Understanding Employee Turnover and Retention Factors

turnover

The rate at which employees leave an organization and are replaced.

separation cost in turnover

Costs incurred when an employee leaves, such as exit interviews, administrative tasks, and separation pay.

replacement cost in turnover

Costs related to hiring new employees, including job advertising, applicant screening, interviews, and background checks.

training cost in turnover

Costs related to onboarding and training new hires, including orientation, on-the-job training, and mentoring.

reduced productivity cost in turnover

Costs due to loss in productivity while the new employee becomes proficient, including vacancy time, learning curves, and errors.

turnover rate calculation

The percentage of employees who leave an organization during a specified period, calculated as (Employees Who Left / Average Employees) × 100.

job dissatisfaction

Negative feelings about one's job, coworkers, or organization that may lead to quitting.

ease of leaving

Refers to how accessible job alternatives are, influencing the likelihood of turnover.

alternatives in turnover models

Attractive external opportunities such as other jobs, education, or life changes.

shocking events in turnover models

Unexpected events, like conflict or policy changes, that trigger turnover decisions.

Job Embeddedness Model

A framework explaining employee retention based on links, fit, and sacrifice.

links in job embeddedness

Connections an employee has to people or activities within the organization and community.

fit in job embeddedness

How well an employee's values and goals align with the organization and community.

sacrifice in job embeddedness

The perceived loss or cost of leaving the job or community.

involuntary turnover

When an organization initiates an employee's exit, such as through dismissals or layoffs.

dismissal

Termination for cause, such as misconduct or poor performance.

layoff

Job loss due to organizational restructuring or economic conditions.

procedural justice

The perceived fairness of the processes used in decision-making.

interactional justice

The perceived fairness of the interpersonal treatment employees receive.

compensation

The total package of pay, benefits, and perks that employees receive for their labor.

base pay

A fixed salary or hourly wage paid to employees.

incentives

Variable rewards based on performance, such as bonuses or commissions.

benefits

Non-wage compensations like health insurance, retirement plans, and paid time off.

perquisites (perks)

Special privileges or benefits, like a company car or private office.

social desirability bias

The tendency to answer questions in a way that is viewed favorably by others.

Efficiency Wage Theory

The idea that above-market wages increase productivity and reduce turnover.

Gain sharing

A group incentive plan that rewards improvements in productivity or cost savings.

Profit sharing

A compensation plan that distributes a portion of company profits to employees.

Expectancy Theory

A theory that motivation is based on expectancy, instrumentality, and valence.

Expectancy

Belief that effort will lead to successful performance.

Instrumentality

Belief that good performance will result in desired rewards.

Valence

The importance an individual places on the expected outcome.

Daniel Pink's argument on pay-for-performance

It can undermine intrinsic motivation; autonomy, mastery, and purpose are more effective.

Barry Gerhart's view on pay-for-performance

It works if metrics are clear and systems are fair.

Sorting effect

The idea that pay systems attract employees whose values match the system.

Pros of pay-for-performance systems

Improves motivation and productivity, attracts high performers, aligns goals.

Cons of pay-for-performance systems

Can hurt teamwork, increase stress, be unfair or hard to implement, and cause unethical behavior.

Reasons for companies to expand internationally

Access to markets, lower labor costs, resources, diversification, profitability.

Types of multinational workforces

Expatriates, host-country nationals, third-country nationals.

Individualism in Hofstede's model

A cultural preference for individual achievement and independence.

Collectivism in Hofstede's model

A cultural preference for group harmony and interdependence.

Power Distance

The degree to which a society accepts unequal power distribution.

Uncertainty Avoidance

How much a culture tolerates ambiguity and uncertainty.

Masculinity in culture

A focus on achievement, assertiveness, and competition.

Femininity in culture

A focus on care, quality of life, and cooperation.

Job withdrawal

A set of behaviors to avoid the work situation, potentially leading to turnover.

Progressive job withdrawal

A process of escalating withdrawal behaviors from dissatisfaction to quitting.

Progressive discipline

A stepwise approach to correcting employee behavior: verbal, written, suspension, and termination.

Outplacement counseling

Services to help terminated employees find new employment.

Wrongful discharge

Illegal termination, such as violating public policy or implied contracts.

Agency Theory

A theory focusing on aligning the interests of principals (employers) and agents (employees).

Merit pay

A pay system linking salary increases to performance ratings.

Merit bonuses

One-time rewards given based on employee performance.

Domestic participation

Operating only within the home country's market.

International participation

Exporting goods or services to foreign markets.

Multinational participation

Operating in multiple countries with localized decision-making.

Global participation

Highly integrated operations across countries with centralized control.

Transnational participation

A complex, interdependent network of international operations.

Self-Dimension in expatriate selection

The candidate's self-esteem, self-confidence, and mental well-being, which affect their ability to adjust abroad.

Relationship Dimension in expatriate selection

The ability to build and maintain positive relationships with host-country nationals.

Perception Dimension in expatriate selection

The ability to accurately perceive, interpret, and evaluate the host-country environment.