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Assignment
On

Causes and Effects of Employee Turnover

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Chapter 1 Introduction

1.1 Introduction Todays competitive business world, it is considered to be an important task to manage employee turnover for any organization. In Bangladesh, it is very important to manage turnover for both government and non-government banks. This report is prepared on the topic Causes and Effects of Employee Turnover.

1.1 Literature Review Very few researches have been conducted related to turnover in Bangladesh so far. The owners of the business organizations do not concentrate on this important issue because of less awareness. In recent years, researchers are conducting research on turnover. Some examples of such kinds of researches are Employee Turnover-a Study of its Causes and Effects to Different Industries in Bangladesh by Mr. AHM Shamsuzzoha and Md. Rezaul Hasan Shumon, The impacts of benefit plans on employee turnover: a firm-level analysis approach on Taiwanese manufacturing industry by Chun-Hsien Lee and Mu-Lan Hsu and Nai-Hwa Lien, etc.

1.2 Rationale of the Study This report was prepareded as a requirement for the fulfillment of MGT-321: International Business course which is assigned by Mr. After searching the different books, websites etc. and visiting Eastern Bank: Chowhatta Branch and then gathering all other necessary information and opinions from the employees and collecting data from other sources, the report was prepared. The report was submitted on September 29, 2012.

1.3 Objectives of the Study The underlying objectives of this report can be classified in the following two types, Broad Objective: To elucidate the overall employee turnover and its causes and effects of an organization.

Specific Objectives: i) ii) iii) iv) To identify the actual reasons of turnover To analyze how turnover affects productivity on organizations. To find out the possible solutions of reducing turnover. To help Private Banks, especially EBL by identifying their problems, analyzing the informations and recommending for possible solutions. 1.4 Methodology 1.4.1 Data Types In this study we used two types of data- primary data and secondary data. 1.4.2 Sources of Data The study includes both primary and secondary sources of data. The primary sources are: Interview Face-to-face conversation Questionnaire The secondary sources of data are Journals Books Websites

1.5 Scope of the Study The study is prepared on the basis of private banks, but it can be used or applicable in governmental banks too. Besides this study is also helpful to understand the causes, reasons and to find out the solutions of employee turnover in other financial and non-financial organizations as some basic reasons and impacts are almost same in every kind of organization.

1.6 Limitation of the Study

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We did our best and there has no dearth of sincerity on our part to make the report. But we had some limitations also: In many cases, up to date information is not published. At the time of preparing survey, all people werent willing to give all information. Besides these, the study has been conducted to analyze the Causes and Effects of Employee Turnover in Private Bank: A Case Study on Eastern Bank Ltd.. On the way of our study, we faced the following problems, which may be termed as the limitation of the study: At a time of preparing the report, we tried to gather every details of the given topic but the major limitation is lack of adequate information. Lack of enough experience on field work.

Chapter 2 Theoretical Aspects of the Study

2.1 Definition of Employee Turnover Employee turnover occurs when employees voluntarily leave their jobs and must be replaced. Turnover is expressed as an annual percentage of the total workforce. For example, 25 percent employee turnover would mean that one-quarter of a company's workforce at the beginning of the year has left by the end of the year. Turnover should not to be confused with layoffs, which involve the termination of employees at the employer's discretion in response to business conditions such as reduced sales or a merger with another company. The severity of turnover varies widely by type of business and the economic health of the region where companies are located. Innovative high-tech companies and the most successful manufacturers frequently experience low turnover rates while fast-food restaurant managers expect turnover to be as high as 50 to 75 percent. As another example, coal mining companies in sparsely populated regions experience lower rates of turnover because there are few other job opportunities.

2.2 Types of Employee Turnover At first glance, the phrase "employee turnover" has a negative connotation -- a stigma associated with an employer's obligation to reduce turnover at all costs. However, there are different types of turnover and all turnover isn't negative. Turnover occurs for a variety of reasons, ranging from termination for poor performance to the departure of highly-skilled employees who resign after they help grow start-up businesses to sustainable. 1. Involuntary Involuntary turnover occurs when employers terminate an employee or ask an employee to resign. The latter may ultimately be considered voluntary turnover; however, the initial decision is to affect an involuntary turnover. When employees are terminated for violating workplace policies, poor performance or business slowdown, the departure is considered

