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The Reason Behind Employee Turnover Management Essay

Labour turnover and absenteeism is a vital issue in an organization especially in the clothing industry. It is mainly causes of employee dissatisfaction in workplace. Every organization needs to give focus on how to change employee mind from job dissatisfaction to job satisfaction. Other wise organizations are badly effected by this. High labour turnover and high absenteeism causes low productivity and efficiency. My aim is to find out the reason behind employee turnover and absenteeism and focuses on factors increases the turnover and absenteeism ratios which are the main barrier of organization development. So organization needs to find out the best way to motivate employees to reduce labour turnover and low absenteeism and get best performance where company can increase productivity and efficiency.

INTRODUCTION:

The main purpose of this project is to find out the reason behind employee turnover and absenteeism. And also discuss the impact of staff turnover and the employee absenteeism ratio which effecting the organisational productivity.

Bangladesh is a developing country. According to UNDP’s Human Development Report 2007/2008 Bangladesh’s rank is 140th out of 177 countries. In Bangladesh, 40% of total population lives below the poverty line. In other report of Bangladesh Garments Manufacturer and Exporters Association (BGMEA), 2007 it shows that garments sector provides maximum export (76%) of total export in Bangladesh and 1.7% of total population of Bangladesh is working in Garments industries.

Ready made garments exports mainly are doing in the European market & US market. The ratios of exports are 49% to European Market, 33% to the US market & rest (18%) to other countries. In a report of UNDP’s (2007) shows that due to a strong demand for skilled labour combined with insufficient wage and discontinuity of payment, management system, inappropriate appraisal system causes dissatisfaction of job, discriminate in workplace etc. there is high level of migration of workers between one factory to other factory, and the average turnover is around 20% and absenteeism ratio is surprisingly increases.

METHODOLOGY:

Secondary data is the main source of data of this project. I collected information from internet, journal about Bangladesh labour issue, some local magazine and newspaper, and books of human resource management. This project is based on exploratory research. I share my personal experience in based on my previous work.

LITERATURE REVIEW:

Bird and Beechler (1995) cited in Briscoe & Schuller (2008) established that employee performance (e.g. morale and turnover rate) in firms that successfully adopted the strategic fit concept was significantly better than in firms that did not do so. Although managerial performance (e.g. profit margin and sales) was also better, the difference was not significant. The concept of ``fit'' refers mainly to the close linkage of HRM strategies and business strategies in ways that will help retain and motivate employees. Yes it is very good point retain and motivation of employee, as because every organisation aim is finding way to keep there employees. Motivation is one of them; it can be two type’s money and appraising employee. In most of the case money is main motivational factor for the employee especially in Bangladesh.

The key reason is why money is the most important factor then we can see that the minimum salary of worker is 1650 BDT (£15) a month (www.news.sky.com/skynews/home/world-news/bangladesh-garment-workers-in-wage-protest). So the monthly income of average employee is low and there life status is not much standard based on there income and expenses. So they always looking for better opportunity when ever they got good offer from other company they migrate or switch the company.

LABOUR TURNOVER:

Some consultants, academics and management gurus states that ‘There are no longer any jobs for life.’ Torrington et al. (2002) argued about the impact of staff turnover rates is depends on the organization to organisaiton. In some organization is successful in business with high turnover rates which are impractical to function in other sector due to the different in operation and difficult to replace skill workers. For example in some chains of fast food restaurants are generally managing business and become successful with turnover rates in excess of 300 percent that means standard occupancy for each employee is only four months (Ritzer 1996; Cappelli 2000). On the other hand, in a professional service organization where personal relation is more important between employees and clients to organizational success, it is badly hampered to the organization if the turnover rates are excess of 10 percent.

Bevan (1991) cited on Bratton & Gold (2007) indicates several causes for high staff turnover. He identified that pay in not only the reason for staff turnover and there are some other factors works on that issue. They are follows:

Employee expectation: The employee’s expectations are not matching with the job such as bonus, benefits, holidays and etc (Torrington et al 2002). That factors causes dissatisfaction of job. It is more likely happened with the new employee’s of the organization.

