To Be Or Not To Be?

A Study of Employee Turnover

To Be Or Not To Be? A Study of Employee Turnover

Topic Area of Submission: Psychology (Organizational Psychology)

Key words: Employee turnover, retention, software industry

Author: Prof. (Ms.) Meenakshi Gupta

Professor of Psychology
Department of Humanities & Social Sciences
Indian Institute Of Technology
Powai , Bombay 400076
India

Email: meena@hss.iitb.ac.in

Telephone: 91 22 25767360 (Office)

91 22 25706964 (Residence)

Fax : 91 22 25723480

Abstract: Employee turnover has been defined as a permanent movement

of the employee beyond the boundary of the organization. Interest in the
topic has gained momentum in the recent past among organizational
psychologists, economists, and sociologists with different perspectives
being adopted to study the phenomenon. Data was collected from 71
employees of a well-known software company (Organization 1) and 36
employees from a finance company (Organization 2). A 30-item
questionnaire was developed to study the relationship of company image,
pay satisfaction, nature of work, nature of peer group, comparison to peer
group, inside career opportunities, expectations-reality match and turnover
perceptions with intentions to stay. A stepwise regression analysis
showed that expectation reality match, length of service, turnover
perception and outside career opportunity were responsible for causing
intention to stay/quit in Organization 1. In Organization 2 the predictor
variables identified were nature of work, age, turnover perceptions and
peer comparison. The only common predictor identified for the two
organizations is turnover perception indicating that employee’s perception
of manpower stability in the organization causes intentions to stay. The
findings have implications for redesigning work settings to attract,
motivate and retain the best employees. The relationships of some
demographic variables like sex, marital status, length of service and
designation were also put to test.

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 To Be Or Not To Be? A Study of Employee Turnover

Introduction

Beginning 1990s, the Indian business environment has undergone remarkable changes.
Most organizations viewed the presence of a long serving group of employees as an
indication of internal efficiency. However, with economic liberalization opening up new
career horizons for professionals in most industries, and thereby tremendously enhancing
their prospects for mobility from one organization to another, turnover has come to be
understood as a negative ‘spill over’ effect of industrial growth. This phenomenon
commonly called turnover had been of secondary interest to most researchers but
increasingly more and more attention is beginning to pour in this direction.

As the paradigm of lifetime employment becomes unrealistic, the question ‘who stays
with you?’ has assumed great importance in organizations today. Simultaneously, there
has been an increasing tendency to ‘buy in’ the talents of professionals with cross-
functional skills in order to create a competitive advantage. One visible effect of this has
been a consistent rise in the pay packages of most organizations so as to attract and retain
the most desirable employees. Such a trend over the last few years has resulted in an
unstable labor market, especially for industries such as marketing, advertising, finance
and software where the skills are by and large transferable, from one work environment
to another.

This paper is an attempt to identify the causes of employee turnover in a software firm
and a finance company. The software industry has been the sunrise industry in India.

As Bill Gates mentioned: “The software industry will create millions of new jobs in the
years ahead. India more than any other developing nation, is seizing this opportunity,
and will become a huge exporter of software expertise. In fact, India is likely to be a
software superpower…” (Gates, 1997).

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 To Be Or Not To Be? A Study of Employee Turnover

India is an important player on the IT map of the world on account of it being an

important source of technically qualified and English speaking manpower. The Indian IT
sector has enlarged from US $ 1.73 billion in 1994-95 to a US $ 2..81 billion in 2000-01.
One of the most distinctive characteristics of those software organizations is that they
have only the expertise of their staff as assets with which to trade. The task of a leader in
such organizations is therefore to recruit, train, empower and retain the best and the
brightest professionals (Narayanmurthy, 1998).

The growth in the finance industry is dependent on the growth of the economy, and on
the interlink of a country’s economy with the global environment. Largely due to the
economic policies of the government in the past few years, the Indian finance industry is
reflected in the development of the capital markets and the sophistication of the financing
options.

