The Effects of Employee Turnover - Case Study Example

1.0 Introduction Labour turnover is one of the organizational problems that are experienced by many organizations today. Labour turnover which is also known as organization turnover refers to the rate at which organization employees leave the company. Labour turnover is very costly and is very disruptive to the operations of a business. A survey conducted in UK in 20008 on employee retention, recruitment and labour turnover indicates that on average, 17.8% of employees leave the organization. It is necessary for an organization to measure the employee turnover and subsequently calculate its costs to enable it to forecast the future losses to enable it to plan ahead and identify why the employees are leaving the company. There are several impacts of labour turnover in an organization. to begin with, there is the high cost of hiring new employees including the cost advertising for the new job vacancies, cost of interviewing the applicants of the job vacancies, recruiting the successful candidates and training. There is also the cost of lost productivity between the time an employee leave and the time another employee replaces the employee who has left. According to a US department of labour, a company spends about 33% of a new worker’s salary to replace the employee who has left. This means that the large companies could be spending millions of dollars per year to cater for turnover costs. High levels of employee turnover can lead to lack of staff to undertake all the crucial functions of an organization. This may in turn lead to overloading of the existing employees which will lead to frustration of employees which may in turn lead to more employees leaving the organization Moore S (n.d) . This will lead to dissatisfied customers. This essay will focus on how leadership, perception and organizational change can lead to labour turn over. 2.0Discussion of the key theoretical concepts 2.1 Leadership Leadership is the process through which one is able to influence other people so that they can successfully achieve a task and lead the company to be more cohesive and coherent(Northouse's 2007, p3). For leaders to undertake this process, they need to apply leadership skills and knowledge. This is known as process leadership. However, others carryout the leadership roles based on certain traits that they possess and this is known as Trait leadership (Jago,1982). The two leadership styles are as illustrated in the diagram below. Source (Northouse, 2007, p5) While leaders are made through learning skills and knowledge that a leader is supposed to possess, leadership can be influenced by the traits that people possess including their values, ethics, beliefs and their character. Having knowledge and the necessary skills contribute directly to process leadership while personality traits give the leader certain attributes that makes them distinct from non-leaders. According to Bass’s theory of leadership, people become leaders in the three ways. The first two ways explain how leaders develop. The first way argues that the personality traits that a person possesses may naturally lead a person to become a leader and this argument lead to development of the trait theory. The second way argues that an occurrence of important event or crisis may prompt a person to act accordingly which will in turn bring out extra-ordinary qualities of leadership in a person. This argument brought rise to the Great event theory. The third way argues that people may choose whether they want to become leaders and that leadership skills can be learned. This argument lead to development of transformational leadership theory which is the most accepted theory in today’s world ( Ivancevich, Konopaske & Matteson, 2008). There are several styles of leadership. Leadership style refers to the manner in which a leader provides direction to his followers and motivates them. In 1939, Kurt Lewin identified 3 styles of leadership namely: Autocratic or authoritarian leadership, democratic or participative leadership, free reign or delegative leadership. Authoritarian style of leadership is a style where the leader gives instructions to employees on how he or she wants a task to be undertaken without asking for the advice of these followers. This type of leadership is considered to be appropriate when the problem is to be solved within a short time and when the leader has all the necessary information and hence no need for input. The other style is democratic style of leadership where the leader allows the followers to give their input before making a final decision. This type of leadership styles is necessary when agreement of the team is crucial. The third style ofleadership is free reign where leaders don’t interfere but instead leave the followers to make decisions on their own. This method is most appropriate where the leader has a team of highly motivated and capable team (Ivancevich et al,2008). 1.2 Perception According to Ivancevitch et al(2008), the process through which a person gives meaning to an environment through organization and interpretation of stimuli into coherent and meaniful picture of what the world is. Perception is usually based on an individual’s past experience and is therefore empirical. For these reason, different people will have different points of views about the same issue. Behavior of a person is greatly determined by a person’s point of view of an event. Information on perception can be collected through hearing, taste, smell, sight, touch or sight. There are several factors that affect the perceptual process including the characteristics of the perceived, the perceiver and the setting. In relation to characteristics of the perceiver, a person’s values, personality, attitudes, motives and their past experiences could influence the perceptual process. The perception process can also be influenced by the perceived object, event or person in relation to size, motion, figure ground separation, contrast and novelty. Also the perceptual process can be influenced by the characteristics of the setting in relation to the social context, physical context or organizational context. The perceptual process has four stages which include information selection, information organization, information interpretation and information retrieval. Under information selection, there is selective screening of information where a person allows only a small portion of all the information that bombards an individual. The selective screening process could be controlled or can happen without the conscious awareness of the perceiver. The second stage of perception is information organization through schemas which is a perceived framework which represents an organized knowledge about a stimulus or a concept that is developed via experience. The third stage of the process is information interpretation where the same information may be interpreted differently by different people. The diagram below is a summary of the perception process (McCuddy,2003). 