Factors that have an impact on Employee turnover

One requirement of dynamic business environment now a day is the retention of honest, qualified, skilled and hardworking human resource.

In an established organization the human resource/workers are provided on-the-job trainings, foreign courses and other professional related experience at the cost of company’s expenditure. Such a well trained and highly professional staff’s turnover is actually very shocking and is a great loss for the company.

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This study is an examination of effects that are brought by inequity, lack of training & development & bureaucratic working environment over Employee Turnover. Empirically, it is an investigation of above mentioned elements that are antecedents of job dissatisfaction and intentions to turnover. Significant relationships are found between inequity and job dissatisfaction and between company inequity and intention to turnover & how lack of training & development & rigid working conditions keep employees demotivated & hence dissatisfied from their job.

The following information attempts to answer the question,

Does the following factors effect employee turnover:

Inequity in pay

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Lack of training and development

Bureaucratic working environment.

In order to answer this question, several topics will be discussed. Firstly, broad problem area for this question will be defined given along with the factors that are responsible for employee turnover. Secondly, the causes of employee turnover will be tested through questionnaires & interviews. Next, the effect of such factors over employees & employers will be discussed. Lastly, the causal relationship will be discussed. Conclusions will follow resulting from the information gathered for this research.

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Employee Turnover Broad Problem Area

Turnover is a routine and normal practice of the employees, and is therefore, an accepted fact for which the organizations are always prepared. Due to this practice organizations get the chance to enroll new more skilled and hard working employees. In addition to above, the available staff is provided ample opportunities for further enhancement in their professional abilities and betterness.

The absenteeism and turnover has always negative effects and impact on company’s output, production, profit and the overall state of employee’s enthusiasm. The rules , regulations and policies are made to run an organization in a befitting manner. Sometimes these have negative impact on employee’s motivational level and job-satisfaction. Thus, leading to turnover, which is a clear indication that these rules and regulations should be re-visited.

2.1) what is employee turnover?

There are factors which force the employee to consider the switching over to new job opportunities. But turnover at an organizational level is employee’s exit from the organization. Compulsory retirements, release on compassionate grounds and dismissal from service are some of the factors due to which the workforce leave an organization.

2.1.1) Reasons Contributing to Employee Turnover

Employee’s turnover has always shown a downward trend in the output of a company which create more problems and less comfort for the management. Retention of employees by giving those incentives, bonuses, extra allowances and facilities ensure better productivity and survival in the market.

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Companies definitely face the problem of employee’s turnover but never bother to investigate or inquire into the circumstances under which such a phenomenon occurs or have occurred. It is therefore, necessary for the companies to find out the reasons and undertake remedial measures for the sake of their survival and output.

Details mentioned below highlight the factors due which workers often leave companies.

Reasons

2008

2009

Compensation

35% turnover

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21% (higher pay)

14% (workload)

Personal problems

7%

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19%

Economic problems

No account

11%

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Relation among peers

17%

19%

Termination at employers end

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24%

7%

2.2) Measuring Employee Turnover

To find out the employees’ turnover of accompany is:

 

Number of leavers

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Average no. Working

x 100

= Separation rate

 

As evident from above that it is the number of employees, quitting the company divided by the number of employees enrolled during the same period and then multiplied by 100. The result is known as the separation rate. Average number of employee performing duties is the number of workforce on the first day of the period added to the numbers working till last day. The result is divided by 2, to find out the average number of employee working in that particular period. Above mentioned formula is a very useful key to find out the company’s employee turnover, to compare this factor with other companies and to compare the employee’s turnover at country level also. As discussed earlier in previous paragraphs, company, firm or an organization must undertake investigation to find out the root causes of employee turn over.

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The separation rate does not provide clear picture as to, whether long term associated skilled or semi skilled manpower has left the organization. The stability index mentioned below, does give the actual details about the retention of long term associated skilled workforce.

Number of workers with one

year’s service (or more) now

Number of workers one year ago

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x 100

= Stability index

 

3.) The Cost of Employee Turnover

The cost of employee turnover is always proportional to the number of employees leaving a certain organization. Companies hire the manpower through a proper procedure which starts from the placement of advertisement in newspapers and then after conduct of proper tests and interviews an employee is enrolled for a specific job or duty. To bring up to the desired level of competence, organization spends lot of money and time on the employee so that they are more useful, productive and well oriented with the duties and responsibilities. Management of the company is involved in the abovementioned process from hiring till an employee is brought to the desired level of competence. While calculating the cost of employee turn over abovementioned expenditure must also be calculated and considered. It is a fact that efforts and money spent on minimizing employee turn over is cost effective. There are more serious factors and reasons due which the cost is increased manifold. These include overstaffing, delay in production, less production due to load shedding of gas / electricity, dishearten workforce, low motivation level, accidents etc.