The Indian capital market over the last few years, has attracted significant attention
worldwide, making it one of the world’s most exciting emerging market. Though there
are still many deficiencies in the Indian markets, at the same time there are many areas of
future growth e.g. debt market, insurance industry, infrastructure development etc.

Employee Retention

The undesired loss of competent personnel is costly to an organization in both direct and
indirect terms. The estimated cost for hiring a professional for one data processing
company were more than $ 9000 for a hypothetical $ 18000/year position, with higher
salary positions entailing higher hiring costs (Shapiro, 1989).

Before one attempts to seek a comprehensive solution to the problem of retention, it may
perhaps be proper to analyze the causative factors that result in heavy migration of scarce
human resources. The various reasons that encourage an employee to leave his present
job are usually related with satisfaction level. The ‘push’ factors pertain to the
dissatisfaction causes, which an employee uses as primary motivators to severe relations

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with his company. They are the work environments, compensation package, low
employee benefits, inconsistent HR policies, incorrect work assignment, lack of
challenge, lack of career development schemes. Two more push factors identified are
‘fear of being found out’ and ‘level of competence’. Some employees manage to get the
job by projecting more skills than they actually possess. After they have strengthened
their knowledge to a certain degree in the organization, they are constantly afraid of
being ‘found out’ and tend to leave as soon as a suitable opportunity comes. Level of
competence implies that the employee may rise in the organization up to a certain level,
after which he feels he may not rise. However, this level of competence may be at a
higher position in another organization with slightly lower standing in the industry. The
‘pull’ factors that lure an employee are higher compensation package and greater
technical challenge (Ganesh, 1997).

Retention Mechanisms

When valuable workers want to quit their job, how does the organization encourage them
to reconsider their decision? How does management convince them to work out any
problems that might be acting as a ‘push’ factor in their decision to leave; or to re-
evaluate the benefits of offers acting as a ‘pull’ factor. Some of the retention techniques
practiced by software companies today are described below.

Retaining through Allowance Fund. In an industry where most work is done on-site,
there may be discontentment among employees who have not been chosen to work at the
client’s place especially overseas. Not that they are incompetent but because the work
demanded only a few people. To tackle this problem some companies have started in
India Allowance Fund, wherein the employees who do not get a chance to go abroad are
compensated financially such that he/she earns almost the same amount that his or her
counterpart sent abroad would earn. Chennai based Shapre Systems and Mumbai based
Mahindra British Telecom started this fund (Nair, 1997).

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 To Be Or Not To Be? A Study of Employee Turnover

Retaining by mentoring. Unlike a counselor a mentor is from within the organization and
has executive powers to recommend a person in a suitable spot. Experience in human
relations, a cool head and a non-biased approach are some of the attributes of a mentor.
Mentors help employees develop self-confidence and their overall personality, which
reflects in the employees’ technical capabilities and helps in overall working of the
organization. A mentor is dedicated to the mentored and guides them till the objective is
achieved. Mentors bring both the organization and the employee closer. They bring a
sense of belonging and loyalty amongst the employees (Chaddah, 1997).

Bond as Retention Measure

To bond or not to bond? Most companies today are forced to ask themselves this
question on an ever-increasing basis. The employer invests a considerable amount of
time, money and resources in training and brings the new entrant to a stage where after
the employer feels that he can begin to get a decent return on investment. It is at this
point of time that the employee decides to leave the firm for better prospects, having
gained a degree of experience and expertise at the employer’s expense. The employer is
bound to feel whether the sole purpose of recruiting people is to retain them for a better
job opportunity. After all he is not running a training institute and paying people to get
trained too. As far as the employee goes he sees no harm in accepting a job offer if one
comes his way and the prospects are better.