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involuntarily. Some instances of involuntary turnover may cause trepidation among remaining employees. Employees who witness regular involuntary turnover or terminations might be concerned about their own job security. Other employee terminations may come as a relief to remaining employees, whose morale and productivity suffer when poor performers affect the workplace climate. 2. Voluntary Voluntary turnover occurs when employees leave of their own volition. Employees who resign, retire or simply leave the organization for other reasons are counted in turnover analyses as voluntary turnover. Attrition is often part of the turnover analysis. Human resources experts define attrition as a decrease in the workforce for voluntary departures. The difference between attrition and voluntary turnover is that employers do not replace employees who leave by virtue of attrition. While some instances of voluntary turnover may occur because employees are dissatisfied, a number of employees resign for reasons unrelated to working conditions. Examples of voluntary turnover for nonwork-related reasons are employees who leave their jobs to travel with spouses, or students who leave the workplace to return to school. 3. Positive Desirable -- or positive -- turnover occurs when the workforce experiences change due to new employees bringing fresh ideas and perspectives to the company replace workers who are terminated for poor performance. Infusing new talent in an organization can re-energize the workplace, catapult productivity and boost profitability. Employers may initially be apprehensive about this type of turnover, simply because the word turnover has a negative connotation. Replacing a stagnant workforce can be costly; however, employers ultimately realize the the return on investment in recruitment and selection processes for new and fully engaged employees. 4. Negative Negative turnover is often referred to as undesirable turnover. It's easy to understand why turnover is considered negative or undesirable when employees leave under a cloud of circumstances such as suggested wrongful termination, mass exodus of disgruntled workers or workplace conflict. Mass layoffs, business closure and plant shutdowns might also be classified as negative or undesirable turnover -- layoffs have a devastating impact on workers and the surrounding community. The negative effects of losing jobs in certain areas can create

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a downward spiraling effect to economic conditions for employees of other nearby companies. For example, when employees suffer job loss from a plant shutdown, surrounding companies that provide services such as meals and other lunchtime and break-time services also suffer from lost revenue.

2.3 Calculation of Employee Turnover Calculating Employee Turnover by Month Lets revisit an employee turnover calculation I explained in my previous blog: monthly turnover. This turnover calculation can be used to learn more when employees leave in their first year. To calculate monthly employee turnover rates, divide the number of employee separations in one month by the average number of active employees at the worksite during the same period. Well say we have one site of operations.

For example, lets say we lose four employees out of 200.

That gives us an employee turnover rate of two percent. What if we repeated this employee turnover calculation to highlight the turnover rate just in the new hires, not in the whole company, over the course of a year?

Calculating Employee Turnover Rates within the First Year Have you wondered if employees leaving in less than 12 months have a bearing on your business? What about on your business practices? You can learn both by learning about first year employee turnover.

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To compute this, divide the total number of employees who leave in less than one year by the total number of employees who leave in the same period. Heres what the formula looks like:

Now to pull numbers into our formula for first year employee turnover:

2.4 Turnover: Causes and Influencing Factors Turnover basically arises from the unhappiness from job place for individual employee. But being unhappy in a job is not the only reason why people leave one company for another. If the skills that they possess are in demand, they may be lured away by higher pay, better benefits or better job growth potential. That's why it is important to know and recognize the difference between employees who leave the job because they are unhappy and those who leave for other reasons. There are number of factors that contribute to employee turnover. We explore some of these factors in more detail below: (i) The economy - in exit interviews, one of the most common reasons given for leaving the job is the availability of higher paying jobs. Some minimum wage workers reported for leaving one job to another that pays only 50 cents an hour more. Obviously, in a better economy the availability of alternative jobs plays a role in turnover, but this tends to be overstated in exit interviews. (ii) The characteristics of the job - some jobs are intrinsically more attractive than others. A job's attractiveness will be affected by many characteristics, including its repetitiveness, challenges, danger, perceived importance and capacity to elicit a sense of accomplishment.

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(iii) Demographics - empirical studies have demonstrated that turnover is associated in particular situations with demographic and biographical characteristics of workers. (iv) The person - In addition to the factors listed above, there are also factors specific to the individual that can influence turnover rates. These include both personal and trait-based factors. Personal factors include things such as changes in family situation, a desire to learn a new skill or trade or an unsolicited job offer. In addition to these personal factors, there are also trait-based or personality features that are associated with turnover. (v) A bad match between the employee's skills and the job - Employees who are placed in jobs that are too difficult for them or whose skills are underutilized may become discouraged and quit the job. (vi) Substandard equipment, tools or facilities If working conditions are substandard or the workplace lacks important facilities such as proper lighting, furniture, restrooms and other health and safety provisions, employees will not be willing to put up with the inconvenience for long time. (vii) Lack of opportunity for advancement or growth If the job is basically a dead-end proposition, this should be explained before hiring so as not to mislead the employee. The job should be described precisely, without raising false hopes for growth and advancement in the position. (viii) Feelings of not being appreciated Since employees generally want to do a good job, it follows that they also want to be appreciated and recognized for their works. Even the most seasoned employee needs to be told what he or she is doing right once in a while. (ix) Inadequate or lackluster supervision and training Employees need guidance and direction. New employees may need extra help in learning an unfamiliar job. Similarly, the absence of a training program may cause workers to fall behind in their level of performance and feel that their abilities are lacking. (x) Unequal or substandard wage structures Inequity in pay structures or low pay is great causes of dissatisfaction and can drive some employees to quit. Again, a new worker may wonder why the person next to him is receiving a higher wage for what is perceived to be the same work.