This turnover has immense negative impacts on the overall production, working environment, discipline and morale of the remaining employees. Under these conditions and circumstances the management must be very cautious and sensible in dealing with this situation. The situation must not go out of control and should be tackled in a professional way. Once well trained and professional workers leave an organization, the shortfall is met through new recruitment which is obviously not the actual replacement of those employees. New employees are less trained; less experienced and are not up to the desired level of competence. In the absence of well trained employees supervisors, the newly recruited manpower would not be imparted the proper job training, guidance, supervision thus causing dissatisfaction amongst new recruits and forcing them to leave the organization.

4) Independent Variables

In subsequent paragraphs three independent variables would be discussed as they directly influence the level of employee turnover.

4.1) Inequity in Pays

For every duty, task, job and performance an individual is awarded / rewarded accordingly. This is called the compensation which is an integral part of management. All organizations have their objectives, goals and missions. The organizations put in lot of efforts and direct all their resources towards the achievement of their mission and objective. Ultimate objective of the company is to earn maximum profits and return against investments. Human resource is the best asset and capital of the company through which the companies always try to extract maximum and pay less in return as compared to the output given by this capital. In order to have maximum return the organization must have and follow the latest compensation policies, employee friendly environment, positive decisions, fair treatment to all employees and best working conditions.

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4.1.1) Factors that Must be Considered

a) Every employee is an asset of the organization and contributes as per his/her abilities, capabilities, experience, professionalism etc. The compensation provided to an individual must be at par with his performance, output and production. Compensation policy applicable to all employees across the board would definitely have negative impact and should be reviewed to avoid discrimination.

b) Organizations must discuss in detail the problems faced in implementation of well balanced and well thought compensation policy. It would definitely improve the morale level of the employees and in return the employer would get a boost in his profits, returns and output/production.

4.1.2) Barriers to Fair Compensation

Communication, measurement, structure, philosophy and administration are the factors that make it difficult to achieve the fair compensation. It could be any one of these factors or more than one.

4.1.2.1) Philosophy

The compensation philosophy of an organization is company’s management mindset, sincerity towards employee’s welfare and resolve to achieve the company’s objectives. There are some barriers which are:

* The company/organization does not introduce the compensation policy/philosophy at all. If introduced then the ongoing practices (culture) do not necessarily support the implementation of this policy/philosophy. The compensation philosophy is not applied across the board in that organization causing dissatisfaction amongst employees.

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* Keeping in view the changing circumstances/scenarios the philosophy is not reviewed regularly.

4.1.2.2) Structure

The compensation systems developed and evolved by the organizations are grade/level specific which creates doubts about the efficacy of that system. The structure does contain some barriers as:

* Complexity of the system makes it difficult to find out the decisions taken and the criteria set by the organization. The structure developed for across the board implementation pose difficulties. The relationship between performance and compensation system should be elaborated.

4.1.2.3) Administration

The implementation of compensation system is key to the success of an organization. Potential barriers in this include:

* Newly enrolled employees’ pay structure is adjusted and finalized equal/more than the more experienced and highly professional employees already working in the company. The organizational system should be streamlined in such a way that all the systems are aligned with others.

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* The awards and rewards on the discretion of an individual are not in conformity with the principles of justice and rights. Similarly the abundance of decisions by different managers gives rise to unwanted, unaccepted and unfair practices.

4.1.2.4) Measurement

Measurement is an assessment as per the prescribed rules, references etc. There should be no hindrance to the fairness in the implementation of compensation system. Some of the points are:

* If review and audit of the system and pay structure in vogue is not carried out regularly then it becomes a barrier. Pay structure prepared and implemented on the basis of gender discrimination is also a barrier.

* Organizations smaller in size as compared to other big companies do not undertake the internal audit thus not highlighting the bad practices.

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4.2) Lack of Training & Development

Training is transfer of knowledge and skills to others to improve their current position and level of competence. Development is an ongoing and regular task undertaken to improve the performance level of an individual or organization for a potential assignment.

