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Employee Turnover

By Sambridhi Shrestha

I have recently started my professional experience, and I love working and learning new things. During this time, I’ve encountered newly hired employees as well as those that have chosen to leave to pursue other opportunities. I had learned about employee turnover in college, but now I was able to see firsthand how a company deals with this common issue.

Companies have a tough time finding the right person for the job. The biggest concern for organizations is the high cost due to employee turnover, direct and indirect costs such as hiring costs, opportunity costs, training costs and morale costs. Additional costs of employee turnover include the real recruitment cost to replace those who leave – advertising, travel, and time for interviews, as well as costs for background checks, drug screens, and specialty testing. High employee turnover is not beneficial for organizations because extra effort must be given for recruitment process and training. Time is also a valuable aspect in any organization which is diminished due to employee turnover.

In South Asian countries like Nepal, the traditional education system does not properly equip young graduates for the work environment, and as a result, the first couple years of most youth’s careers are focused on learning. So an environment where teaching and learning is emphasized will likely improve both talent acquisition and retention. Employees today seek for more career development and growth. Many entrepreneurs in Nepal seem to micro-manage their employees and allow minimum flexibility. This leads to a lack of motivation for the employee and an increase in employee turnover for the organization. In the United States, the average total turnover rate reported across industries by employers in 2015 is relatively flat at 16.4%, according to Compdata Surveys’ national survey, BenchmarkPro, surveying 28,000 organizations. In 2014, total turnover rate was reported at 15.7%. Another study by Equifax reported the following turnover rates in various industries in the United States between 2014 and 2015: Healthcare & Education: 30%, Financial: 29%, Information: 32%, Transportation: 40%, Manufacturing: 25%, Retail 56%, Leisure, 68%, Business Services: 60%, Wholesale: 29%.

One of the main reasons for employee turnover is due to dissatisfaction of employees. A research in the US posted by Brandon Carter on Apr 13, 2017 reveals that 51% of employees are “somewhat satisfied” with their jobs, and 34% of employees say they plan to leave their current role in the next 12 months.

Reasons for employee turnover:

Conflict: Conflict is also a major reason for employees to leave their job. Conflicts bring social disorder and lack of communication which is not healthy to the employee as well as the organization. For instance, the conflict between the subordinates or the conflict between the different hierarchies in the organization can cause employees to leave an organization.
Work-life balance: Having a work-life imbalance can also hamper the performance of an employee causing them to leave from the organization. For instance, females who have just entered into motherhood may have a hard time maintaining their work and catering to the needs of their child. The financial incentives like low pay rates and low benefits in the organization can also be another factor that causes turnover.
The job did not meet expectations: The job description given in the interview and the actual job to be done may not match, and this can also create dissatisfaction. Also, the bonus and commissions promised to them may not come to fruition, which creates more potential for employee turnover.

Reducing employee turnover:

Increasing retention of employees: One initial method for retention is to hire the right person for the job which will ensure low employee turnover as the recruit will have interest and skills for the job.
Recognizing and rewarding employees: Employees should be rewarded/recognized for their efforts. This helps in motivating the employees indirectly.
Continuous opportunity to grow: The monotony in work space decreases the thinking capacity and motivation to work. Job rotation, job enlargement, promotion and salary increases are other ways to retain employees. Similarly, new opportunities must also be provided to the employees to reach their need for self-actualization.

In context to Nepal, one of the leading mobile networking brands, Ncell has been able to attract and retain the best talent in the market, which has become one of the key factors of Ncell’s success. Currently, Ncell has an efficient manpower of more than 500 employees. Ncell has been attracting and retaining the employees by providing large bonuses. The salary of one employee is ₨549k monthly. In Ncell, one of the major factors to retain employees is financial incentives.

Similarly, if we look at leading gadget brand, Apple, it has employee retention of 81%. The benefits provided by Apple are longer parental leave, education reimbursements for all classes taken by employees, an expanded donation-matching program, subsidized student loan refinancing, and full acceleration of stock in the event of an employee’s death. This is indicative of a larger trend at Apple–to focus more on people, not just products.

Understanding employee turnover is a very crucial matter for organizations as well as employees themselves. Having knowledge about the causes of employee turnover, its consequences for the organization, and methods or techniques to diminish turnover rates is a significant mission for managers and the organization itself.

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