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➢ Abstract ➢ Background of the study. ➢ Introduction. ➢ Literature Review. ➢ Purpose Statement. ➢ Research Questions. ➢ Hypothesis. ➢ Conceptual Framework ➢ Methodology ➢ Validity and Reliability ➢ Definition ➢ Limitation and Delimitation. ➢ Significance of the study.
RESEARCH ON “THE IMPACT OF EMPLOYEE TURNOVER ON THE ORGANIZATION
PERFORMANCE IN INDUSTRIAL SECTOR”
This study aims at exploring and understanding the impact of employee turnover on the organizational performance in industrial sector of Pakistan. As the primary focus of the study is on exploration so the proposed study will use sequential exploratory design based on the mixed method approach in which first phase is qualitative in which semi -structured interviews will be conducted to find out the impact of employee turnover on the
organization performance whereas the second phase is quantitative in which , themes from the qualitative data will then be used to develop a questionnaire to quantify the findings and furthermore to examine whether the both findings complement each other or not. BACKGROUND There may be several factors involved why employees leave their job. It could be a voluntary turnover where employee chooses to leave. Some of these reasons include better career opportunities, increased compensation and broaden the current tasks. Involuntary
turnover occurs when employee are asked to leave for reasons including poor performance or an inappropriate behavior, company benefits, employee attendance and job performance are all factors play an important role in employee turnover. When a company replaces a worker then company incurs direct and indirect expenses. These expenses include the cost of advertising, headhunting fees, human resources fee and new hiring cost. Most companies find that employee turnover can be reduced when they affect overall company. By offering employees benefits such as reasonable flexibility with work and family balance, performance reviews and performance based interviews along with traditional benefits such as paid holidays or sick days and companies are better able to manage their employee turnover rates. By reducing employee turnover rates, companies can gain advantages like profitability, productivity and competitive advantages. With all these issues in mind the aim of this research is to develop and test a model for organization performance. The model will analyze which factors affect employee turnover and what is the affect of employee turnover on the organization.
INTRODUCTION Employee turnover is very important issue of human resource management. The impact of human resource management (HRM) policies and practices on firm performance is an important topic in the fields of human re-source management. Staff turnover-that is, the termination of employees and the hiring of other individuals to replace them-is a complex phenomenon requiring a systematic view and an awareness of many variables within both the work and external environments. There are several factors why an employee leaves their job. Some of these reasons include better career opportunities, increased compensation and some restrictions. The problem which is focused in this study is to investigate the effects of employee turnover on organizational performance and the factors which caused the employee turnover in the industrial sector of Pakistan. This problem will be focused the factors which may reduce the employee turnover like HR practices, job satisfaction and motivation ,employee training and exit interviews etc which ultimately will result in higher performance of organization. Prior research has offered mixed conclusions based on both theoretical and empirical analysis and according to previous research that turnover has negative effects on operating performance due to the disruption of existing routines (Dalton and Todor 1979, Bluedorn 1982). As noted by several observers, however, the consequences of turnover
have received significantly less attention from researchers (Staw 1980, Mobley 1982, Glebbeek and Bax 2004). This lack of academic attention is particularly surprising given that industry studies have estimated the cost of turning over one employee earning $8 per hour at $3,500 to $25,000. Preliminary evidence in individual studies generally suggests that aggregate employee attitudes have positive relations with customer satisfaction– loyalty and financials, and there is a negative relationship between employee attitudes and employee turnover. Among the few empirical papers on the effects of specific HRM practices on aggregate turnover, which showed that job enrichment interventions and realistic job previews were moderately effective in reducing turnover, is notable. McEvoy and Cascio (1985). Due to some deficiencies, there is needed to conduct a research on employee turnover. Firstly, previous research only described the negative effect of employee turnover on the organization and did not explain the positive effects of employee turnover on the organization. According to the new researcher that firms may benefit from the
innovative thinking or increased motivation that new workers bring to a job (Abelson and Baysinger 1984, Mowday et al. 1982).Second potential problem limited access to outcome measures that one can compare across business units. For this reason, many of these studies are limited in precision and statistical power; as such, results from individual studies may appear to conflict with one another. These conflicting views suggest that the
effect of turnover on performance may depend on the nature of the environment in which turnover occurs. Thirdly, methodological problem is related to the widespread collection of data via questionnaire. Because survey respondents generally self-select into samples, selectivity or response bias may also affect results. This study plays an important role in the economy of any country especially in underdeveloped countries like Pakistan, so this study is very important for the underdeveloped countries like Pakistan because it will investigate the effects of employee turnover on the organization performance. This study is important because, by directing this inquiry into important areas of the effectiveness of workplace education and training in terms of employees’ turnover, the findings derived from the study will be expected to be useful in understanding the effect of training on employee turnover and in developing management retention strategies in the focus organization as well as other organizations operating in the same sector in general. By using this study different organization can reduce the rate of employee turnover and increase their productivity and profitability. The purpose of this study is to improve the organizational performance in industrial sector by reducing employee turnover with the help of HR practices, job satisfaction, motivation and organizational justice which will play an important role in the development of country .The main purpose of this research is to check the causes of employee turnover
and the effect of employee turnover on the organization performance and how can reduce employee turnover.