A lack of attention: Employee’s are found that managers are not giving attention to them and they are not providing supporting training to develop themselves. For that reason they are not well perform in the job. (Torrington et al., 2002)

Work environment: Work environment is not friendly with the employee such as lack of freedom in work, limited responsibility, no challenging environment and there are no innovative works within the organization. (Torrington et al., 2002)

Appraisal system: Some organization doesn’t have the proffer evaluation systems. So employees are disappointing with the unfair promotion and worried about the development opportunities system. (Torrington et al., 2002)

Management system: Due to unskilled management and their unfair treatment with the employees and lack of knowledge of how to motivate employee. Gregg and Wadsworth (1999) cited in Torrington et al. (2002) demonstrate in their study of 870,000 workers starting new jobs in 1992 out of that 17 per cent had left within three months and 42 per cent within 12 months.

According to Armstrong, M (2003) analyses the reason for employee turnover and he identified several reasons to quitting from job such as more pay from other company, better career prospects, more job security, more opportunity to develop skills, better working conditions, poor relationships with manager or supervisor, poor relationship with colleagues, bullying or harassment in workplace, and personal reason like pregnancy, illness, moving away form area etc. From the above reason to resolve personal reason is beyond management control but other all reason management can do further analysis to do better for employee satisfaction.

Armstrong, M. (2003) derive some action plan for low employee turnover for example better employee remuneration packages for employees’, give more opportunity for professional development, training and careers, enhanced future employability because of the position of the organization as one that occupies and build ups high quality people, as well as the learning chances it provides, employment conditions which deal with work-life balance issues by, such as flexible working hours and planning to give more over time and leave policies, and as long as child care facilities or vouchers to meet the personal needs with family responsibilities, organization need to arrange better amenities and opportunity for skill workers, for example transportation, provident fund, production bonus etc. facilities.

Ogbonna and Wilkinson, 1988, 1990 cited on Legge, K.(1995) argued that resigned behavioural compliance is contrasted favourably with commitment (psychological contract) which is seen as characteristic of employment relationships under conventional personnel management. On that argument it is clear to present in work is fully depend on employee commitment in workplace. And lack of commitment means not satisfied with job which leads to absenteeism and turnover. Moreover, Guest (1992a) cited on Legge, K.(1995) argues that McGee and Ford’s (1987) result get the reasons to emotional commitment being connected to effort at the same time as continuation commitment to low labour turnover.

In a study of Taplin et al. (2003) cited on Marchington, M. & Wilkinson, A. (2007) found that turnover rates of 26.5 per cent in clothing industry, out of that 45 per cent leaving during the first three months of their employment and one-third employees long-lasting further than a year. The outcome of their study was most marked at smaller workplaces. In general, they finalized that if the industry in this sector is unable to retain the employee by providing good remuneration packages and additional bonuses otherwise they will continue to be plagued by issues like turnover as workers seek alternative job.

However Marchington, M. & Wilkinson, A (2007) in a study of CIPD (2004) finds that labour turnover rates vary considerably between industry sector and occupational group, at the same time as do the costs of recruitment. Most employers are more concern about collect statistics on labour turnover, but they also facing problem with lack of data or software issues (IRS Employment review 2004). Many employers also performs exit interviews, and both of these tasks are usually carried out by HR department where no involvement of line manager. The information is used to improve HR practices and policies such as communication, induction, learning and development and selection in an effort to reduce turnover (CIPD 2004b, p31).

Perhaps the issue is the most difficult due to all cases of labour turnover are treated in the similar way, without giving any allowances for the performance levels and latent of the employees who quit from organization doing comparison with available employee. It is pointed that, manager is comparatively happy if an unskilled or poor performer were to leave, and there are suggestions from the researchers that if the future of the company is uncertain then employers in reality encourage turnover for not to ‘carrying staff’ (Smith et al 2004 cited on Marchington, M. & Wilkinson, A., 2007). On the other hand, if turnover was determined along with high-flyers or high skilled or highly experience and those who remained were unskilled or poor performers or lacked of ambitions, in that case this could have serious penalty for the organization.

However, a high rate of labour turnover could be benefited for the company if the organizations aim is to trim back the workplace or reduce costs of production (Sadhev et al 1999 cited on Marchington, M. & Wilkinson, A., 2007). Alternatively, Rubery et al 2004; Smith et al 2004 cited on Marchington, M. & Wilkinson, A., 2007 argued that employers may come to a decision to use temporary employment agencies for recruiting staff so that they pass the problem to somewhere else. Glebbeek and Bax 2004 cited on Marchington, M. & Wilkinson, A., 2007 point out that company should decide whether an optimum level of labour turnover with the mix of internal labour market and keep new recruits coming in, or whether the cost of turnover make most cases costly and unnecessary.

