Case: Churning About to Heat Up Traditionally, the US workforce has had on of th
ID: 350696 • Letter: C
Question
Case: Churning About to Heat Up
Traditionally, the US workforce has had on of the highest rates of voluntary turnover in the world, and this is actually considered a source of competitive advantage. Unlike layoffs that reduce the overall size of the economy, people who turn over voluntarily often have lined up better jobs already, and thus, create a new job opening for someone else after they leave. Thus, this kind of "churning" does not affect the size of the economy and results in a better person-job fit for many people. It also rewards good employers who fail to meet the needs of the workforce, thus "thinning the herd" at the firm level.
The churn rate for the US economy. however, is not what it used to be, and many have pointed to this factor as one of the reasons for the weak nature of the most recent recovery. Many workers during the recession were very reluctant to leave their jobs, and this aversion to risk reduced the number of job openings and above what might be attributed to the bad economy. One study suggested, for example, that 80% of the reduction in hiring during the 2007-2009 recession was due to a reduction in churn rather than a decline in job creation.be changing, however. Turnover rates that stood at 9% in 2008 and 2009, jumped to 15% in 2010 and 2011. In addition, all signs pointed to even higher increases in 2012 and 2013. A national survey conducted by the Society of Human Resource Management indicated that job satisfaction, a leading indicator of voluntary turnover, was down over 80% in 2012, and a separate survey conducted by HR software vendor Cornerstone OnDemand estimated that 25% of employees were looking to change jobs in the 2013-2015 time period. Many of these workers suffered through years of increased workloads without increased pay during the recession and are looking to improve their situation as the economy continues to hear up.
For businesses, the cost of this churning is close to $2 trillion due to the need to recruit and train new workers. This cost is not distributed evenly across employers, however. Organizations that were not able to keep up employee morale are about to lose a large percentage of their most valued employees, whereas companies that met their employees' needs are likely to experience stability or growth. Thus, churning streamlines the economy and creates efficiency by eliminating weak competitors and strengthening the most competitive firms.
Questions:
1. What are some of the steps organizations take to reduce and avoid turnover among employees?
2. How does an increase in churn rates create strategic opportunities for firms with strong reputations in the labor market?
Analyze the case and respond to the questions at the end of the case. In addition, include:
-How do employee development, career development performance management, and employee engagement reduce voluntary turnover?
- What measures of employee development, career development performance management, employee engagement, and turnover do you think are most beneficial as an HR leader?
- How does turnover contribute to competitive advantage?
Write a 5 page paper.
Explanation / Answer
What are some of the steps organizations take to reduce and avoid turnover among employees?
Building Respectful Relationships with Employees
Managers and executives don’t need to be best friends with their employees. In fact, surveys have shown employees want to maintain a level of professional distance with superiors. But employees do place a high value on mutually respectful relationships. This means having clear expectations for every position. It means including all employees on decision-making processes. And it means ensuring that the workplace environment is positive and professional. Our 2017 Employee Engagement Reportfound that workplace culture is the primary factor when it comes to happiness.
02. Challenging Employees
The same report found that employees believe their time is often being wasted “putting out fires.” Employers too often fail to provide new opportunities for employees to improve their skills and become better at their jobs. Offering regular professional development and opportunities for advancement is valuable no matter what field you’re in.
03. Incentivizing Effectively
Employers typically offer individual bonuses to incentivize the behavior they want to see. But this is part of an old system that isn’t responsive to what employees want. Think about offering rewards that encourage the whole team to work together. For example, a happy hour paid for by the company is a good start.
04. Creating Open Communication
Seemingly every company lists effective communication as one of its core values. But how many actually follow through on this? Providing multiple ways for employees to offer feedback is just the start. Through regular pulsing surveys, you can pinpoint problems as employees see them and respond immediately.