LITERATURE REVIEW Staff turnover-that is, the termination of employees and the hiring of other individuals to replace them-is a complex phenomenon requiring a systematic view and an awareness of many variables within both the work and external environments. Employee turnover is an important measure of the health of an organization. Employee turnover in organizations has received substantial attention from both academics and managers. To check the impact of employee turnover on the organization performance the researchers used 48 months of turnover data from U.S. stores of a major retail chain and find that, on average, employee turnover is associated with decreased performance, as measured by profit margin and customer service .The particular aspect of management on which the researcher focus is process conformance the extent to which managers aim to reduce variation in store operations in accordance with a set of prescribed standards for task performance service (Zeynep Ton, Robert S. Hickman, 2007). Prior research has offered mixed conclusions based on both theoretical and empirical analysis and according to previous research that turnover has negative effects on operating performance due to the disruption of existing routines (Dalton and Todor 1979, Bluedorn 1982).Others have suggested that firms may benefit from the
innovative thinking or increased motivation that new workers bring to a job (Abelson and Baysinger 1984, Mowday et al. 1982,). These conflicting views suggest that the effect of turnover on performance may depend on the nature of the environment in which turnover occurs. Most studies considering the moderating role of task characteristics draw on some variant of the distinction that is clearly stated “between the exploration of new possibilities and the exploitation of old certainties” (March’s 1991:71). According to him, in situations involving exploration, the addition of novice workers may actually increase knowledge levels within the firm not because of the expertise of these new workers. Much of this negative effect stems from the direct costs of turnover, such as those involved with severance and the recruitment and training of new employees (Staw 1980, Darmon 1990). Several studies provide support for the benefits of turnover in settings requiring exploration or innovation. The worker mobility implied by turnover may serve as a source of new knowledge for firms (Dalton and Todor, 1979 and Staw, 1980). The average effect of turnover on work group performance is negative; this effect is less pronounced for complex tasks than for simple tasks (Argote et al. 1995,). Longitudinal analysis of Borders stores shows that, on average, increased employee turnover is associated with decreased store performance, as measured by customer service score and profit margin. Turnover has a nonlinear effect on performance, with low-turnover stores being more affected by turnover than their highturnover counterparts (Price, 1977). The increasing turnover does not have a negative effect
on store performance at high-process-conformance stores; at low-process-conformance stores, the negative effect of turnover is pronounced and where performance depends on the repetition of known tasks, managers can reduce turnover’s effect by imposing process discipline through standard operating procedures. Testing theories described the
dissatisfaction progresses into withdrawal has dominated turnover research during the past 25 years (Hom & Griffeth, 1995). The experience of job related stress (job stress), the range factors that lead to job related stress (stressors), lack of commitment in the organization; and job dissatisfaction make employees to quit Firth et al.(2004). Employee turnover is an important measure of the health of an organization. All libraries should implement a three-step program of turnover management: the collection and analysis of data on turnover patterns, the identification of those factors contributing to turnover in the library through organization of a formal exit interview program, and implementation of remedial actions which address the main causes of turnover. The exit interview as an effective tool for documenting the causes of turnover in a library and for influencing management action. The exit interview must be based upon a standardized format, assure employee confidentiality, employ talented inter- viewing staff, involve periodic assessment of effectiveness, and provide for routine feedback to management. (James. Neal, 1989). Most research on turnover focuses on voluntary and avoidable separations because they are more subject to control by management (Price, 1977). Turnover can be seen as
