Employee Turnover And Retention

Organizations worldwide in today ‘s industries face challenges with the globalisation of the economic system and the turning market place. Investings in technological advantages are besides important as it is to retain the best employees in order to remain competitory in the market and create sustained competitory advantage.

High turnover rates indicate that employee keeping is non an easy undertaking. But what is the ground for employee turnover? Is it the mistake of a company ‘s direction or the attitude of the employees?

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This work analyzes the current state of affairs on employee turnover and keeping in Malaysia and gives deductions about the grounds for Malayan employees to go forth or hold the purpose to go forth their organisation.

Furthermore the impact and effects for the organisations is discussed with valuable recommendations how to cut down employee turnover.

The Malayan labor market is characterized by continues growing. Favorable economic conditions contributed to an addition in domestic and foreign investings. In this state of affairs the competition for hiring and retaining gifted workers has increased among Malayan industries.

In 2009 the voluntary employee turnover rate in Malaysia was 10.1 % , an addition to the rate of 9.3 % analyzed in 2008 ( Hewitt Asia Pacific 2009 ) . The mean voluntary turnover rate for the Asian-pacific states is 10 % ( 2009 ) . Japan reported the lowest with 5 % and India the highest with 13.8 % ( Hewitt Asia Pacific 2009 ) . The costs for companies caused by employee turnover are high, sing advertisement, enlisting, choice, engaging and preparation. Besides the costs there is besides a loss of productiveness and valuable cognition. Depending on the place the costs range from one and a half to five times of an employee ‘s one-year pay. Penetrations into the factors that contribute to an employee ‘s determination to go forth or remain within the company are provided in Chapter 2 of this work.

1.2 Forms of Employee Turnover

Before analysing the job on employee turnover and keeping, three common distinctions of employee turnover are described briefly.

The first signifier is internal and external employee turnover. Internal turnover means that employees taking over a new undertaking in the same organisation whereas in external turnover employees go forthing the organisation for another occupation outside the company. Internal turnover are less harmful for the organisation since the already gained company specific cognition might besides be utile for the employees new place. In other words the Human Capital for illustration accomplishments, cognition and preparation stay within the company.

Another distinction is between skilled and unskilled employees. As already pointed out the turnover rates for unskilled employees is much higher. But it is besides easier for a company to replace unskilled employees with the consequence of minor loss of public presentation compared to skilled workers. The 3rd distinction is voluntary turnover and nonvoluntary employee turnover. In instance of voluntary turnover the employee decides to go forth the organisation and in the signifier of nonvoluntary employee turnover the employee has to go forth the organisation due to e.g. long-run illness or employer initiated expiration.

Compared to the voluntary turnover rate stated above, the nonvoluntary turnover rate is rather higher with 18.6 % in 2009. ( Hewitt Asia Pacific, 2009 )

This survey concentrates on voluntary turnover and chiefly on external turnover ( more common signifier and more impact on the organisational public presentation ) .

2.0 Analysis of employee turnover and employee keeping in Malaya

Besides the factors that can be positively influenced, there are besides signifiers of employee turnover that can non be controlled. These signifiers are traveling to be defined foremost, before we analyse the factors that have a positive impact on turnover or turnover purpose. In order to capture the current state of affairs in Malaysia on this subject, recent publications have been reviewed. Following, the positions of Human Resource Managers in Malaysia are presented.

2.1 Controllable Factors on Employee Turnover

Job satisfaction and organisational committedness is considered as the chief factors for the employees to remain within their companies. An employee is satisfied with his work, if it fulfils the several desires and demands. Important factors that contribute to this position are employee motive, employee end accomplishment and positive morale in the workplace. These factors are reliable on demographic factors. Due to restriction of this work the different demographic factors for illustration age, gender and instruction degree are non examined in item. Nevertheless the most of import demographic factor for this work the cultural facets and influences are considered.

Committedness to the organisation included three constituents: credence of organisational values and ends, excess attempt on behalf of the organisation, and the desire to stay with the company ( Mowday, R. , Porter, L. & A ; Steers, R. 1982 ) . Committed employees feel “ connected ” and can place with the company. This positive feeling makes employees to remain.