4.2.1) Typical Reasons for Employee Training and Development

The process of training and development of an individual or contingent is undertaken when organization is of the opinion that employees’ performance had started deteriorating and training is required under the continuous training program. The induction of new equipment and infrastructure, for change of role, also require the training and development well on time.

4.2.2) General Benefits from Employee Training and Development

General benefits accrued from employee training and development include improvement in professionalism, capacity building of employee required for use of advanced technology and latest equipment, high morale and motivation, awareness about harassment at work places thus reducing turnover.

4.3) Bureaucratic Working Environment

Immense changes have occurred in the present day work environment. Previously the employees were exploited by the employer but nowadays, due to lot of awareness provided by the media, Government, NGOs, the employee are more current, updated and educated on their rights and privileges. In this era the work place and environment has to be good so that employees are motivated and attracted. The task of providing nice work place and excellent environment does not only lie on the shoulders of executives but is also the responsibility of managers and supervisors of the organization. The work force must feel at home and be proud of working in such an environment. In this way they would give maximum output and productivity. Now we can say that traditional management i.e. management by status quo, or strictness would always produce the negative results and would not serve the purpose rather it would destroy the organization. In typical bureaucratic working environment the employees are badly treated, not paid fairly and their hard work is not appreciated.

5.) Problem Statement

“This study explores the relation between employee turnover and the organizational policies regarding compensation, training and development and working environment in OGDCL”

6.) Basic Research Questions

Is employee turnover affected by Inequity in Pays?

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Is employee turnover affected by Lack of training and development?

Is employee turnover affected by bureaucratic working environment?

7.) HYPOTHESIS

Hypothesis development will help us either accept or reject the relationship we developed.

7.1) Statements of hypothesis

After identification of required variables, a relation is established through theoretical reasoning, following statements are formulated for hypothesis testing;

7.1.1) Main Hypothesis:

Does inequity in pays lead to employee turnover?

Does lack of training and development leads to employee turnover?

Does bureaucratic working environment leads to employee turnover?

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7.1.2) Testing hypothesis

Null Hypothesis

There is no relation between inequity in pays and employee turnover.

There is no relation between lack of training and development and employee turnover.

There is no relation between bureaucratic working environment and employee turnover.

H0 : ­ = 0

Alternate Hypothesis

There is some relation between inequity in pays and employee turnover.

There is some relation between lack of training and development and employee turnover.

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There is some relation between bureaucratic working environment and employee turnover.

H1: ­ = 0

8.) RATIONALE OF STUDY

Basic purpose of this study is to find the reasons of employee turnover in an organization and subsequently give suitable recommendations. The employees’ turnover in an organization is an alarming issue which should be dealt with professionally, honestly and according to the factual state and details. In this way the accurate state would emerge and then remedial measures would be taken to avoid turnover. These adopted measures will definitely improve the situation in an organization thus, having positive impact/effect on other employees. The reason, due which an employee has left the organization, localized by the managers sometimes do not coincide with the facts this factor gives rise to wrong calculations and estimates thus, depicting in accurate data for executives and future reference.

According to the previous results of employees’ turnover, organization is able to estimate the needs and requirements of their future staff and modify their recruitment and selection policies.

9.) SCOPE OF STUDY:

The researcher has tried to measure the effect of measurable organizational policies on employee turnover; this will help to forecast the future needs of changes to be made in the organizational policies in accordance to employee turnover.

10.) LIMITATIONS:

The limitations of this research are those factors which are not measurable, but do have a significant affect on employee turnover. Like political, Petroleum regulatory authority’s policies etc. This research is limited to oil and gas industry.

11.) Preliminary Data Collection for Employee Turnover

The steps taken for gathering preliminary data are as follows;

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11.1) Method Selection

The topic that have selected is the topic on which many researchers have done lots of work. So we can call this study as a descriptive study. In this research, the researcher has tried to explore and add some new information towards it. Similar to a descriptive study, it has been tried to elaborate all information that is already present and how can we better understand these issues? This research can be called an applied research because factors causing turnover has been clearly and authentically pointed out.

11.1.1) Scales

When exact numbers of objective factors as opposed to subjective factors, scales used are called ratio scales.

11.1.3) Questionnaires

As there are three independent variables in this research. According to them and the availability of employees, three questionnaires have been given.

