Employee turnover is a costly for any organization, especially in the case of executives and professionals. There are various types of employee turnover, and these are determined by what causes behind employees leaving the organization. Some employees leave an organization voluntarily, and this is called voluntary turnover. It is mostly caused by personal reasons, geography, career opportunities, or the payment (Jackson and Mathis, p. 84). The other type of turnover is involuntary turnover where the employees are terminated due to poor performance or violation of the organization rules and regulations. In addition, when the disruptive and low performing employees leave the organization it is called functional turnover while dysfunctional turnover is where the high performers or the professionals leave the organization.
Not all employee turnovers affect the efficiency of the organization negatively. This essay discusses the consequences of employee turnover on organizational efficiency.
Consequences of employee turnover to the efficiency of the organization
Efficiency indicates how well an organization is able to use the available resources to produce outputs that are of good quality and quantity. In general efficiency is where an organization is able to make profits (Cochran, p. 25).
Employee turnover affects the productivity of an organization either negatively or positively. To start with, when the employees leave the organization involuntary due to their low productivity, the organization efficiency is affected positively (Jackson and Mathis, p. 84).This is because low performing employees lowers the productivity of an organization. Therefore, the organization management should set policies and principles to guide the behavior of the employees. This will help the organization to deal with those employees who are disruptive. The low performing, disruptive and unreliable employees should be fired, as a way of eliminating them from the organization (Jackson and Mathis, p. 84).
However, most turnovers affect the efficiency of an organization especially for the controllable turnover and the dysfunctional employee turnover. When the professionals or the key individuals such as the executives leave the organization at crucial work times, for example when production is high due to the high demand, the efficiency is affected. This is because in most cases they are high performers and hence when they leave the organization the productivity declines (Jackson and Mathis, p. 84). The production level goes down due to a decline in the number of employees. Labor in an organization is considered as input and hence when the input is low the level of production also declines.
When employees leave an organization they have to be replaced so that the organization efficiency can not be adversely affected. The organization incurs a lot of costs to employee new employees the cost are either direct or indirect (Mehta, p. 75). For example, they incur the cost of advertising the job opportunity in the newspaper or any other form of advertisement that the management decides to use to reach potential employees. This is a direct cost. After advertising the job opportunities available in the organization, the management also incurs some other direct costs. For example, they incur the costs of recruiting and selecting the qualified employees. The selected employees are trained and the cost of training them is incurred by the management. There are also manpower expenses that are incurred by the organization that are related to the hiring process. Therefore, turnover drains a lot of finances from the organization and affects the efficiency of the organization (Mehta, p. 75).
In addition, the organization incurs some intangible costs. To start with, when there is a lot of employee turnover in an organization in the same duration, the image of the organization in the society is affected negatively. It reflects some weakness in the management of the organization and hence a negative image is portrayed to the society. A negative organization image, affects the efficiency of the organization because many employees cannot be attracted to work in that organization. In addition, the demand of the organization products may also decline.
During staff shortage period in an organization, the remaining staff usually works hard to maintain the level of production. Therefore, these staff is mostly overloaded (Mehta, p. 75). Overloading staff may affect their health and hence the level of productivity declines. For the remaining employees to continue overworking, their salaries should be increased because sometimes they are forced to work overtime to meet the target of the management. Other than increase of the salaries and wages of the employees, the management should also get other ways of motivating them so as to retain them. Therefore, the organization has to incur the cost of retaining the employees through motivation (Mehta, p. 75).
Moreover, due to the effect of employee turnover in the organization, the management carries out a research on how to reduce employee turnover. In most cases, the management needs to strategies on ways to motivate the employees. Some costs are incurred to carry out this research because the management may decide to appoint some professionals to carry out the research. Therefore, researching and implementing the solution (problem solving process) drains some profits from the organization.
Employee turnover has an adverse effect on the efficiency of an organization. This is because it affects productivity, causes low morale in the employees who remains in the organization and also leads to a negative organization image. Therefore, employee turnover affects the organizational efficiency negatively. In most cases, job turnover relates to job satisfaction and job opportunities. Therefore, the organization should control employee turnover by ensuring that the hierarchical structure of human needs is satisfied. First, the employee physiological needs which include adequate salaries and wages and comfortable working conditions should be satisfied. Secondly, employees’ security should be provided. After satisfying the safety needs, teamwork should be encouraged because it helps to create a sense of belonging in the employees which Is a need that has to be satisfied. The other need that employers should satisfy to reduce turnover, is self esteem and when it is satisfied self confidence is gained. Self esteem also leads to a feeling of worthiness and adequacy and this increases productivity in the organization. Finally, a feeling of accomplishment and self fulfillment should also be satisfied. Self fulfillment and accomplishment is mostly through personal growth. Therefore, to retain the employees in the organization the management should ensure that these personal needs are satisfied. When these needs are met, the employees are motivated and hence organization productivity increases. However, the firm’s size, its age and its capital intensity also affect and therefore those firms which are old in the market and have a large capital are not severely affected by employee’s turnover.
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