The extend of governable turnover is rated much higher than unmanageable turnover, due to hapless direction or less importance given to this issues among the direction in general. How employee turnover can be positively influenced by direction schemes, this is elaborated in chapter 4 of this work.

2.2 Uncontrollable Factors on Employee Turnover

There are two common signifiers of employee turnover that can non be controlled. First “ Job-hopping ” and back a sensed alternate employment chance. Ghiselli ( 1974 ) defined job-hopping as “ the periodic scabies to travel from a occupation in one topographic point to some other occupation in some other topographic point ” . He described that this phenomena is driven by natural urges instead than based on a logical idea of persons. The other influence on job-hopping is the civilization. Malaya can be categorized as a civilization where job-hopping is a really common pattern. Abelson ( 2003 ) states that within a turnover civilization it is an acceptable behavior to hoop from one occupation to another. Furthermore he describes that an employee may experience an increased force per unit area to alter a occupation after remaining with a company for a long clip because of societal influences.

That committedness to the company is dependent on the civilization ; this can be seen for illustration in Japan and China.

In Japan, “ lifetime employment ” was a common pattern. Students got recruited from companies during their concluding twelvemonth, and would remain within the company until retirement. The employee benefits from the received “ lifetime ” security. The employer benefits from the loyal and committed worker, preparation and calling chances can be planned really good.

China is defined as a really relationship orientated civilization ; the trueness to the supervisor is really high. This behavior has its roots in Confucianism ( Farh & A ; Cheng, 2000 ) . It means that persons who occupy an inferior function in a dyadic relationship ( in this instance supervisor and subsidiary ) are obliged to be obedient and loyal to their several higher-ups. This consequences in the designation with the supervisor and internalisation of supervisor ‘s values. But besides in Chinese civilization where “ trueness ” used to be height was late reported that the employee turnover increased and to one of the highest in the universe. ( Chinahourly, 2010 ) . This tendency is caused by salary additions and deficit of qualified forces. It is reported that job-hopping has become a “ workplace civilization ” . Latest study shows that a Chinese junior employee stays an norm of 2.3 old ages in a company, a mid-level employee 4.2years and a senior employee 5.8 old ages. In European states and the United States employees stay an norm of 3 to 4 old ages longer.

2.3 Why employees leave their company – Malayan instance surveies

In order to derive an penetration sing the turnover purpose of Malayan employees, following three instance surveies are examined.

The first survey is conducted among employees in Penang, Bayan Lepas and Prai Free Trade Zone, Malaysia ( Ramayah, T. , Jantan, M. & A ; Tradisina, S. ) . Companies in these countries are distinguished by a high employee turnover. The labour costs increased immediately in the past decennary due to a deficiency of skilled workers and professionals. The survey was conducted utilizing questionnaires aiming 50 directors, 100 supervisors and 200 operations employed in fabricating companies in Penang. An addition in occupation satisfaction is stated as the chief challenge for directors in order to maintain employees in the company. The consequence shows that occupation satisfaction is chiefly dependent on the nature of work followed by supervising and publicity. Among colleagues the occupation satisfaction additions with optimum complexness of the occupation. Payment was ranked as less of import in the part to occupation satisfaction. The consequences differ among genders.

Second survey examines the private company sector in Petaling, Malaysia ( Yeoh, S. , Lim, C.S. & A ; Osman, S. ) . 120 employees were selected in the survey, in order to derive an penetration into organisational committednesss, occupation emphasis, occupation satisfaction and the likeability to alter the current occupation. Employee satisfaction and occupation emphasis experienced by employees are pointed out as the chief influence factors on organisational committedness and the employee ‘s determination to remain or go forth the organisation. A general centrist ( 67.5 % ) to high ( 22.5 % ) occupation satisfaction could be identified. The turnover purposes are on a moderate ( 42.5 % ) low degree ( 30.8 % ) and high degree ( 26.7 % ) . Younger employees are more likely to go forth the organisations, but it could besides be distinguished that this group has lesser occupation emphasis than older workers. One-half of the workers stated to hold a high degree of emphasis in conductivity their assigned occupations. Turnover purpose is caused by lower occupation satisfaction ( 20 % ) , deficiency of organisational committedness ( 13 % ) and ( 0.9 % ) high degree of emphasis. A rise in salary ( wagess on single public presentation ) increases the organisational committedness every bit good as occupation satisfaction.