providing some benefits: helps keep salary costs down, creates opportunities for upward mobility, encourages staffing flexibility and organizational restructuring, brings employees with new ideas and experiences into the organization, and reduces the frustration created by dead-end jobs. The negative consequences tend to be more visible and the costs greater than anticipated. The fiscal impact, sometimes described as the positional replacement costs, can be summarized in several categories: costs incurred when an individual leaves, costs of advertising the position and recruiting and selecting a replacement, costs of new employee orientation and training, costs of equipment, and costs of lost production and productivity (Flamholtz, 1973). Many organizations employ a post-turnover survey as a substitute for or as a complement to, the conventional exit interview. The use of questionnaires enables the organization to sample consistently rather than depend on evidence produced by the sporadic statements of individual employees (Your- man, 1965). The exit interview is thus a central component of effective turnover management and the exit interview provides for the establishment of good working relations with former employees, and furnishes useful management data. It must be based upon a standardized format, assure employee confidentiality, employ talented interviewing staff, involve periodic assessment of effectiveness, and provide for routine feedback to management (James G. Neal, 1989). Based on 7,939 business units in 36 companies, this study used meta-analysis to examine the relationship at the business-unit level between employee satisfaction–
engagement and the business-unit outcomes of customer satisfaction, productivity, profit, employee turnover, and accidents (James K. Harter, L. Hayes, 2002) some researchers have found positive linkages between general workplace attitudes and individual performance outcomes (Iaffaldano & Muchinsky, 1985, cited in Harter, Schmidt, Hayes , 2002). A Business-unit-level research also provides opportunities to establish linkages to outcomes that are directly relevant to most businesses. Important outcomes such as customer loyalty, profitability, productivity, employee turnover, and safety variables are typically aggregated and reported at the business-unit level. Gallup researchers have focused on the consistently important human resource issues on which managers can develop specific action plans. Gallup researchers, both qualitative and quantitative data have indicated the importance of the supervisor or the manager and his or her influence over the engagement level of employees and their satisfaction with their company in which the specific facet of satisfaction most highly related to performance has been satisfaction with the supervisor. (Judge et al, 2001). So, the employee satisfaction and engagement are related to meaningful business outcomes at a magnitude that is important to many organizations and that these correlations generalize across companies.HR practices have an economically and statistically significant impact on both intermediate employee outcomes (turnover and productivity) and short- and long-term measures of corporate financial performance. Human resource management practices can help to create
a source of sustained competitive advantage, especially when they are aligned with a firm’s competitive strategy (Begin, et al 1991; Cappelli & Singh, 1992). The dependent variables include both intermediate employment outcomes and firm-level measures of financial performance, and the results are based on a national sample of firms drawn from a wide range of industries (Mark A. Huselid, 1995). The use of high per- formance work practices, including comprehensive employee recruitment and selection procedures, incentive compensation and performance management systems, and extensive employee involvement and training, can improve the knowledge, skills, and abilities of a firm’s current and potential employees, increase their motivation, reduce shirking, and enhance retention of quality employees while encouraging no performers to leave the firm (Jones & Wright, 1992). Human resource management practices can help to create a source of sustained competitive advantage, especially when they are aligned with a firm’s competitive strategy (Butler, Ferris, & Napier, 1991). Most of the prior work has focused on perceptions of job security, the presence of a union, compensation level, job satisfaction, organizational tenure, demographic variables such as age, gender, education, and number of dependents, organizational commitment, whether a job meets an individual’s expectations, and the expressed intention to search for another job were all predictive of employees’ leaving, and found that perceptions of organizational culture influenced turnover. (Sheridan, 1992, cited in Huselid, 1995). Prior work in both the academic and popular press has argued that
the use of High Performance Work Practices will be reflected in better firm performance. This study provides broad evidence in support of these assertions. Across a wide range of industries and firm sizes, I found consider-able support for the hypothesis that investments in such practices are associated with lower employee turnover and greater productivity and corporate financial performance. The vast majority of research on the relationship between the provision of training and turnover has adopted the human capital theory. The increasing availability of training data has greatly aided research on the effects of training (Soreze, 2008). This study is important because, by directing this inquiry into important areas of the effectiveness of workplace education and training in terms of employees’ turnover, the findings derived from the study will be expected to be useful in understanding the effect of training on employee turnover and in developing management retention strategies in the focus organization as well as other organizations operating in the same sector in general.(Soreze,2008).A quantitative approach using survey or secondary data to develop a causal link between variables, with only few empirical research studies have been able to take a closer look at the nature of company training and its effects (Loewenstein and Spletzer 1998, Barron et al 1999 , cited in Soreze,2008). The research purposes combine explanatory but according to the researcher descriptive research is concerned with identifying the phenomena whose variance wish to describe
