Research

To the new generation of American workforce, work is something more than a source of income. Unlike their parents, the baby boomers, they do not hold on to their job for very long and do not have a strong sense of loyalty toward the organizations they work for. Companies on the other hand are aware of this change in attitude and its costs, so they try to create a work environment that makes it hard for good performers to leave.

Turnover has direct and indirect cost. The true cost of turnover is a sum of all costs incurred by the event. This includes recruiting, interviewing, trainings, and the developing costs of a new hired. When the employee leaves the organization, the workload of the leaver will be distributed to another employee which will not only require extra time to complete, thus causing overtime pay, but also reduces overall the productivity of the employee. Turnover also affects business in direct and indirect ways. A shortage of workforce creates a stressful working environment for everyone that directly affects the organization’s performance. Moreover, the employee morale suffers which starts other negative chain reactions.

It has been estimated that the costs of replacement of an employee is equal to one-third of annual salary paid for that specific position.

Turnover could be voluntarily or involuntarily. Voluntarily is defined as leaving the organization at will. But involuntarily turnover is when the decision to terminate is made by the employer. Even though most scholars focus on voluntary turnover and its causes, we choose to explore both types of turnover for the purpose of this paper.