An employer being a businessman needs to take care of his own interests. He cannot
afford to be altruistic. If he on the other hand is too hard-nosed about this affair, he can
actually prevent the right people from joining his company. The right part would be the
middle path (Bulsara, 1997). Bonds are justified and acceptable if the company is clearly
spending significant money and/or time for training the employee and hence expects the
employee to spend a minimum prefixed period after getting the training.

Bonds are not justified when the person is going abroad or working in India on revenue
earning assignment. Some companies claim that the experience gained on an assignment

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abroad is actually training and hence the person needs to return and work with the
company in India to pass on his knowledge to other employees. By the same argument
every employee working on assignment in India is continuously getting trained and hence
needs to continue to work and should also be required to sign a bond (Doshi, 1997).

The true HR challenge in is in retaining as is evident from our previous discussion where
the demand for a particular skill is high and supply far short of demand. In such a
scenario there is bound to be high mobility among such professionals. Before addressing
the problem of retention one needs to seek answer to the question why do people quit?
What are the factors one weighs in deciding if one wants to be in an organization or not?
Reasons for leaving have been largely speculative. So far there has been no systematic
attempt to study the causes of employee turnover among high skilled professionals. The
present study is an attempt in this direction.

Objectives

The purpose of the study was to examine the factors that influence turnover intentions.
The specific objectives were:

1. Does company image influence employee turnover intentions?

2. Does pay satisfaction influence employee turnover intentions?
3. Is nature of work an important determinant of employee turnover intentions?
4. Does nature of peer group influence employee’s intentions to stay with the
organization?
5. Does peer-self comparison influence turnover intentions?
6. Does internal career/growth opportunity provided by the organization
influence employee’s intentions to leave?
7. Does outside career opportunity influence employee’s intention to stay with
the organization?
8. Does the degree of match between what was expected and what was achieved
in the present job influence turnover intentions?

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 To Be Or Not To Be? A Study of Employee Turnover

9. Does perception of employee stability influence intentions to stay with the

organization?

Methodology

Two organizations were selected for the study. Organization 1 is a software company. Its
chief activities include manufacture of high-end servers; PC line of products and
providing networking solutions. It has collaborations with three large US software firms.
It received ISO 9001 certification, which represents an external validation and
endorsement of their internal processes. This has been implemented within the company
over the last few years to ensure the highest level of customer satisfaction and delivery
commitments. The ISO certification also gives an extra edge to the company’s business
development activities in the international market. It employs approximately 850
personnel of which 750 are software professionals. Most of their businesses come form
Europe and the US. It proposes to expand its client base to the Middle East and the
African continent. It also plans to set up its own R&D section so as to be in the state of
preparedness for future clients. 71 software professionals formed a sample for this study
of which 51 were males and 20 females. The mean age of the sample was 27 years and
length of service in the organization 19.30 months. Of the 71 professionals, 47 were
unmarried and 24 married; 43 were at the lower level of the hierarchy and 28 at the
middle level.

Organization 2 is a finance company set up in the year 1992 in collaboration with a giant
American finance company. Its efforts are directed towards building an organization of
high integrity and credibility that institutionalizes professional practices in the capital
market. The objective is to provide total satisfaction to all constituents by achieving a
blend of financial innovation with profit and efficiency. To achieve these goals the
organization focuses on building on its core competencies in the existing line of its
business: developing new, innovative and customized products and exploring new and
unchartered avenues for sustained growth. The company has consciously opted for a
functional flat organizational structure with greater responsibilities to employees for

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decision making. 36 professionals from organization 2 formed part of the sample of

which 30 were males and 6 females. The mean age of this sample was 28 years and
average length of service 23 months, 21 respondents were married and 15 unmarried. 14
finance professionals were at the lower level of the hierarchy and 22 at the middle level.

The study examined the influence of company image, pay satisfaction, nature of work,
nature of peer group, comparison to peer group, inside career opportunity, outside career
opportunity, expectations-reality match and turnover perception on intentions to say in
the organization (retention). It also examined the role of age, sex, marital status, length
of service, and designation on employee attitude and behavior at work.