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2.5 Relationships among Turnover and Productivity Turnover deeply related with the productivity of an organization. Employee turnover can hamper the overall productivity of an organization and is often a symptom of other difficulties. Productivity is the measures of an organization to achieve its targeted production with the means of workforce, authoritys strategies, machineries, equipments and assets. Authorities must have plans to increase their productivity. Various terms affect productivity such as incentive scheme, line balancing, scheduling, etc. Production of a manufacturing organization is hampered due to labor turnover. This problem is one of the main factors for Ready Made Garment (RMG) sectors in Bangladesh. Small percentage of turnover may cause considerable amount of production lost. Turnover directly affects the production and productivity. It causes a replacement which is costly and time consuming. So many formalities have to maintain to replace a person. During that time production is hampered to a great extent. There are also other difficulties during the replacement of workers such as follows: The newly replaced worker may not be efficient like the previous one. The newer one takes time to be easy with the new system, with the co-worker, to be habituated with the new environment etc. During the time of replacement the co-worker faces problems due to the vacancy. After the replacement the co-worker have to spend time from their task to help the new worker. Some organizational authority point on the turnover tendency of the worker that affects their productivity. Suppose, a worker may get assurance from another organization for joining and the joining date may be after one month later, then the worker gives up concentration from working. At the time productivity of the organization falls down. Newly appointed employee may not be trained properly for the new position and needed time consuming training for settle down with the new job place. There may be cultural differences between new employees with the previous one which slows down his / her job performance. Demographic position also influences workers performance and characteristics. All the causes mentioned above contribute hugely to the damage of productivity of any organizations or service sectors. Care therefore must be taken to reduce or minimize turnover rate as minimum as possible.

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2.6 Advantages and disadvantages of high employee turnover Losing employees on a regular basis is often viewed as a negative thing, particularly because it portrays a picture of a management that doesn't care much about their employers. However, there are sometimes some advantages to a high employee turnover, depending on the reason for their leaving. Advantages

1. New blood: If the same team of employees is in place for a long time, they tend to
become stale. They may still get the job done, but almost as if they are on automatic pilot and there will be very little innovation. New blood may be able to see what can be improved and act on in, because they haven't yet had chance to get stuck in a rut. They can inject new ideas and innovation into the proceedings.

2. Keeping other employees on their toes: Long-term employees tend to resent

newcomers, simply because they are set in their ways and don't want anyone else to show them up. However, in the long run, it can be a good thing, because it reminds older members of staff that they can't afford to slack off. There is also the possibility that relations between staff members will improve as the result of new members of staff.

3. Getting rid of troublesome employees: Most organizations have at least one or two
members of staff that cause trouble - perhaps because they gossip or are moody. Their behavior may be detrimental to the office as a whole. Once they have left, the office environment may become a much better place - unless the trouble-makers are replaced by other trouble-makers of course.

Disadvantages

1. Brain drain: Staff members build up a great manual of knowledge during their time in a
job. Unfortunately, few, if any, write this knowledge down, so when they leave, it leaves with them. Management is then faced with the challenge of ensuring that the new members of staff are trained up as quickly as possible, which can be a drain on resources. There is also the risk that the employees who have quit will pass on trade secrets to their new company.

2. Potential loss of clients: It is often personal contact that makes a business what it is; so
losing a good salesperson could result in the loss of clients, because they leave to follow the employee to their new job. This is a major reason that headhunters look to persuade

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employees to leave and go elsewhere - they already have a proven track record of which another company can take advantage.

3. Lower levels of loyalty: Loyalty to a company tends to build up over a period of time,
so if most of the employees in a company have only been there for a short time, they are unlikely to feel particularly loyal to the company. Lower levels of loyalty mean that employees will come in, do the job and go home - there will be no extra input from them and good employees could well feel under-appreciated. Ultimately, whether a high employee turnover is a good thing or not depends on the type of company you are running. A company where new employees can be trained quickly and do not take away as much knowledge when they leave could benefit from a high turnover, whereas a knowledge-based company could struggle.