The 3rd survey examines the organisational committedness every bit good as the employee ‘s purpose to go forth the organisation in Malaysia ( Juean, W. & A ; Kaur, S ) . The study, where 181 Malayan workers ( among multiple industries and occupation degrees ) contributed, provides the information that organisational committedness has the most positive deduction on an employee ‘s determination to remain in a company. Affectional committedness resulted as the most impact on an employee ‘s turnover purpose, followed by continuation and normative committedness. It could be established that the turnover purpose lessenings by high engagement and influence on determinations that affect the occupation or the squad. Scott-Ladd ( 2006 ) indicates that in order to give high occupation engagement sufficient cognition and accomplishments are required. The direction is advised to supply several preparation and support.

The addition of workload leads to higher occupation dissatisfaction. Job security is considered as of import factor to remain within an organisation, the importance of this factor might be increased during the planetary fiscal crisis in 2007 – 2010. ( This survey has been conducted during this period ) .

2.4 Malayan Managers position on Employee Retention

Malaysians Human Resource Managers province employee battle as a important factor in employee keeping ( The Edge Financial Daily, 10.04.2010 ) . Get Les Mckeown defines employee keeping as “ a systematic attempt by employers to make and further an environment that encourages current employees to stay employed by holding policies and patterns in topographic point that address their frogmans demands. ”

The apprehension of the demands of employees, particularly the younger coevals is of import. It is predicted that an engaged employee turns into a trade name embassador with high company committedness. Therefore it is necessary to construct a trade name, which the employee can place and is attracted to.

Besides battle and company committedness, preparation and development are recommended by Malayan Human Resource Managers for retaining employees. “ Employees like to fell they ‘re appreciated. So companies have to put in these people and it ‘s fundamentally approximately development. You have to prosecute them at different degrees and you have to hold development programs every bit good. ” Dhirendra Shantilal ( Senior Vice-president Kelly Services Asia-Pacific ) .

A lower strength of preparation is by and large practiced in developing states. This is besides seen as one of the chief differences to developed states where the turnover rates are lower. A deficiency of preparation and calling planning is besides stated as one of the chief factors in the high turnover rates reported in China.

A survey among 180 Malayan fabrication companies ( Jusoh, R. & A ; Parnell J. ) provides an penetration in the general importance given by the company for employee keeping schemes and the attempts to maintain the employees satisfied. The company ‘s competitory scheme and public presentation measurings are examined. The consequence shows that there are chiefly fiscal measurings in topographic point. Multiple public presentation steps including employee satisfaction and preparation, besides client satisfaction and trueness are advisable. This would lend to a higher class of importance put on employee satisfaction in the top direction.

An employee study in 2006 by MEF ( Malayan Employers Federation ) shows that 90.5 % of 306 analyzed Malayan companies are holding a public presentation based wages system. A wages system based on senior status, which would promote employees to perpetrate to the company, is non common in Malaysia. Another determination is that there are minimum probes in occupation preparation beyond the needed basic accomplishments.

3.0 Critic of job: Employee Employee turnover

Employee turnover frequently gives insomniac darks to human resource directors in the state of Asia and it is known issue in Malaysia. Employee turnover is the difference in the rate of the employees go forthing a company and new employees make fulling up their several place. This has become a major job among most of the companies, particularly in those that have low paying salary and hapless direction. There are many factor and facet that play a important function in the impacting the employee turnover rate of a peculiar company, this can be derive from both the company ‘s direction position every bit good as from the employee ‘s position. ( Naresh Khatri, Pawan Budhwar, Chong Tze Fern, n.d )

Furthermore, we are traveling to research and analyze the cost of employee turnover and how it will make an impact to a local company.