(Ghauri et al 2002, cited in Soreze, 2008) Thus the use of descriptive study, as one purpose is to identify and describe the variability in different factors that seem to affect the training effectiveness in term of reducing employ turnover (Saunders et al, 2003). In simple term, the standard human capital model predicts a negative relationship between firm-specific training and turnover, whereas general training would have no effect on turnover. However; the existing empirical studies provide evidence that the relationship is not actually straightforward. The results are indeed mixed in the sense that although the majority of studies point to a significantly positive relationship (Green et al., 1996, Forrier and Sels 2003).Some indicates that the relationship is negative (Elias 1994, Loewenstein and Spletzer 1999, Lynch 1991, cited in Soreze, 2008), while others suggest a non-significant relationship (Krueger and Rouse 1998). To sum up all discussion, we can say that Better job opportunities, Dissatisfaction of job, demotivation, and lack of commitment in organization, job stress and disruption of existing routines are the factors which may affect employee turnover. These factors effects employee turnover and also may cause to increase employee turnover in the organization. Further, decreasing employee turnover will increase the organization performance. But for further discussion, I have selected variables like demotivation, better job opportunities and dissatisfaction of which may
directly affect employee turnover and ultimate effect on the performance of the organization.
The purpose of this concurrent mixed method study would be to better understand the research problem by converging both quantitative (board numeric grand) and qualitative (detailed view) data. In the study, both questions and interviews will be used to measure the relationship between employee turnover and the organization. At the same time the perceived organizational performance will be explored using questionnaires interviews with employee of organization in Pakistan.
Objectives of the study:
○ Overall objective: ○ To investigate the impact of employee turnover on the organization performance in industrial sector of Pakistan.
○ Specific aims:
To explore the relationship between dependent variable (organizational performance) and independent variable (employee turnover). To explore the relationship between employee turnover and the factors which may cause of employee turnover like employee demotivation ,dissatisfaction of job and better job opportunities.. What best practices should adapt to different organization to reduce employee turnover. Examining the effect of employee turnover on the organization which could be helpful for human resource management to reduce employee turnover. It will greatly facilitate the improvement in Hr practices in order to achieve greater organizational commitment and reduce turnover intentions.
Main Question: • How employee turnover affect the organization performance in industrial sector?
• • • Does demotivation and turnover intentions positively related with each other? How does Job dissatisfaction increase employee turnover intentions? Does better job opportunities and lack of organization commitment increase employee turnover?
➢ Main Hypothesis:
H1: There is negative relationship between employee turnover and organizational performance. ➢ Sub- Hypothesis: H2: Demotivation, job dissatisfaction and better job opportunities are positively related with employee turnover. H3: Demotivation, Job dissatisfaction and better job opportunities are interrelated with each other . H4: better job opportunities and job dissatisfaction increases employee turnover intentions. H5: HR practices directly affect on employee turnover and the organization performance. H6: There is relation between job dissatisfaction and demotivation.
Based on stated review of literature and theories, following conceptual framework is devised to conduct this study:|
Better job Turnover Dissatisfaction Demotivation Employee Organizational Performance
“The impact of employee turnover on the organizational performance will lead to the decrease the development of industry, which in turn mediates the impact of employee turnover on performance through mediating their motivation”. In the above conceptual framework demotivation, dissatisfaction of job and better job opportunities are the factors which increases employee turnover. An increasing rate in employee turnover negatively affects organizational performance and organization spent more money for hiring and training new employees.
I have used mixed methodology in my proposal because both qualitative and quantitative methods have been used in research. Mixed method is a philosophical assumption that integrates qualitative and quantitative research approaches within a simple subject. Its central premise is that the use of quantitative and qualitative approaches in combination provides a better understanding of research problems that either approached alone.