According to Linda Maund (2001) some internal causes of an increasing labour turnover:

The recruitment and selection procedure is not enough and imperfectly matches individuals to jobs. Employees willing to leave the organization and they are always seeking jobs which better matches with their skills and interests.

Employees are not well motivated and don’t feel the organization from the core. So, employees’ feeling is that s/he does not ‘own’ the organization and they don’t have liability or responsibility of it. S/he will consider better opportunities outside the organization and employee does not feel any interest to do better for the organization.

Not equality in wages and salaries with competitors. If wages and salaries do not fulfill the expected levels of companies in a similar business, then the individuals will search employment where s/he will get competitive rates or better reward packages.

Some external causes of an increasing labour turnover:

Head hunting: There is good demand of high skilled or skilled worker in the competitive market place. So, there is competition for a limited labour supply.

Improved transportation system: With good transportation infrastructure and the nice increment facilities encourage individuals to move away from local community to look for suitable work.

Negative result of a high labour turnover:

In order to be successful, recruitment and selection procedures can be more costly for organization.

It is costly for organization to train and retrain employee.

The induction of new employees into the organization and to familiar with its environment and culture is time consuming.

The productivity of the new workers is less as the experienced skilled workers productivity and efficiency.

Saiyadain (2006) point out that ‘I changed my previous job to this because it pays well.’ So pay is the crucial issues for quitting job. According to Torrington et al. (2002) there is some argument in the retentions literature about raising pay levels reduces staff turnover. In one side some researcher found that usually, employers who offer the most attractive reward packages to the employees have lower turnover rates than those who pay poorly (Gomez-Mejia and Balkin 1992), for that reason many organization uses pay rates as their major weapon in retaining employee (Cappelli 2000; IRS 2000a; IRS 2000b cited on Torrington et al. 2002).

On other research based on questionnaire suggests that pay is a good deal and less important than other factors in a decision to quit one’s job (Bevan et al. 1997; Hiltrop 1999 cited on Torrington et al. 2002). In a study Sturges and Guest (1999) cited on Torrington et al. (2002) point out that in the field of graduate employment pay rising is not vital factors for quitting job that only resulting greater job satisfactions but they wants more challenges and innovation within the job roles.

In addition, a result of research cited on Torrington et al. (2002) appears to verify the views of Herzberg (1996) where he indicates pay as ‘hygiene factor’ rather than a motivator. Therefore it shows as a cause of dissatisfaction at work, other than not of positive job satisfaction. People who are not get paid well by the employer they automatically motivated to leave the job but if they satisfy about their pay, the additional benefits do not effect to change their mind to quit job.

The key factors of labour turnover:

Employee expectation / Better career prospects/ More job security (Torrington et al., 2002; Armstrong, M. 2003; Bratton & Gold, 2007)

A lack of attention / poor relationships with manager or supervisor, colleague. (Torrington et al., 2002; Armstrong, M. 2003; Bratton & Gold, 2007)

Work environment / more opportunity to develop skills/ bullying or harassment in workplace (Torrington et al., 2002; Armstrong, M. 2003; Taplin et al. 2003 cited on Marchington, M. & Wilkinson, A. 2007; Bratton & Gold, 2007)

Appraisal system/ the recruitment and selection procedure are not enough and imperfectly match individuals to jobs. (Maund, L., 2001; Torrington et al., 2002; Armstrong, M. 2003; Bratton & Gold, 2007; Bird and Beechler, 1995 cited on Briscoe & Schuller, 2008)

Management system/ Employment relationship/ employee commitment in workplace or psychological contract. (Guest, 1992a; Mcgee & Ford’s, 1987 cited on Legge, K. 1995; Ogbonna & Wilkinson, 1988, 1990 cited on Legge, K., 1995; Gregg & Wadsworth, 1999 cited on Torrington et al. 2002; Armstrong, M., 2003; Bratton & Gold, 2007)