3.1 Costss of Employee Turnover to the Management of an Organization

When employees leave a company, the employer has to incur a considerable sum of direct and indirect disbursals. These costs usually includes such as advertisement cost, clip taken to enroll a replacing, headhunting disbursals and besides chance costs such as loss of productiveness. Harmonizing to ( Global Business Articles Website, 2010 ) the cost of a turnover is estimated to be you 150 % of the one-year wage for a in-between degree employee and up to 400 % for a specialised high degree employee.

As discuss antecedently, there are indirect and direct cost incurred whenever an employee decide to go forth the company. Let us take deeper expression at some of the different beginnings where costs are derived from ( Timothy R. Hinkin, & A ; J. Bruce Tracey, 2000 ) .

Recruitment of replacings of the employee. This cost are including the administrative disbursals, publicizing to occupation vacancies, testing and questioning procedures, and services associated with choice, such as medical scrutinies cheques.

Lost of productiveness associated with the interim period before a replacing can be placed on the occupation.

Lost productiveness due to the clip required for a new employee to acquire up to rush on the occupation that includes cognizing the procedure, cognizing the environment and achieving sufficient preparations.

Lost productiveness associated with the clip that colleagues must pass off from their work to assist a new employee. This is a known issue where colleagues will pass some clip assisting and steering the freshly hired employee in their assignments and undertakings.

The costs of developing where a certain accomplishment must be attain for the occupation that besides includes the supervisory and colleague clip spent in preparation for the new employees, every bit good as the clip that the new employee must pass off the occupation.

The costs associated with the period prior to voluntary turnover when employee tends to be less productive as they are go forthing the occupation shortly.

In some instances costs associated with the communicating of proprietary trade secrets, processs, and accomplishments to competitory organisations. This is likely to be seen when an employee basketballs to a rival.

4.0 Recommendation and Solution

We have discussed and critic some of the possibility and factors that lead to high employee turnover in organisation. Furthermore we will supply some recommendation and scheme to assist organisation in Malaysia to better retain their employees and win in the war for endowment.

4.1 Management Schemes: Employee Retention Program

Harmonizing to ( Management Training Systems, 2010 ) many of the costs of employee turnover are indirect, but the key to minimising employee turnover, and thereby salvaging the organisation rather a batch of money, is really direct. Employee keeping is the key to cut downing employee turnover. That might sound obvious, but employee keeping is a hard undertaking.

Definition of employee keeping plan by ( George E. Pataki, George H. Madison, & A ; George C. Sinnott, 2002 ) states that an effectual employee keeping plan is a systematic attempt to make and further an environment that encourages employees to stay employed by holding policies and patterns in topographic point that address their diverse demands. Below will be the stairss and step to be taken into consideration when we are looking into employee keeping plan.

Good leading squad and director

Having a good leader or director is important to the issue of employee keeping. A good director will act upon the employee working under his squad to either be to the full engaged and satisfied or to experience ignored and demotivated. Manager plays a critical function to do certain that his full squad are engaged and motivated. A merely sentence like “ You matter so much to me and to this squad. I ca n’t conceive of losing you ” will do the employee felt valued for the work done.

Opportunity to progress as company grows.

Turning companies can offer ample chances to advance bing employees. Make certain to non merely offer the chance, but the preparation and development to do such advancement possible.

Positive and healthy work environment.

The positive civilization of a concern is what draws many employees to work for you in the beginning. The emphasiss of growing can frequently alter this portion of the civilization of a concern. Measure must be taken to keep the civilization you intended to make in the early yearss of the concern.

Job Satisfaction and Intrinsic Motivation.

Job design and occupation satisfaction is important to maintain employees on the top of their public presentations and to retain them from go forthing. This is discussed earlier in the Malaysia Case Study where occupation satisfaction is a cardinal ground ensuing employee turnover in organisation. The Management has to do certain that the enlisting of employees fits the occupation design and ends in order to maintain the employees satisfy and per se motivated on the occupation demands.

Extrinsic Rewards.