11.1.2) Rating Scales

Each question has five options, each of them have been assigned a value at the back end.

11.1.4) Population

As the word population indicates, in this particular study population is all the employees of OGDCL.

11.1.5) Population frame

The enlisted employees of all the departments of OGDCL are the population frame of the study.

11.1.6) Sample

Employees to which the questionnaires have been distributed are the sample for the study.

For this research data has been gathered through;

Questionnaires 2. Interviews

List of variables identified in Literature Review

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Compensation (rewards and benefits)

Working Environment

Individual Values

Organizational values and commitment

Job performance

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Job satisfaction

Bureaucratic and rigid working environment

Training and development

Career oppurtunity

             

On the basis of Selected Variables Theoretical Framework is Formulated

Independent variable

(Organizational policies)

Inequity in Pays

1. Pay not equivalent to workload.

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2. Pay scale not related to qualification

Dependent Variable

(Outcome)

Reduced Organizational productivity

Employee Turnover

Lack of Training & Development

No updated Knowledge

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Bureaucratic Working Environment

1. Centralized decision making.

2.Fixed Jobs

As mentioned earlier, only 3 independent variables out of many for the research have been selected. The other independent variables beside inequity in pays, lack of training & development & bureaucratic working environment are;

Job change

Company culture change

Compensation & benefits

Company’s economic problems

Relationship with co-workers

Fired

Housing & transportation

Working schedule

Routine work job

Less chances for job growth

Unfair performance appraisal

Inequity in pays, lack of training & development & bureaucratic working environment has direct impact on employee turnover. In this case, all the 3 independent variables have been manipulated by exposing different groups to different degrees of changes in it. This manipulation of the independent variable is known as treatment and the results of the treatment are called treatment effects. Here level of motivation is in a sense that when these independent variables start operating to influence the dependent variable employee turnover, employees are either highly or less motivated and thus their level of turnover varies according to the treatment given to these 3 independent variables

1. OGDCL

Introduction

Oil and Gas Development Company limited was established in 1961 for oil and gas exploration in the region. Company was declared self financing organization in 1989 and in 1997 public limited company governed by companies’ ordinance 1984. Government of Pakistan bought 5% of its shares through IPO. OGDCL owns 48%oil and 34% gas reserves in Pakistan. Company has the record of 60 discoveries against its achievements.

Human Resource Base

OGDCL has the largest number of professional human resource in today’s oil and gas setup of Pakistan and since its inception the company has gone through so many advancements like inclusion of latest equipment, implementation of HR practices and so on. OGDCL owns highly qualified professionals of its kind who has the expertise to undertake all types of assignments starting from geological surveys to production and processing.

Strategy

OGDCL Vision

To be a leading multinational Exploration and Production Company.

 

OGDCL Mission

Our mission is to be the leader in providing oil and gas in Pakistan by continuous and sustained exploration and production (in country and abroad) through all available options including strategic partnerships. To strive for the satisfaction and expectation of our partners’ by following and implementation of organizational practices, technological advancements for sustainable growth keeping in view the social responsibilities.

Core Values

Merit

Integrity

Team work

Safety

Dedication

Innovation

GOALS

Financial

To reduce cost and time over runs to improve financial results.

To maximize profits by investing surplus funds in profitable revenues.

To make investment decisions by ranking projects on the basis of best economic indicators.

Growth and superior return to all stakeholders.

Double the value of the company in next five years.

Learning and Growth

Motivate and train our workforce, revitalized our equipment base and attain full autonomy in financial and decision making matters.

To enhance the technical and commercial skill through modern HR Management practices.

Continuously develop technical and managerial skills at all levels and stay abreast of latest technological developments in the industry.

Utilization of best blend of latest technologies and high performing human resources.

Internal processes

To set up task forces with representation from all relevant departments to improve internal business decision making and strategic planning.

Excel in exploration, development, and commercialization.

Availability of updated information to the shareholders and customers.

To use most effective business practices and formulate a framework of synergic organization with the change in culture.