05. Hiring Right
Our research demonstrates that maintaining solid relationships with colleagues is crucial to a positive work environment. Therefore, organizations need to consider more than skills and experience when filling positions. They need to consider how well new employees will fit in with their organizational culture.
06. Getting Serious About Work-Life Balance
With technology allowing incredible connectivity, too often companies expect that employees are available 24-7. However, this system is simply not sustainable or ethical. Encouraging employees to disconnect from work regularly is the way forward. This is especially true for younger generations of workers, who have seen their parents suffer from the effects of work-related stress.
07. Doing Exit Interviews
Talented employees are going to leave. Finding out exactly why and what competitors are offering is key to improving employee retention. Employees who are leaving are likely to be honest about what problems exist and what the company can do to change things.
How does an increase in churn rates create strategic opportunities for firms with strong reputations in the labor market?
Analyze the case and respond to the questions at the end of the case. In addition, include:
There may be no absolute answer to this question. Economists argue that, where labour is in short supply, where employers have invested heavily in their employees through training and where skills are expensive and scarce, then ‘excessive’ amounts of labour turnover constitute inefficiency, being a lost investment or requiring an expensive replacement (Campbell, 1993; Weiss, 1980). Therefore employers would have incentives to devise policies to reduce the level of turnover by retaining labour. Industry effects on labour turnover are pronounced. Seasonality and dependence on part-time, young or temporary workers introduce more groups of workers with a higher turnover risk. It has been noted that, in sectors dependent on low skill, paying low wages and non-unionized, such as fast food catering and hotels, high levels of labour turnover are non-problematic, and indeed may be functional, as dissatisfied workers exit rather than organizing within the workplace (Gabriel, 1988). Brown and McIntosh’s (1999) work on a fast food company found employers encouraging turnover to ensure they were not carrying staff.
Recruitment costs were low (an ad. in the shop window), training and development absent and labour supply large. This therefore meant that labour turnover was, if not ‘costless’, then certainly cheaper than investing in the regularization of staff. Edwards and Scullion’s (1982) research from a workplace industrial relations perspective suggests that high rates of labour turnover are corrosive of work group solidarity, inhibit unionization and benefit employers through keeping workers in a fragmented and disorganized condition. Assuming that there are more negatives than positives associated with unionization, it may therefore be beneficial for employers to have high rates of labour turnover. However, Freeman (1980), utilizing the work of Hirschman (1970), linked job satisfaction with different turnover measures in a model to explain choices facing dissatisfied workers who could exit or seek a voice to have sources of dissatisfaction addressed.
Unions provide both a better way of gaining higher pay (compared to market exits) and also a voice through which grievances can be heard and settled. Thus, the costs and benefits of ‘exit and voice’ could be examined, and it was argued that unions, through collecting grievances, help retain labour, and therefore are an efficiency – assuming, as the authors do, that there are higher transaction costs associated with recruitment of labour on a continuous basis and also assuming that unions are indeed ‘effective’ in increasing wages or reducing workers’ quitting behaviour (Delery et al., 2000). See Batt et al. (2002) for a review and sector analysis of the relationship between union presence and workers’ exit rates. From this initial research we would suggest that there are
Organisations seeking to identify the specific attributes of employment that their employees value typically do so using employee surveys. Love and Singh (2011) identified a dual role for these surveys. They argued that employer surveys can also act as a strong medium for workplace branding and identified eight common themes for HR success from a sample of ‘best employer’ surveys related to HR practices:
• inspired leadership
• strategic plan that promotes ‘best employer HR practices’
• employee communication
• performance management
• training and development
• benefits based on ‘best practices’
• physical workspace
• corporate citizenship.
Love and Singh (2011) also made the salient point that the use of ‘best employer’ is not a new idea and has over time reached a point of saturation, with many organisations positioned as an employer of choice, essentially removing any competitive advantage derived from the label. They noted a move towards targeted or specialised employer branding and the increasingly global nature of labour markets forcing many organisations to have a consistent worldwide bran