The operational definition of the variables is given below.

Operational definitions of variables

Independent variables

1. Company image (CI): It is the strength of an individual’s identification with, and

pride in an organization.
2. Pay satisfaction (PS): It is the extent of contentment received out of the money,
fringe benefits, and other commodities having financial value which organizations
give to the employees in return for their services.
3. Nature of work (NW): The extent to which role performance in an organization is
stimulating, result oriented, skill demanding and non-repetitive.
4. Nature of peer group (NP): It is the extent to which the peer group in an organization
is responsible, intelligent, work oriented and genuine.
5. Comparison to peer groups (PC): The extent to which the individual identifies
himself with his peer group on work related attributes such as skills, ambition and
educational qualifications.
6. Inside career opportunities (IC): It is the probability that an individual will be able to
occupy roles within the organization that offer greater rewards and growth
opportunities.

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 To Be Or Not To Be? A Study of Employee Turnover

7. Outside career opportunities (OC): It is the nature and quality of unoccupied roles in
an organization’s external environment.
8. Expectations-Reality Match (ER): It is the extent to which the present job measures
up to the kind of job that the individual wanted when he first took it up.
9. Turnover Perception (TP): It is the extent to which the employee perceives the
organization houses a set of long serving employees.

Dependent Variable

Intentions to Stay (K): It is an individual’s behavioral intention to stay with the

organization, as a direct outcome of company policies, labor market characteristics, and
employee perception. Intentions to leave is negatively related to continuance
commitment and is a widely agreed upon precursor to turnover (Mobley et. al., 1979).

Tools: Questionnaire

In order to measure the independent and dependent variables a questionnaire was

designed with 30 close-ended items measuring all the variables on a 5 point rating scale.
Information on demographic characteristics (age, sex, length of service, number of
organizations worked with before and designation) was also sought.

Results & Discussions

Table 1 presents the means and standard deviations obtained on all the questions
measured on a five-point scale. The table shows that nature of the peer group had the
highest mean value of all the variables for Organization 1 whereas expectation reality
match had the highest mean for organization 2. But this was not significantly different
when both the organizations were compared.

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 To Be Or Not To Be? A Study of Employee Turnover

Table 1 Mean and SD for Organization 1 & 2

Org 1 (N=71) Org 2 (N = 36) df105

VARIABLE MEAN SD MEAN SD T VALUE
Company Image 3.35 0.85 3.53 0.45 1.15
Pay Satisfaction 3.45 0.69 2.22 0.52 9.46**
Nature of Work 3.17 1.04 3.64 0.45 2.64**
Nature of Peer 3.82 0.70 3.68 0.49 1.02
Group
Peer Comparison 3.59 0.71 3.68 0.59 0.61
Inside Career 3.39 1.07 2.28 0.69 5.63**
Opportunity
Outside Career 2.68 1.02 3.39 0.81 3.61**
Opportunity
Expectations- 3.60 1.02 3.89 0.88 1.46
Reality Match
Turnover 2.80 0.67 3.00 0.59 1.50
Perception
Intentions to 3.09 1.03 2.69 0.71 2.11*
Stay
*p=05
**p=.01

Results indicate that employees in Org 1 are significantly higher on pay satisfaction than
employees in Org 2. Differences also exist on nature of work with the finance
organization employees finding their work more satisfying. Inside career opportunity was
more pronounced for the software employees indicating that they perceive themselves to
be provided with greater growth opportunities. Outside career opportunities were
perceived to be higher by the finance professionals. Organization 1 employees were
found to have grater intentions to stay. This finding is in keeping with the slow down in
the IT/Software sector today.