Rational for the selection of Mixed Methods Approach:
The most important thing in the selection of approach is the nature of research problem as my research problem is twofold in nature. So I have decided to choose mixed methods research approach as to accommodate my first objective of exploring and understanding the complexity of the contextual variances in context of Pakistan. I will use interpretivism as a research philosophy and use semistructured interview method under the umbrella of qualitative paradigm. Then to cope with my second objective i.e. to deal with the validity, reliability, and generalizability, positivism will be chosen supported by survey method in the circumference of quantitative paradigm. Furthermore this decision is supported by the rationale of availing the merits and overcoming the demerits of both
approaches as discussed by Creswell (2003), the use of multiple data sets can inform the research, by yielding insight and methodological changes that improve the study and strengthen findings as well as collecting diverse types of data best provides an understanding of a research problem.
Selecting Mixed Methods Approach on the basis of Pragmatic Knowledge Claims I have decided to collect the qualitative and quantitative data in phases using Sequential Exploratory Design in sequential strategies. A visual view of the sequential strategy is as follows: QUAL
Interpretation based QUAL quan
qual data analysis
Develop Instrument QUAN Data collectionData analysis QUAN
Interpretation qual QUAN
During this process qualitative data will be collected using semi-structured interviews in the first phase of the study through open ended questions.
Purposeful sampling will be used to choose experienced respondents regarding the phenomena under consideration. On the other hand quantitative data will be collected through questionnaire in the second phase of the study. Questionnaire including close ended questions will be delivered to selected sample in order to validate the themes emerge from the qualitative phase and to generalize the findings to a larger population followed by data analysis with the help of SPSS software.
Sample And Sampling Technique:
I will use convenience sampling technique for data collection. Convenience sampling denotes choosing settings, groups, individuals that are conveniently available and willing to participate in the study. I will target industrial sector in Pakistan. I will select 15 industries but for further research I will take 8 industries.
Tools of Data Collection:
Data is collected through both qualitative and quantitative method. During this process qualitative data is collected using semi-structured interviews
and surveys in
the first phase of the study through open ended questions
supported by probes and prompts to get deep insights and to keep the respondent on track respectively with time and cost saving approach.. The rational that I will use semi-structured interview method instead of observations or document study is based on the fact that my research is based on exploring and understanding the complexity of what contextual variances occur in a specific social setting by taking account of participants’ multiple subjectivities, interpretations, and perspectives regarding employee turnover and organization performance .My decision to use interview over other means of data collection is influenced by the various arguments presented by different authors. As Wellman (2001) stated that interviews are very useful because highly specified data can be obtained in a very short span of time and is also useful in providing a general overview of people’s thoughts. Further I have decided to choose semi-structured interview that could be argued as the most important way of conducting a research interview because of its flexibility balanced by structure and the quality of the data so obtained (Gillham B. 2007), Choosing interview on other data collection methods i.e. observation or documents is a decision made on the basis of deep comparative study and critical review of all the methods and there relative strengths and weakness. Interview
method is rational to choose for this study as it not only provides highly specified data as compare to observation and documents but also, as per the objectives of my study, it gives deep insights to perceptions and meanings of individuals with broad yet controlled exposure and scope with the flexibility of opportunity to be learned by the researcher even if he is not acquaint with this technique earlier. On the other hand quantitative data is collected through questionnaire in the second phase of the study. Questionnaire including close ended questions will be delivered to selected sample in order to validate the themes emerge from the qualitative phase and to generalize the findings to a larger population followed by data analysis with the help of SPSS software.