Poor pay packages/ Not equality in wages and salaries with competitors/ Head hunting (Bevan et al., 1997; Maund, L., 2001; Hiltrop 1999 cited on Torrington et al., 2002; Torrington et al., 2002; Saiyadain, 2006; Bird and Beechler, 1995 cited on Briscoe & Schuller, 2008)

Personal reason like pregnancy, illness, moving away form area etc. (Armstrong, M., 2003)

ABSENTEEISM:

In everyday life employees need a little extra effort to come to work in an emergency. A little little problem makes a tremendous impact on work attendance such as problem with bicycle, a drizzle, and a small tiff with spouse and several such types of incident. But it depends on satisfaction or dissatisfaction of work and for the dissatisfied worker these minor problems becomes the major issues for missing from work on the other hand for the satisfied worker is totally irrelevant. However, it causes extra cost to cover this situation. An organization has to recruit extra manpower or retaining large number of manpower as they required due to the increasing rates of the fact of absenteeism. Bhatia and Valecha (1978) cited on Saiyadain (2006) defines that organization has to retain extra 10 per cent workforce of the total workforce.

However, there are several definition of absenteeism are available and most of them are describes ‘absenteeism as absence from work when one is expected to work’. Absence from work could be happened several reasons such as inability or unwillingness to come to the works. Any absence with prior notice or approval did not count as absenteeism only unexpected sickness or injury is counted as absent.

Harris, L. cited on Towers, B. (2003) points out that absence is a responsive area of human resource management which lifts possible disagreements between control and care for the individual. He also argued that stress in workplace can play a significant role of employee absence. Studies in both the UK and the USA of Bailey (1998) cited on Towers, B. (2003) found that half per cent age of total annual absence is linked to stress related illness. In a survey about the causes of sickness absence of CIPD (2001) report identify that stress-related illness as the causes of sickness absence far more frequently by public sector organization. In other study of Labour Research Department (1999) identified workloads, long hours, shift work, job design and bullying as the main reason of stress-related illness.

Apart from the illness related absence IES report find out some reason which are influence employee to absence in workplace. They are discusses as follows:

Workplace factor, attitudinal and stress factors: Evans and Palmer (1997) cited on Towers, B. (2003) argued to turning absence to attendance in workplace is very important for the organization and working environment is playing significant role which influence worker to away form workplace. 40% managers in Industrial Society research point out less confidence and a repetitive job is the main causes of absence. Other studies by Rhodes and Steers (1990) and Huchzynski and Fitzpatrick (1989) cited on Towers, B. (2003) also find the relationship between low job satisfaction and lack of interest and higher level of absence.

Moreover, Towers, B. (2003) point out in studies of attendance is that absence means taking time off which is a form of ‘retributive justice’. This can be happen when an employee suffers depressed due to poor pay, work environment or undesirable management behaviour and according to him absence is highlighted as a worse employment relation in workplace.

Domestic and kinship factors: According to Industrial Society report women’s family responsibility is the third most causes of absence in the industrial sector. The women with nuclear family (Hacket and Jackson, 1993 cited on Kossek & Lobel, 2000) absenteeism are higher due to having more household responsibilities and the availability of dependent children and elderly relative’s responsibilities (Hendrix, Spencer and Gibson, 1994 cited on Towers, B., 2003). Rosen (1991) cited on Kossek & Lobel (2000) point out that less than 10 percent family found where male stay-at-home wife and doing childcare and other domestic responsibility.

Apparently, a woman absent rate falls when age of dependent children rises. Employer can benefit by arranging programs to support employees and dependent such as well baby care, sick childcare, benefit for dependents and long term care insurance etc. (Kossek & Lobel, 2000).

Health and lifestyle factors: In studies of absenteeism reveals a clear link between lifestyle and attendance at work. As because better life style reduce sickness and mental stress which are the causes of absence. So employers can get benefit from an investment in programs promoting employee health (Towers, B. 2003) and traditional programs do little to restore the workplace to meet employees’ individual desires (Kossek & Lobel, 2000).

Moreover, According to Sinha and Nair (1965) cited on Saiyadain (2006) study on absenteeism shows that the lower job satisfaction is causes the higher rates of absenteeism. They classified their research based on respondents in two groups as low absentee and high absentee group. Their result also points out that low absence groups are more satisfy with their job than the high absence group.