2.7 Solutions to Employee Turnover within an Organization Turnover is a major problem in many organizations. When a company is able to recognize how to keep skilled workers in line when others may retire then the company will be able to work efficiently. Staying ahead of the competition relies upon the organization being able to re-adjust to turnover. High employee turnover hurts a companys bottom line. Experts estimate it costs upwards of twice an employees salary to find and train a replacement. And churn can damage morale among remaining employees. Here are some ways to lower turnover in workplace. 1. Developing the Community Spirit: Across the nation we are asking more of our employees and in many cases they are spending more time with those they work with than they are waking hours with their spouse, partners, or significant others. This means there are families at work as well as a family at home. The community spirit simply means employees look out for each other and back each other up. When an employee is out sick or on an assignment others pick up the workload without being asked to do so. Of course this may involve a culture change in your organization and the results are proven to be powerful.

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If community spirit is not present this usually means there is a lack of trust between employees and maybe even management. The community spirit begins with trust in each other and in management. 2. Set a Work life balance program in place: With the demands on the personal lives as mentioned above many employees will not push themselves over their limit as in years past. Why is this? Let's take a closer look at the ages of those we are likely talking about. In most cases we are talking about Generation X employees. Those born between 1964 and 1980. When you look at this generation, they are sometimes called the lazy generation, which could be nothing further from the truth. Generation X was known as the first generation of latch key children. This meant that they had to fend for themselves when they came home from school. Their parents were not around because they were out working longer hours and doing more. Consequently, they made a promise to themselves that they would not do this to their children. 3. Not forgetting to Charge the Employee's Battery: A car has an alternator to charge the battery while it is running. Without an alternator the car would start once and while running the battery would eventually die and thus the engine may not start again. Those companies successful in managing employee retention do this in a variety of ways which include outside company activities, holiday pot luck lunches etc. One powerful way is to bring in a professional speaker. Many organizations do not want to spend the money to bring is a "Motivational Speaker" because this type of motivation (battery charging) is considered too expensive. What if one were able to bring in a speaker / trainer who have the ability to teach practical knowledge and information beneficial to organization who also understands how to charge the batteries at the same time? The range of topics like this includes teambuilding, leadership, diversity, customer service training to name just a microscopic few. With this type of session, in most cases the cost per employee can be kept to a more manageable level. 4. Branding Employment: Most organizations understand the power behind branding for marketing purposes. They fail to understand the power behind branding from an employment experience. Think about what your organization does and develop a brand on why employees want to work there. The United States Army's most powerful brand "Be All You Can Be" was a recruiting promotion that exceeded all expectations. 5. Utilizing the Exit Interview to Advantage: Even if everything is done correctly you will still loose people. In the exit interview the number one answer an employee gives when they

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leave is more money. If the person doing the exit interview digs a little deeper other factors will emerge. They may include shorter commute, better chance for advancement, more challenging etc. The cop out answer is more money and most of those doing the interview stop right there. If you get money and you know you need to dig deeper the most effective way is to ask; "Besides money, is there anything else that lead you to this decision?" Once you have an answer then ask why that is important to them. If it is important to them most likely it's important to others as well. You will then want to ask, "Between X and money, which is the more important reason you have chosen to leave?" You will want to repeat this cycle a few times to get the hierarchy of their reasons. Some will give you one or two others may give you five or six reasons. And once you have the hierarchy you have something to work from for the future. 6. Holding All Leaders Accountable: This is where senior management needs to make the turnover rate in an organization over to the specific managers. They need to manage their own churn rate and this should be a portion of their performance evaluation. Nothing will stop employees from leaving if they really want to leave and sometimes it may be better if they do leave. Maybe they are not meant to be on your bus. 7. Recruiting Carefully: In order to reduce turnover an organization must sometimes outsource in order to get the best quality workers. When turnover becomes a problem recruiting firms are ones to help with the needs of replacement. Recruitment firms help the organizations to find qualified employees with the work experience, knowledge, skills, and the ability to be molded into successful employees. A particular vendor who provides such recruiting services is Aerotek. Aerotek provides staffing services to help hire, find, and manage the necessary workforce. Services provided include recruiting and staffing, information reporting, and workplace management solutions. Recruiting agencies are helpful because they can do background checks on recruits, analysis on the recruits level of motivation and honesty, and they are able to negotiate salary ranges. Aerotek provides the following services: Customer Analysis - Aerotek takes the time to get to know the organization and what they are looking for in an employee. They do their best to find the perfect person for the job that you have available.