Validity and Reliability:
Validity refers to issues of whether or not an indicator really measures the concept that it is advised to measure whereas Reliability us the stability or the consistency of measurement. So keeping in view my research problem I have choose the mixed method sequential approach in which preference is given to qualitative` approach so first issue which I will face regarding validity and reliability is that it does not carry the same meaning as in quantitative approach However for the first phase which is qualitative I will ensure reliability by
comparing coding among several coders and will see that after transcription whether they will arrive at the same codes and themes or different one . In order to ensure accuracy of findings or validity .I will strategies 1-Member Checking: Discussing the summaries of the findings (e.g., themes) with participants and ask them whether the findings are an accurate reflection of their experiences. 2-Peer Examination: A Doctoral student will serve as peer examiner with the approval of the supervisor. 3-Clarification of the researcher bias 4-Rich and Thick description to covey the findings And finally I will use 5-An external auditor to review the entire process For the second phase which is quantitative in nature reliability means, whether the result is replicable, whereas validity means whether means of measurement are accurate and whether they are measuring what they are intend to measure. So with regards to reliability I will check the results through statistical procedure of internal consistency and with regards to the validity I will establish the validity of the questionnaire through content validity (i.e. asking the expert use the following
opinion) and of their results through criterion related and construct validity(i.e. factor analysis of the measures). Moreover validation of the instrument will be done through a pilot study and by taking a large sample representative of the population.
Developing this proposal as well as during the complete research process, ethical issue should be deeply and wholly kept into consideration since the introduction of research problem statement till writing and disseminating the whole research. The following ethical issues will be kept under consideration during the research process and aftermaths
The purpose of study is made clear and simple to be easily understood by the readers as well as the respondents to avoid any ambiguity at any end. Precisely yet comprehensive information will be provided to respondents in order to make them clear about all aspects, objectives and outcomes of the research.
Mutual consent form, permission letter and any other written approval if needed will be dually signed by both the researcher and the respondent. Prior time adjustment will be made in order to avoid any interruption in the flow at research site It will be made sure to secure and protect the information gathered from respondent to avoid any harmful consequences for them Permission to tape the interview and to keep this information on an electronic database and analyze it for research purpose. The privacy of the participants would be protected to the maximum extent allowable by law. Prior permission will be taken regarding the storage of data after the completion of the study for a certain time period in the ownership of the researcher. In order to overcome the potential ethical issues in writing the research regarding use of language, suppressing, falsifying or other fraudulent practices the complete details (in coding and anonymous form) will be released so that the reader would determine by himself the credibility of the study.
Definition of Key Terms: Job Dissatisfaction:
Job dissatisfaction can be the result of a complex tapestry of factors or a single cause Factors that may increase job satisfaction include feeling valued and appreciated, as well as being rewarded. Being involved in a task-based group that provides feelings of power while meeting personal needs such as camaraderie may also increase job satisfaction. Other factors include family-friendly work policies, flexible work schedules and on-site childcare. Your level in the organizational hierarchy can also play a role -- the higher the level, the more satisfaction tends to be expressed.
The demotivation hypothesises that pay discrepancies decrease work motivation among both lower and higher paid individuals who essentially perform the same task. Compared with equitably paid workers, employees who felt they were being under- or overpaid reported lower job satisfaction and greater readiness to change jobs.
Organizational commitment in the fields of organizational behaviour and Industrial/Organizational Psychology is, in a general sense, the employee's psychological attachment to the organization. It can be contrasted with other work-related attitudes, such as Job Satisfaction, defined as an employee's feelings about their job, and Organizational Identification, defined as the degree to which an employee experiences a 'sense of oneness' with their organization . (Meyer, J. P., & Allen, N. J. 1991).
Stress, in general, is “a physical, chemical, or emotional factor that causes bodily or mental tension and may be a factor in disease causation.” One type of stress is job stress. With job stress, the stressors involved are work-related.
There are some limitations in conducting the research about the impact of employee turnover on the organization performance.
• • •
First, limitation is methodological. Second, limitation related to financial problem. Thirdly, lack of resources for conducting survey.
Lack of skilled interviewers.
• This study will be restricted to check the impact of employee turnover on the organization in industrial sector of Pakistan.
Significance of the study:
The study will broaden our understanding of the impact of employee turnover on the organization performance in the proposed model. Since the traditional view of employee turnover is very narrow, current study will add to existing body of knowledge by signifying: • The importance of examining the effect of employee turnover on the organization could be helpful for human resource management to reduce employee turnover By using this study managers can mitigate the effect of turnover on
. • •
This study is important because, by directing this inquiry into important areas of the effectiveness of workplace education and training in terms of employees’ turnover, the findings derived from the study will be expected to be useful in understanding the effect of training on employee turnover and in developing management retention strategies in the focus organization as well as other organizations operating in the same sector in general. By using this study different organization can reduce the rate of employee turnover and increase their productivity and profitability
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