Organization1

Significant differences were obtained between the two sexes on Peer Comparison
(t=3.09, df 69 p < .05) and Turnover Perception (t=2.43, df 69, p < .05). Males
evaluated themselves better in relation to their peer groups (mean = 3.75) than females
who rated themselves at par with their peer group (mean = 3.20). Females were observed

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 To Be Or Not To Be? A Study of Employee Turnover

to be having a more stable perception of the work force (mean = 3.1) with an average
employee staying for 4 or more years. On the other hand, males perceived the workforce
as unstable (mean = 2.69) with average employees staying for 1-2 years in the
organization.

Marital status was as expected significantly related with age (t = 3.94, df 69, p < .05).
Unmarried employees were observed to fall in a lower age group with their mean being
25 years. Married employees had a significantly higher mean age of 30 years.
Differences were also observed on the variable number of organizations worked with
before, with married employees having worked for an average of 2.5 organizations.
Unmarried employees on the other hand have worked for lesser number of organizations
(mean = 1.21). Differences were also observed on the perception of the nature of peer
groups (t = 2.37, df 69, p < .05). Unmarried employees were found to rate their peer
group with more desirable characteristics (mean = 3.86) than their married counterparts
(mean = 3.02).

Table 2 gives the correlation matrix between all the variables of the study. The table
shows a significant relationship between age and intention to stay. Researches focusing
on individual variables have studied the influence of age on intentions to quit. A study
by Werbel and Bedeion (1989) indicates that age is a significant moderator of
relationship between performance and intention to quit. On the other hand the study by
Healy et. al. (1995) found a near zero relationship between age and turnover. Turnover
models (Price, 1977) also reiterate that age and other demographic variables such as
length of service retain powerful independent effects on intentions to stay. Length of
service was also found to be significantly associated with intentions to stay. Gerhart
(1990) structural model of turnover proposes a direct positive relationship between tenure
and intentions to stay. Assuming that tenure could be used as a proxy variable for length
of service, it points towards the amount of firm specific training or specialization
received by an employee who has stayed for a long time with the organization. Hence it
may be stated that the longer an employee stays with a particular firm, greater will be his

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 To Be Or Not To Be? A Study of Employee Turnover

exposure to a specific area of specialization (for e.g., to a particular programming

language) thereby greater would be the intention to stay with the same organization.

Other demographic variables (sex, marital status and designation) were not found to have
a direct relationship with intentions to stay. Literature reveals that male-female
differences exist, with females shown to have higher intentions to leave, but this
difference disappears when job satisfaction is controlled in the analysis. No previous
study, however, has explored the relationship of marital status and designation on
intentions to say. The present study found a non significant relationship for the two
variables.

Company image measured the extent of individual’s identification with and pride in an
organization. The variable was positively correlated with intentions to stay. Previous
research does not find a direct mention of company image as a variable but if
organizational commitment could be used as a proxy variable for company image, then
studies (including matching model by Wanous, 1980) indicate that organizational
commitment is negatively correlated with turnover intentions and behavior.

Pay satisfaction, nature of work and inside career opportunities have also found an
important relationship in turnover literature. These three variables were significantly
correlated with intentions to stay. A single study on occupational change by Markey and
Parks (1989) found these three factors to be significantly important in determining a job
switch. Their results indicated that more than 60% of the sample (10 million workers)
switched jobs for better pay, better working conditions and better advancement
opportunities.

The present study found expectations reality match to be also significantly correlated to
intentions to stay. Previous research, though not studying the variable directly, finds a
mention of two similar concepts. One deals with Realistic Job Preview (RJP) and
another is the proposal put by Human Capital theory. The importance RJP of the
accuracy of job information has been indicated to be an important precursor variable to

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voluntary turnover (Wanous, 1980). Hence, lesser the accuracy of job related
information, greater are the chances that the employee would have unrealistic
expectations, thus resulting in turnover. Along similar lines, Human Capital theory finds
relevance there. Study by Tsang et. al. (1991) indicates that workers with education in
excess of what their job requires of them has an adverse effect on employee stability in
the organization. Therefore, a mismatch between expectations and reality on the job can
have a jeopardizing influence on intentions to stay.

