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CHAPTER ONE
INTRODUCTION
Beadles et al.(2000) found a positive and significant correlation between job retention and organizational performance. Campion (1991) found that inescapable turnover was characteristically viewed as critical to an organization. The notion that turnover decreases the organizational performance was supported by the most of researchers. Mobley (1982) suggested that turnover might interrupt job performance when an employee who intended to leave became less efficient and effective. Shaw, Gupta, &Delery, 2002 found empirically that voluntary turnover was associated with the inferior organizational performance.
Other researchers suggested that turnover could improve performance. One probable advantage of turnover was the exclusion of poor performing employees (Price1989). Furthermore, Staw et al; (1986) proposed that turnover might enhance performance if most of the turnover was by employees with longer or very short tenure.
According to Reggio (2003), employee turnover“refers simply to the movement of employees out of anorganization”. It is a negative aspect, which might leadto the failure of employee retention strategies in theorganizations. “Leaving of job appears to reflectsignificant work place problems, rather thanopportunities for advancement into better Jobs”(Holzerand Wissoker, 2001). Turnover of employees disruptsteams, raises costs, reduces productivity, and results inlost knowledge. So, it is essential for the management torealize the importance of employee job satisfaction. It was estimated in a study by Abbasi & Hollman in 2000that American industries incurred $11 billion annually as a result of voluntary and involuntary turnover. This cost was due to termination, advertising, recruitment, selection and hiring.
Turnover also produced etherealcosts, such as declining morale, and the interruption ofsocial and communication patterns as noticed byMobley, in 1982. Beadles et al., (2000) stressed thestudy of turnover as a well-researched area which wasone of the major interest in organizational behavior. Shaw (1999) studied the association between employeeturnover and organizational culture and Kaak, Feild,Giles, and Norris in 1997 explored the concept ofturnover culture amongst lower staff. Some studies byPizam& Ellis, (1999) recommended retention programsthat could diminish turnover and its cause and effects.Realistic job previews, job enrichment, socializationpractices were included. Boles et al. (1995) studied tomake use of the pre-employment applicationdemographics to reduce employee turnover. Hampton,2000; Shanahan, 2000; Schreiber, 2000; Baumann,2000 studied that the literature was also immersed withrecommendations to undertake turnover and reduced retention.
In their study, Pinkovitz et al. (2004) attemptedto know how much an organization is more likely tospend to ensure getting an adequate return oninvestment (ROI) in employees. Turnover direct costsenclose factors such as termination, vacancy,recruitment and selection, orientation and training. Otherindirect costs can encompass such factors as lostofproductivity of incumbent prior to departure, lost ofproductivity of co-worker, lost of productivity of the newhire during initial transition.
By calculating the real cost of employeevoluntary resigning, it will be an indicator of what willworth to retain employees. Reggio (2003) pointed to theformula for computing turnover rates that the USdepartment of Labor as follows:
Turnover Rate = (Number of separation duringthe month/Total number of employees at midmonth) X100
Therefore in almost any organization, if the managementutilizes the information compiled throughthe Exit interview system, positively it would result in acontrolled turnover and develop an effective retentionstrategy (Gray, 2003). Gray (2003) reiterates thatorganizations need to assess their typical patterns of turnover pertaining to their own circumstances.However, there are some general policies that should beconsidered so as to improve employee job satisfaction.Employees’ job satisfaction is positively correlated withemployees’ retention. Reggio (2003) concluded fromliterature review that: “it is important that organizationsstrive to keep employees satisfied. Happy employeesmay be less likely to be absent from their job voluntarilyor to look for work elsewhere” (P.38). To overcome thenegative consequences of turnover, there is a need tounderstand the causes and the consequences ofturnover in First Bank context. The study aims todefine the main turnover factors in First Bank and develop general guidelines foremployees’ retention strategy within the Bankcontext.
