Universal Development Bank
LTD., Nepal. München: GRIN Verlag GmbH
Robert, R., n.d. Role of human resource management in staff retention, International
Journal of Personnel Management, May (2008) Issue. s.l.:s.n.
Saridakis, G., & Cooper, C. L. (2016). Research handbook on employee turnover.
[Online]
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Available:https://books.google.co.ke/books?
id=zg7xCwAAQBAJ&printsec=frontcover&dq=cost+of+employee+turnover&hl=en&s
a=X&ved=0ahUKEwipqMDQydjaAhUCesAKHbd_BX4Q6AEIPDAD#v=onepage&q=
cost%20turnover&f=false
[Accessed 25 04 2018]
Spell, H. E. L. a. V. R., 2014. Developmental climage: A cross-level analysis of
voluntary turnover and job performance. Journal of vocational behavior, 84(3)..
[Online]
Available at: http://www.sciencedirect.com/science/article/pii/S105382215000522
[Accessed 23 04 2018].
Strain, M. The advantages of reducing employee turnover. Chron [Online]
Available: http://smallbusiness.chron.com/advantages-reducing-employee-turnover-
17599.html
[Accessed 24 04 2018]
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APPENDICES
Appendix A: interview section
(Guideline - Give distinct and detailed answer to the following questions?)
Personal Information.
1. What is your highest level of Education?
2. How long have you been in the work force?
3. Which of the following age brackets do you fall in?
a. 18 – 35yrs.
b. 36 – 45 yrs.
c. 46 – 55 yrs.
d. 56 yrs and over.
Impact of employee turnover to the performance of the organization.
1. How does employee turnover affect the performance of the organization?
2. Can you distinguish the performance rate of the organization when there is high
employee turnover rate to when there is low employee turnover rate?
3. What is the specific impact of employee turnover to this organization?
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Causes of employee high employee turnover rate in organization
1. What are some of the possible causes of employee turnover in organizations?
2. Has this organization every experienced high employee turnover? If yes, why? And if
no, why?
3. How can you possibly rate the employee turnover in the organization?
How employee turnover can be reduced
1. What measures have the organization put in place to effectively deal with employee
turnover?
2. Can you highlight how other organization have been able effectively reduce
employee turnover rate?
3. What is he percentage success rate of an average organization in managing
effectively employee turnover rate
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