Outside career opportunity is the last variable that was significantly negatively correlated
with intentions to stay. A number of authors have incorporated this variable in their
models, though not necessarily under the same label. Price’s (1977) model of turnover
indicates that job satisfaction and opportunity structure interact, and turnover is most
likely for dissatisfied individuals in economies of high opportunity. Along similar lines,
Mobley (1977) proposed ‘search for and evaluation of alternatives’ as important
mediating steps between dissatisfaction and actual quitting. The matching model by
Wanous (1980) also speaks of the role of ‘comparison of present job to others’ for
assessing job’s utility in fulfilling employee’s goals and expectations. Hence, an
expectation that the present job will help in achieving important intrinsic and extrinsic
work goals to a greater degree than an alternative job would, forms an important
component of work adjustment process and employment stability.

The results do not show a significant relationship of nature of peer group and peer
comparison and turnover perceptions with intentions to stay. This finding is in
contradiction with earlier research done in the area. O’Reilly et al. (1989) explored the
relationship between social integration of the group and individual turnover. Their
finding indicated that lower level of group social integration is negatively associated with
individual turnover. For the present study, it is possible that in a software firm nature of
peer group, and comparison of peer group does not hold any significant relationship to
individual intentions to stay due to homogeneity of the sample.

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 To Be Or Not To Be? A Study of Employee Turnover

Table 2 Correlation Matrix (Organization 1)

Variable 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1. Age
2. Sex (0.42)
3. Marital status 0.62** 0.15
4. Length of service 0.46** (0.04) 0.18
(mths.)
5. No. of organizations 0.47** 0.17 0.41** (0.23)
6. Designation 0.43** (0.12) 0.28* 0.41** 0.06
7. Company image 0.07 0.17 0.03 (0.07) (0.04) 0.08
8. Pay satisfaction 0.23 0.11 0.08 0.13 (0.07) 0.00 0.29*
9. Nature of work 0.05 (0.04) (0.09) 0.02 0.09 0.06 0.53** 0.32*
10. Nature of peer group (0.26) 0.07 (0.27) (0.30)* 0.09 (0.08) 0.18 0.11 0.18
11. Peer comparison (0.16) (0.35)* (0.08) (0.14) (0.04) 0.00 (0.02) (0.12) 0.14 (0.11)
12. Inside career 0.00 0.10 (0.15) 0.00 0.02 0.00 0.57** 0.49** 0.58** 0.42** (0.14)
opportunity
13. Outside career (0.19) (0.08) (0.03) (0.09) (0.02) (0.01) (0.30)* (0.28)* (0.24) (0.06) 0.32* (0.27)
opportunity
14. Expectations reality 0.15 0.05 0.11 0.02 0.14 0.05 0.48** 0.35** 0.63** 0.10 (0.09) 0.42** (0.37)**
match
15. Intentions to stay 0.34* (0.03) 0.19 0.39** 0.09 0.18 0.45** 0.38** 0.42** 0.02 (0.07) 0.36** (0.40)** 0.56**
16. Turnover perception 0.07 0.28 0.08 (0.05) 0.03 0.07 0.22 0.06 0.09 0.19 (0.20) 0.23 (0.01) 0.03 0.24

* p = .05
** p = .01
( ) = indicates negative correlation

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 To Be Or Not To Be? A Study of Employee Turnover

Turnover perception, though not found to be significantly associated with intentions to stay,
emerges as a predictor variable at step no. 3 on stepwise regression discussed later in this
section. This may be possible since the correlation coefficient value associated with turnover
perception is a borderline value which assumes a significant value when partially correlated
with intentions to stay. This is an interesting observation since it shows the interactional effect
of other variables on turnover perceptions.

In order to determine the causality effect of the independent variables on employee’s intentions
to stay. Stepwise regression was carried out (Table 3).