Lastly, he found that organizational commitment is positively correlated with age, job experience and durationof service in the actual institution. Cohen 1993; Hom&Griffith 1995 and Allen, Shore &Griffith 2003 explored that turnover intentions have represented a reliable indicator of actual turnover and were heavily influenced by job satisfaction. Hom and Griffith (1995) maintained that employees decided to leave their organization when they become dissatisfied with theirJobs. Likewise, Meyer &Herschovitch argued in 2001 that when employees were dissatisfied with their jobs, their desire to remain in their organization started toerode. In fact, initial consequences of these negativeaffects, in the form of low job satisfaction were turnover cognitions.
Background to the Study
Today we are living in a dynamic world. Advancement of information technology has brought to Centre stage the importance of human resource, more than ever before (Jyothi and Venkatesh, 2006, p.1). In a competitive scenario, effective utilization of human resource has become necessary and the primary task of organizations is to identify, recruit, and channel competent human resources into their business operations for improving productivity and functional efficiency (Ibid). Qualified, motivated, and experienced human resources are also essential in economic liberalization and globalization era.
Human resource management is the most exciting area in the field of management. The responsibility of recruiting and selecting the right person for the organization is HRM department. Since people constitute the cornerstone of any organization, assumes nerve centre in most organizations. This is the science of managing employee/workforces in an organization. It ensures right person at right place at right time. It also provides training and development opportunities for their efficient performance (Khadka, 2009, p. 2). HRM develops practices which fosterteamwork and flexibility and makes the employees feel that they are valued and their contribution is essential for the development and growth of organization.
Aswathappa (2005) defines HRM as the set of programs, functions, and activities designed and carried out in order to maximize both employees as well as organizational effectiveness (p. 5). It is also a process, which consists of the acquisition, development, motivation, and maintenance of human resource (DeCenzo and Robbins, 2005, p.36). It treats employees as the essential means of realizing organizational objectives rather than mere objectives (Jyothi and Venkatesh, 2006, pp. 2-3). It focuses on engendering commitment among employees by winning their hearts (Ibid).
Human resource is a crucial aspect of HRM. Especially key or talent employees are destiny of the organization. The retention of those employees is one of the significant issues of contemporary context. Employee retention is the ability of the management to retain its employees for a longer period of time. It needs favorable policies and practices, which let the key employees stick to an organization.
Organizations invest a lot of resources for employees to make them able or corporate ready. High employee turnover ratio or flyaway of talent employee is the greater loss of the organization. It can be a problem because of increased recruiting, selection, and training costs and work disruptions (Robbins and Coulter, p.343).
Newstrom (2007) states excessive employee turnover can have several negative effects on an organization. They include:
- Separation costs (exist interview time, separation pay, unemployment tax increase)
- Training costs for few new employees(both orientation and skill development instruction; both formal and informal learning experiences)
- Vacancy costs (temporary help or overtime pay; productivity loss and service disruption)
- Placement costs (attracting, screening, and relocating new hires)
- Morale effects (loss of friendship, concerns about personal job loss during downsizing) (p.210). citation
Poor compensation and benefits, negative work environment, frustration, constant friction with their superiors or other members, unfair treatment, lack of recognition; challenging job; job security; motivation; and opportunity for career development, and etc. are the main causes of leaving or quitting job by employees. Thus, organization should address these things in time to retain their key employees.
Jyothi and Venkatesh (2006) suggest the following aspects while attempting to retain employees: (i) planning ahead, (ii) clarity in job requirements, (iii) identify a good source of recruitment,(iv) screening and interview, (v) provide challenging work, and (vi) focus on compensation and working conditions (pp. 94-95).
Employee retention is an important function of HRM. Retaining function comprises the activities of (i) rewarding employees for performing their job effectively; (ii) ensuring harmonious working relation between employees and managers; and (iii) maintaining a safe healthy work environment (Cascio, 2006, p.6). Cascio (2006) also suggests fair treatment of employees, open communication, face-to-face resolution of conflict, promotion of teamwork, respect for the dignity of each individual, and pay increases based on merit are essential to retain employees (p.8).
This study examines and analyzes the employee retention in banking industry case study First Bank (FIRST BANK). A bank is a financial institution that accepts deposits through different kinds of accounts and lends those deposits either directly or indirectly. Banking industry is generally a highly regulated and reliable industry in Nigeria.