Extrinsic wages like gross revenues incentive, public presentations fillips, pay increase and trueness fillips based on figure of functioning old ages as discussed earlier are of import to retain cardinal employees. Besides that, occupation acknowledgment, competitory rewards, position, regard, and so forth, are besides of import to most employees to experience that they are being valued by the organisation.

Social Community.

Create more societal community or particular involvement group where employees of the same involvement can acquire together after work hours. Social group like hebdomadal badminton session, picture taking session can assist employees to remain engaged with each other and be committed toward an organisation. Do non undervalue the power of these societal bonds to retain employees.

Clear Organizational mission and vision

Share and maintain employees informed of where the organisation is headed, and maintain them updated on the advancement. Organizational Mission and Vision can assist acquire everyone focused on the undertakings at manus and do them recognize the bigger image of how their part and difficult work will take the growing of the organisation. And non burying to besides portion the advancement with the employees and acknowledging the cardinal winners, therefore doing them committed to accomplish the organisation ‘s mission.

Employee calling way and growing.

Many employees leave because they are disquieted they will non suit in as the concern expands. Some employees might felt that they do non hold a clear calling way as in what can they make next. The direction can look into this affair by supplying calling programs for each employee to assist them understand their topographic point in the organisation. And when necessary, direction offer preparation and developing plans for them to scale.

Job Stress and Opportunity for work life balances.

Although due to the expanding of organisation and concern may ensue in longer working hours and emphasis on the employees. Job emphasis must non be overlook as an issue ; equal sum of good managed work emphasis is healthy to obtain better public presentation. But extended and ailing manage emphasis degree will take to hapless occupation satisfaction and farther more contribute to turnover rate. Management must guarantee that all their employee have the capableness to cover with work emphasis by on occasion holding stress direction workshop or holding some societal group event that aid in let go ofing work emphasis. Organization must besides look into the work life balance issue where employees have sufficient personal and household clip.

4.2 Management Schemes: Employee Motivating

Management should besides look into the BASIC of employee motive construct to where it will act upon the turnover rate. As being said earlier, a extremely motivated employee will be less likely to go forth a occupation. Organization should supply preparation in the context of employee motive to all direction and line director. This is to guarantee that they are cognizant of the demands and demand to hold their employees motivated. Mentioning Abraham Maslow ‘s hierarchy of demands that states that, people are motivated by multiple demands in a hierarchal order across different phases. Hence, director plays a critical function in measuring these demands and to seek to carry through these demands to maintain a extremely motivated work force.

4.3 Management Schemes: Employee Engagement

( Gerard H. Seijts, Dan Crim, 2006 ) An employee that is engaged will be person who is to the full involved and committed in, and is enthusiastic about this or her work. An engaged employee will besides take the work into a personal degree and attention about the hereafter and growing of the organisation where he or she is willing to put more attempts to see the organisation succeeds.

By sing this recommendation, organisation will construct a work force that is so emotional attached ( by taking work to a personal degree ) , committed to their occupation and besides productive and effectual. Therefore, the opportunities of the employee turnover will be minimized as they are extremely engaged and driven to be align with the organisation end.

Employee battle can be achieved in many ways. An illustration of employee battle procedure will be for the direction to remain connected with your employees by holding breakfast talk, quarterly company meeting to hear and garner feedback from the employee. And by sharing of clear organisation vision and holding profit-sharing strategy that will profit every employee for their part in the organisation will be another illustration to acquire employee engaged to an organisation.

5.0 Decision

Employee turnover is a important job for the bulk of the organisation around the universe. It is a great doomed for an organisation to lose a cardinal employee and furthermore losing it to a rival. We believe that high employee turnover rate will be major organisational liabilities that need to be minimized and it is proven to be dearly-won, and should be closely monitored and certain employee keeping plan should be continuously improved.

As a decision, we think that the civilization of occupation trusting in Malaysia is going a serious issue and should be earnestly look into by the direction of an organisation. And by understand the factors and grounds that are act uponing this in your organisation and why, therefore we can develop a keeping program with new schemes to cut down the cost of employee turnover.

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