Table 3 Stepwise Regression (Organization1)

Variables
Dependent Independent Predictor for R β f-ratio
variable entered square
on step no.
Intentions to Expectations 1 0.318 0.483 32.11**
stay Reality match
Length of 2 0.465 0.381 29.59**
service
Turnover 3 0.523 0.239 24.43**
perception
Outside career 4 0.552 (0.184) 20.29**
opportunities
Constant 0.55 0.921
** Significant at 0.0000

Variable expectations reality match emerges as a predictor variable on step no. 1 (R square =
0.32), indicating that 32% of the variance in intentions to stay may be explained by the variable
expectations reality match. However, this 32% figure is not to be looked at in isolation, since
other significant predictors (on step no. 2, 3 & 4) have an interacting effect on this variable.

The next variable (entered on step no.2) that has the power to explain the variance in dependent
variable intentions to stay (K), is the length of service (LOS) of the employees. 47% of the
variance in the intentions to stay may be contributed to this variable (after dropping the effects

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of ER). However, in this case also, the proportion is not to be interpreted in the absolute sense
since other predictors (on step no. 3 & 4) have an interesting effect on the potency of the R
square value.

The next significant predictor of the dependent K was calculated to be turnover perception (R
square = 0.52). This indicates that after dropping the influence of variables ER & LOS,
turnover perception could explain 52% of the variance observed in the intentions to stay.

The last variable entered on step no. 4 (thereafter reaching the p< .05 limits) is outside career
opportunity (OC), with the power to account for 55% of the variance in the intentions to stay.
This high explanatory power is achieved after dropping significant predictor variables like ER,
LOS & TP but inclusive of the effects of other variables not entered into the equation.

Taking the beta (slope) and constant (y intercept) into account, a linear turnover model could be
predicted.

K = 0.55 + 0.48 ER + 0.38 LOS + 0.24 TP – 0.18 OC ………. (equation 1)

It may be noted here that many significantly correlated variables (with dependent K) were
dropped by the statistical package SPSS while carrying out stepwise multiple regression
analysis. This is because only those variables become predictor variables, which have a high
partial correlation coefficient with intentions to stay. For e.g., both NW and ER are
significantly correlated with K, but only one was selected to be predictor variable (ER) since it
had a higher partial correlation coefficient with K. Another point to be noted here is that the
predictor variable turnover perception, though not significantly correlated with K, emerged as a
strong predictor in the regression analysis.

As seen form the stepwise regression results expectations reality match was found to be a very
important variable (entered on step no.1) that directly influences intentions to stay. This is an
individualistic variable, implying that a gap between an employee’s expectation of the job and

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what the job actually offers is of significant importance in determining, whether an employee
intends to stay with the same job.

This finding is consistent with the matching model formulated by Wanous (1980). Introducing
the concept of RJP as a staffing procedure for enhancing need-reward match process, Wanous
proposes that RJP increases the accuracy with which job applicants assess the degree of match
between needs and rewards provided by the job in question. If applicants accept the job after
receiving and RJP, a better match is expected between applicant work related needs and job
rewards. A strong job reward match results in job satisfaction; and job satisfaction influences
employment stability by negatively affecting actions to secure another job.

Length of service is the next predictor variable entered in the linear equation. This is in line
with the structural model (Gerhart, 1990) which identifies tenure as one of the chief
components of intentions to stay. Length of service could be viewed as a proxy for the amount
of firm specific training or specialization and also represents an investment in the firm. Also
age and length of service being strongly correlated implies that the employee has grown with
the organization. It may be interpreted that this long stay with an organization builds up a
sense of complacency within the employee, along with fostering somewhat narrow range of
skill acquisition and experience. Hence, it is likely that a long stay with the organization
reduces the employee’s confidence in dealing with broad and varied situations thus fostering a
longer stay with the organization. Further, family setup stabilizes around this period of time,
thereby requiring a greater risk taking ability on the part of the employee to switch his job.