The key factors of absenteeism:

Physical Illness (Saiyadain, 2006)

Stress related illness (workloads, long hours, shift work, job design and bullying) (Harris, L.; Bairley, 1998 cited on Towers, B. CIPD survey about absenteeism, 2001; & Labour Research Department, 1999)

Workplace factor, attitudinal and stress factors (Evans & Palmer, 1997; Rhodes & Steers, 1990; Huchzynski & Fitzpatrick, 1989; & Towers, B. 2003)

Domestic and kinship factors (Hacket & Jackson, 1993; Rosen, 1991 cited on Kossek & Lobbel, 2000; Hendrix, Spencer and Gibson, 1994 cited on Towers, B., 2003; Kossek & Lobbel, 2000)

Health and lifestyle factors ( Towers, B. 2003; Kossek & Lobbel, 2000)

Lower job satisfaction (Sinha and Nair, 1965 cited on Saiyadain, 2006)

CASE:

Pacific Jeans Ltd. is one of the leading garment industries in Bangladesh. They are working with world renowned buyers like GAP, H&M, NEXT, Lee, Wrangler etc. In the year 2004 they used old machine in there production. In late 2004 certainly company’s fall a problem. There absenteeism rates and turnover percentages became high (25%) increases which is very high in garments industry and is not manageable for the production (sewing). As per Pacific Jeans Ltd. production report normal absenteeism rates are below 10% which can easily balance from the production line with any loses. So that was badly effected the production. Due to that reason they failed to meet their shipment on time.

Pacific Jeans Ltd. recruits a work study team to find out the problem. Why absenteeism rate and turnover ratio’s becoming high. The team analysis the problem and find out some reason why the problem increases and how to improve there production. They are as follows:

Unfair determining compensation system for employee

Inappropriate Job evaluation for new employees.

Performance appraisal system

Lack of motivational system

Uses old machine in production

Due to that unfair system operators turnover and absenteeism ratio was surprisingly increases where company loosing there productivity and efficiency.

However, this team introduces operator ranking method of job evaluation like Trainee operator, Junior operator, operator and Senior operator where any have chance to go higher grade by showing high his/her performance. They also introduce process or operation classification method like ‘A’ ‘B’ ‘C’ grades based on the difficulty of the operation. And compensation package was set according to there ranking. Any operator have chance to get further promotion or change his present status by showing their performance. Therefore every operator was motivated himself to do good grades operation which helps him/her to promote themselves.

Moreover, the team finds out the solution about the new operator recruitment process which helps to select the best and necessary operator the team. They taking cycle time (cycle time is observed time of a process how long it takes to complete the operation) of operation (at least 10 cycle) with the help of stop watch which the operator knows best and calculate the capacity of the new operator with giving 10% – 20% allowance (for example bobbin change, needle broken, thread cut, toilet & fatigue etc.) based on the operation categories (see appendix I).

Based on his/her capacity and doing which grades operation it can easily identify the ranking of operator and determine the compensation package. It is fair judgments system for the operator and employees also happy with the system. So far that is best and fair way to evaluate the operator. As a result of fair evaluation system and compensation packages operators are motivated to do best performance and reduces the absenteeism and turnover rates that lead to high job satisfaction to the employees.

Finally this company introduced modern technology with high-tech machine which is ensured high quality product and install switch track system where work is going on in chain system. One sewing operator can do his work then he dashes the chain to the next operation. In this system bottle neck can easily identify and also it reduces helping operation as normal and employees are easily motivated to cope with the new technology or high-tech machine where they increases there production capability and efficiency up to 20% annually.

CASE ANALYSIS:

Organisational productivity depends on the employee performance in the workplace. Employee behaviors in workplace like turnover, absenteeism, lateness, careless work tendency, social loafing, lack of interest etc. all are causes affect of quality and quantity of work output. Those employee behaviors lead to company’s destruction on productivity and decrease the production volume as usual. So manager should always find the way to get high performance from the employee. Turning employee’s poor performance to high performance fully depends on the work motivation. Managers need to understand the employees need to achieve the organizational goal (Kreitner, 2001 cited on Saithep, R. 2008).

Moreover, according to Stredwick (2005) employees are motivated different ways such as competitive salary, increment, training program, promotion etc. Appropriate motivational programs could make employees to work for an organization efficiently. However, motivation is linked with individual’s needs and organizational goals, if both are works in same direction that drive to the success of an organization.