2.3 Communication Communication is the process of transferring information from one person or place to another. It involves the speaker developing the message and transferring it to the receiver in order to get a required response. There are various classes of communication including spoken, non-verbal communication, written communication and visual communication. Spoken communication includes use of telephone, television and face to face meetings. Non verbal communication includes use of gestures, body language and dress code. Written communication includes emails, magazines, books, letter and internet. Visual communication includes use of logos, maps, graphs and other visualizations. According to the communication theory, communication process must have a sender and a receiver to transmit the information via a channel of communication. Employee communication systems and processes must provide a two-way system. In one way, it makes it possible to for the organization to inform the workers about issues that concern them. From the other direction, it gives opportunity for upward communication by giving workers a voice. Communication within a company is known as internal communication and it can be formal or informal. Internal business communication involves upward, downwards and literal communication. Upward communication is where communication flows from the employees to their leaders or supervisors. It is a means for employees to air their grievances, offer ideas and provide feedback. Downward communication involves flow of information from the management or leaders to the employees. It is needed by the management to give instructions, give vital information, announce decisions and obtain feedback. Lateral communication is flow of information between employees of the same rank. This could is necessary to build goodwill, solve problems and accomplish tasks (Armstrong ,2009) 3.0 applications of the theoretical concepts 3.1 Leadership and labour turnover When an employee is deciding whether or not to respect a leader, they don’t think about the characteristic but rather they make observations of how that leader behaves so they can know who the leader really is. An employee may leave an organization because they feel that they cannot trust their leader. If the followers lack confidence in the leadership of an organization, they will feel uninspired and if this is not checked, it can lead to labour turnover. Leaders can however prevent this through convincing their followers that they are worthy of being trusted. An employee may also leave an organization because they are not satisfied with the leadership style. Different employees require different leadership styles. For instance, a new employee may require more supervision as compared to an experienced employee. An employee who is highly skilled and motivated may require free reign leadership as opposed to Autocratic leadership. If a leader uses the same style of leadership on all employees, then they are likely to feel unsatisfied and may end up leaving the organization. To solve this, leaders must first understand the human nature of employees including motivation, needs and emotions of followers. Also employees may leave an organization because of communication breakdown between the leader and the followers. If the leader does not communicate well about what is expected of the followers, they are not likely to perform well and hence they are not going to be inspired. If this continues, employees may leave the organization. To cope with this, the leadership should ensure that the communication system is effective (Ashraf ,n.d) . 2.2 Perception and Labour Turnover As described in the perception process, different people will interpret the same information differently. There are several perception distortions that may make a person to leave an organization. The first distortion is stereotyping. An organization leadership may stereotype individuals on the basis of their gender age or race. In some organizations, female employees are not given opportunities to hold management positions simply because they are women. Therefore, when such vacancies arise, only men are allowed to hold these positions. This is because women are perceived to be weak and incapable of holding such positions. Men on the other hand are perceived to be the head of family and therefore capable of holding management positions. In other organizations, some leadership positions cannot be held by people of particular races or age since they are perceived to be incapable of holding such positions. Such stereotyped employees may feel demeaned and may leave these organizations. The other perception distortion that can lead to labour turnover is halo effect. This is where one attribute of an employee is used to develop an overall impression of that employee. For instance, a person could miss a leadership job simply because they are short because the manager believes that short people can be leaders. Even if they are qualified professionally to take that position, they may miss this position because the management perceives that short people cannot be leaders. Leaders should avoid perception distortion so as to reduce labour turnover (McCuddy, 2003) . 2.3 Communication and labor turnover Communication is said to be a two way process. If communication is not effective, then there will be lack of adequate information and employees will not be able to perform the jobs efficiently. This will leave the employee unhappy and if this situation persists, the employee will leave the organization. If communication is not effective, rumors and gossips will develop which may end up demoralizing the employees especially if the rumors have to do with their jobs. If this is not addressed, then the employees may end up leaving the organization. If the leaders are not able to communicate clearly on the scope of an employee’s job, there will be confusion and task overlap. This may lead to stress or injury to employees due to lack of proper instructions. This may eventually lead to labour turnover. In order to reduce the rate of labour turnover, there is need to put up a clear and effective communication system (Armstrong M,2009) 4.0 conclusions From the above analysis, it is clear that if leadership of an organization is not checked, it can lead to labour turnover. Different employees require different styles of leadership and it is important for an organization to understand each individual and apply the type of leadership thatis most suitable to the. It is also clear that we perceive the same information differently. However, leaders should be careful to practice perception distortion which may lead to increased levels of labour turnover. Leaders should avoid perception distortions such as stereotypes and halo effect on their employees. Finally, organization leaders should ensure that they communicate effectively to the employees to ensure that the employee get the right information at the right time. That way, they will avoid cost of poor communication system including, unhappy employees, gossip and rumors, confusion and ultimately labour turnover. . References Armstrong M(2009) Armstrong’s handbook of human resource management practice11th Edition London and Philadelphia:London Ashraf T (n.d) Organizational Behaviour. Retrieved on 14th April 2012 from http://www.unesco.org/education/aladin/paldin/pdf/course02/unit_14.pdf Huczynski, A A and Buchanan, D A (2007) Organizational Behaviour, 6th edn, FT Prentice Hall,Harlow Ivancevich, J M, Konopaske, R and Matteson, M T (2008) Organizational Behaviour and Management,8th edn, McGraw-Hill/Irwin, New York Jago, A. G. (1982). Leadership: Perspectives in theory and research. Management Science, 28(3), 315-336. McCuddy M. K (2003) Organizational Behavior, Retrieved on 14th April 2012 from http://www.wiley.com/college/schermerhorn/047120367X/ppt/ch05.ppt Moore S (n.d) The Effects of Employee Turnover Retrieved on 14th April 2012 from http://www.ehow.com/facts_4866742_effects-employee-turnover.html Northouse, G. (2007). Leadership theory and practice. (3rd ed.) Thousand Oak, London, New Delhe, Sage Publications, Inc. Robbins, S. & Judge, T. ( 2011). Organizational Behavior, 14th Edn. Upper Saddle River, NY, Pearson Education. Read More