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Sourcing- Aerotek goes to the community colleges, schools, and other organizations to find potential employees to fit your description. This allows for variation and more skills to be found. Screening- Each candidate is screened for the skills that they possess as well as how well they would be able to fill the position. According to Aerotek.com, Aerotek has the experience, expertise and resources to provide complete staffing solutions. Perfect Fit Program Time Central - Timekeeping Solutions Government Staffing Minority Partnerships Aerotek Onsite - Vendor On-Premise Workforce Management Solutions Aerotek Time & Expense Allegis Group Comprehensive Staffing Health and Safety Training Recruiting is a good direction to go for an organization who is having trouble maintaining employees and replacing them will well qualified employees. Let's not forget the time that will be saved from such assistance. Using the services of Aerotek will be a great component of technology because they are able to use particular software that organizes their databases. The databases are filled with names, numbers, skills, and job preferences. They are also able to keep track of how well their placements have filled positions. An organization would be wise to take advantage of such a great technological advancement in Aerotek in order to keep up with the turnover rates that may occur.

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Employee turnover may be prevented if measures of employee appreciation are taken. Just in case that is unable to be a steady alternative, recruiting services such as Aerotek are ready to step in to assist.

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Chapter 5 Findings and Recommendation Findings High employee turnover hurts EBLs bottom line. Experts estimate it costs upwards of twice an employees salary to find and train a replacement. And churn can damage morale among remaining employees. Here are some ways to lower turnover in EBL: Hiring the right people from the start, most experts agree, is the single best way to reduce employee turnover. Interview and vet candidates carefully, not just to ensure they have the right skills but also that they fit well with the company culture, managers and co-workers. Setting the right compensation and benefits is important too. Work with human resources to get current data on industry pay packages, and get creative when necessary with benefits, flexible work schedules and bonus structures. Review compensation and benefits packages at least annually. Pay attention to trends in the marketplace and have HR update you. Pay attention to employees personal needs and offer more flexibility where you can. Consider offering telecommuting, compressed schedules or on-site or back-up day care. Bolster employees engagement. Employees need social interaction and a rewarding work environment. They need respect and recognition from managers, and a challenging position with room to learn and move up. Managers often overlook how important a positive work environment is for staffers, and how far meaningful recognition and praise from managers can go to achieve that. Awards, recognition and praise might just be the single most cost-effective way to maintain a happy, productive work force. Simple emails of praise at the completion of a project, monthly memos outlining achievements of your team to the wider division, and peer-recognition programs are all ways to inject some

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positive feedback into a workforce. Also, consider reporting accomplishments up the chain. A thank you note to the employee is good. Copying higher-ups makes that note even more effective. To make it easier to identify accomplishments, ask your team for weekly or monthly updates of their achievements. Ask for specific numbers, examples or emails of praise from co-workers or customers. Outline challenging, clear career paths. Employees want to know where they could be headed and how they can get there. Annual reviews or midyear check-ins are one obvious venue for these discussion, but you should also encourage workers to come to you with career questions and wishes throughout the year.

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Conclusion Turnover is a burning issue for any organizations. For the steady productivity of an organization it is essential to maintain its skilled workforce. But most of the times it is very difficult to control the turnover rate within organizations. There are so many factors that affect turnover. According to the theoretical discussion and the case studies many solutions to reduce turnover has been discussed. First of all, obviously satisfactory salary structure helps to reduce turnover though job security also an important issue too. But it is not the only and always the solution for the authority. A person does not stay in an organization only for salary but he/she may stay for many other reasons such as, rearranging employees, good stream relation, better working environment, preferable job location etc. Productivity of an organization depends on the skills or expertise of its workforce. A skilled worker may be an asset for any organization. If a skilled person leaves an organization the effects will be very high where as in case of a semiskilled or un-skilled person the effect will be less. As a result, a vacant place of a skill labor may be filled by another new worker but production falls due to their skill difference. On the other hand, five or six semi-skilled or unskilled labor may be turnover but those empty places can be filled by one or two skilled labors. It is therefore, crucial to maintain a constant workforce particularly for the skilled ones in an organization to reduce turnover for the betterment of the organization. Most of the work of this paper is obviously theoretical but a complete mathematical model to measure this turnover rate can be done in future research. If the skill of the employee or worker is expressed in terms of weight or in percentage, a mathematical model then could be possible to measure the direct relationships of turnover and productivity. To develop such model we have to consider so many factors such as; relationships among wage and salary structure, compensations, fringe benefits, location advantage, job security, social and economic factors to turnover etc. To integrate all these factors in a model could show a new way to control turnover for the managerial concern.