Findings of Research on Employee Turnover

As mentioned above, I distributed 3 different questionnaires to 10 employees in order to measure the impact of independent variables (inequity in pays, lack of training and development & bureaucratic working environment) on dependent variable (employee turnover). Findings of these questionnaires are shown below;

A. Inequity in Pays

Rating Scale

Strongly Disagree

Disagree

Neutral

Agree

Strongly Agree

1

2

3

4

5

Major factors in compensation questionnaire

Experience

Strongly Disagree

Disagree

2

Neutral

Agree

2

Strongly Agree

6

Strongly Disagree

Disagree

2

Neutral

Agree

3

Strongly Agree

5

Older vs Younger

Education

Strongly Disagree

Disagree

3

Neutral

Agree

7

Strongly Agree

Contractor VS Permanent

Strongly Disagree

7

Disagree

2

Neutral

Agree

1

Strongly Agree

Quit for better Pay

Strongly Disagree

1

Disagree

1

Neutral

Agree

1

Strongly Agree

7

At OGDCL, the experienced employees are paid more as compared to young employees.

More and more benefits are attached with the tenure of service rather then the abilities or competencies of an employee. As government (due to his over influence) already banned the permanent posts in OGDCL, still contrary to the other organizations, the “on contract” employees are under paid, and it really create a sign of frustration among newly hired youngsters.

Due to this pay structure, as the employees of OGDC receive any offer of better salary package, they all of a sudden leave the organization. So the technical employee turnover at OGDC is dramatic.

B. Lack of Training & Development

Strongly Disagree

1

Disagree

3

Neutral

2

Agree

13

Strongly Agree

11

Responses of training & development questionnaire are depicted above. The overall responses show that the concept of training & development in OGDCL is low; employees do have given training but doesn’t match with their job requirements. Training is not given keeping in mind to enhance an employee’s effectiveness rather to just fulfill the current requirements of job.

C. Bureaucratic Working Environment

Major factors in questionnaire

Individual Decision

Strongly Disagree

Disagree

Neutral

3

Agree

4

Strongly Agree

8

Rigid Control

Strongly Disagree

Disagree

1

Neutral

Agree

2

Strongly Agree

7

Fixed Duties

Strongly Disagree

Disagree

Neutral

Agree

4

Strongly Agree

6

Opportunity for Growth

Strongly Disagree

Disagree

5

Neutral

Agree

5

Strongly Agree

Group Work

Strongly Disagree

Disagree

Neutral

Agree

Strongly Agree

10

At OGDCL, there is bureaucratic working environment, like in other typical government organizations. The questionnaire feedback suggests that the employees are over controlled. Fixed duties are assigned to them, which discourage the innovation and creativity. There are fewer chances of growth opportunities. No concept of work group and team structure.

Hypothesis Development of Employee Turnover

Up till now, the researcher has established relation between variables through theoretical framework and reasoning, now the hypothesis is the step, which will actually conclude that whether these relations do exist, thru facts, figures and testing. Hypothesis development will help us either accept or reject the relationship we developed.

Hypothesis Development of Employee Turnover & Inequity in Pays

Statement of Hypotheses

Does inequity in pays lead to employee turnover?

Testing Hypothesis

1-

Null Hypothesis:

There is no relation between inequity in pays & employee turnover.

H0 : ­ = 0

Alternate hypothesis:

There is some relation between inequity in pays & employee turnover.

H1 : ­ = 0

Level of significance:

¡ = 0.05

Since it is two tale tests so ¡ / 2 = 0.025

Test statistic to be used:

Since the responses size is less than 30 so we will apply “t” test.

ƒ – ­

t =

sd /ƒ-n

f

x

fx

x2

fx2

8

1

8

1

8

10

2

20

4

40

0

3

0

9

0

14

4

56

16

224

18

5

90

25

450

“f=50

“fx=174

“fx2=722

“fx = 174

“ fx2 = 722

“f = 50

“ fx2 “fx 2

sd=

“f “f

722 _ 174 2

=

50 50

= 1.52

“fx 174

x = = = 3.48

“f 50

­ = “ x / n = 15/5= 3

3.48-3

t = = 2.23

1.52 50

Critical Region

The value of t tabular at significance level 5 % at two tails is equal to either + 1.96 or – 1.96 so the value of t calculated that is 2.23 is greater than t tabular.

Conclusion

As calculated value of t = 2.23 is greater then tabulated value of t, so we reject H0 and accept H1 that there is relation between inequity in pays & employee turnover.

Hypothesis Development of Employee Turnover & lack of training and development

Statement of Hypotheses

Does lack of training and development lead to employee turnover?

Testing Hypothesis

Null Hypothesis:

There is no relation between lack of training and development & employee turnover.

H0 : ­ = 0

Alternate hypothesis:

Th