Organisation’s aim is to hire and retain employee. So they should have HR policy to hire and retain employee. Saiyadian (2006) describe some determinant of compensation or salary structure. So organization needs to set a good salary structure for attract new employee and also retain available employee. There are two methods works to determine salary structure: one is salary survey and other is job evaluation (Saiyadain, 2006).

In salary survey organization is able to give a competitive salary based on the comparison with other competitor companies. And company can offer extra allowances to retain employee such as transport facility, production bonus, attendance bonus etc. so that employee are well motivated for the company and achieve high performance from employee.

Other method is job evaluation which is a systematic process of measuring the internal value and complexity of job. Inappropriate job evaluation causes employee job dissatisfaction or unhappy with job which is influences employees mind not to give 100% target in his work. Torrington et al. (2002) describe this as the way to build up a connection between the employee contribution and compensation. It is also good technique to evaluate employee skills and motivate to them to show best performance in a job. Saiyadain (2006) point out that job evaluation is the best way to observe the outcomes of skills, capabilities, measures the responsibilities and management system which is closely related to the best performance. In general job evaluation does not set the financial value of job but it gives foundation for it. Apparently it is a performance appraisal technique which helps to improve the job descriptions and requirement.

Furthermore, for fair job evaluation system Saiyadain (2006) introduce ranking method, job classification & point based system. Where in ranking method operators are classified different stages such as trainee operator, junior operator, operator and senior operator based on their performance. Secondly in job classification method sewing operations are classified based on the difficulties to do such as A, B, C, and D grade sewing operation. For example single needle machine are easy to operate so anybody can do small sewing operation in this machine on the other hand feed of the arm or waist band attach by kansai machine is hard to operate with maintaining high quality and quantity. And thirdly point based method which is helps to employee how they perform in his/her category and what percentage they achieve. For example according to work study officer observation in back pocket attach sewing operation one operator’s 100% and standard target is 50 pc/hr (with allowance) but if any operator give production 40 pc/hr then his/her percentages is coming down to 80%.

Pacific Jeans Ltd. did well accept a combination of all of these method and created link with ranking method, job classification and point based method. They evaluate the employee in every six month and in special case anytime based on quality of the work and arrange training program for employee if necessary. They also introduce high quality machine where operator can easily do operation with good quality such as program single needle machine, program double needle machine, program kansai machine etc. Company also increases attendance bonus from 100 taka to 500 take to encourage employee to attend in workplace and they added production bonus for employee (who achieve 100% standard target they will get bonus). For that reason employees of this organization are feel competition to do best performance and promote them to higher grade where they did not discriminate by the management. Finally company was able to turn employee mind from job dissatisfaction to job satisfaction and reduce there absenteeism and turnover ratio below 10% and productivity and efficiency increases 20% annually.

CONCLUSION:

High labour turnover and absenteeism is a crucial issue for the organisation. Most of the organizations are badly sufferer (especially industries sector) if there is high staff turnover and absenteeism. Employees are core of the organization. Organizational success and development depends on the employee’s performance. So, human resource management should be positive to the employees and employer need to take extra care about employees. Fairness in job evaluation is more important in an organization.

According to Armstrong, M. & et al (2005) job evaluation is the important tool for the development and management of a rational and acceptable grade and pay structure as part of an overall reward policy. Employer and HR can ensure to create good working environment with fair management and also need to offer a good compensation packages with added facility where employees mind stuck on the point that they are not discriminated with the system and they could have good compensation packaged by these pay structure they can manage a standard life.

Finally it can say that retain employee is very important in organization for organisational success and organizational aim to motivate employee with high job satisfaction other wise they have to face high labour turnover and high absenteeism which is causes more cost for the organization. In this project it discusses external and internal factors of increasing employee turnover and absenteeism which are helpful for the HR policy making to reduce labour turnover and low absenteeism and those reasons are the main center point of HR management. Organization can focus on those factors and take necessary steps to retain employees in the organization and organisation also beware from others competitor organizations talent hiring policy. As a result employees are well motivated to remain in the organization. Therefore from the reduced amount of labour turnover and low absenteeism company can get maximum benefit with maintaining high productivity and efficiency.

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