Turnover perception, entered on step no. 3 in the equation also forms an important determinant
of intentions to stay. Here again, T test result of differences between the two sexes on variable
turnover perception can be interpreted in the context of the overall regression results. Hence, it
could be said that the female members were found to have a more stable perception of the
employees. Though literature finds no mention of the influence of predictor variable turnover
perception on intentions to stay, Krackhardt & Porter’s (1986) snowball metaphor may offer an
explanation here. The snowball explanation of turnover suggests that patterns of turnover are

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 To Be Or Not To Be? A Study of Employee Turnover

not independently distributed across any work group thereby suggesting that people are not
independent actors. At work they effect others and are effected by others. Hence, when an
employee perceives that the workforce is stable in the organization, there is a larger probability
that he would have greater intentions to stay. General organizational norms concerning work
or value of work may also influence turnover perceptions. Norms can also vary across
segments of an organization, for e.g., in the organization studied women were found to have a
better stability perception of the workforce than the men.

The last predictor variable, entered on step no. 4, is outside career opportunity bearing a
negative relationship with intentions to stay. A number of research work has studied the
influence of comparable external job opportunities with intentions to stay. Mobley (1977)
model of employee turnover decision process proposes that comparison of alternative jobs with
the present job is a precursor to intentions to stay/quit. Research in psychology and economics
suggest a main effect of general labor market conditions on voluntary turnover. Price (1977)
used opportunity structure (state of the economy) as a proxy variable for outside career
opportunity. He proposed that job satisfaction and opportunity structure interact, and turnover
is most likely for very dissatisfied individuals in economies of high opportunity. Gerhart
(1990) structural model includes the dimension ‘perceived ease of movement or labor market
perceptions’ as a determinant of voluntary turnover. Whatever the appropriate measure of
external job opportunities, implication of the finding is that such conditions may place strong
constraints on turnover control programs of the organization. Such programs, designed to
alleviate turnover, may appear successful when there is a general dearth of alternative career
opportunities. However, as outside career opportunities become more generally favorable (as
in the case of a growing economy), employees who intend to leave may actually do so in
increasing numbers. Finding may be explained using March & Simon (1958) model which
indicated that certain factors e.g., expectations reality mis-match push the employee to look for
alternative employment, whereas other factors for example, favorable perception of outside
career opportunities may ‘pull’ the employees to consider alternative employment.

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 To Be Or Not To Be? A Study of Employee Turnover

Organization 2

No significant differences were obtained between the sexes on any of the variables.
Differences on age and length of service with married employees having a higher mean age (30
years) and greater length of service (34.6 months) than the unmarried employees (age 26 years:
length of service 14.8 months). Significant differences were obtained on pay satisfaction
(t=2.13, df 34, p=.05) with married being more satisfied (mean=2.42) than their
counterparts(mean=2.06). Differences were observed on inside career opportunities (t=3.98, df
34, p=.01) with the unmarried finding greater career opportunity in the job external market
(mean=3.65) than their married counterparts (mean=3.02) married employees had a greater
intention to stay (mean=3) than the unmarried (mean=2.48) with a t value of 2.31, df 34,
p=.05.

The correlational analysis between variables show a positive relationship of length of service,
company image and nature of work with dependent variable intentions to stay. This is
consistent with previous literature cited in the area (Gerhart 1990).

Other variables were not found to be significantly associated with intentions to stay. However
an examination of the coefficient values suggest that age, marital status, peer comparison, and
expectations reality match would have emerged to be significant if the sample size was
marginally larger.

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 To Be Or Not To Be? A Study of Employee Turnover

Table 4 Correlation Matrix (Organization2)

Variable 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1. Age
2. Sex 0.04
3. Marital status 0.61** 0.08
4. Length of service 0.74** 0.02 0.57**
(mths.)
5. No. of organizations 0.14 (0.02) (0.09) (0.09)
6. Designation 0.53** (0.10) 0.44* 0.58** 0.00
7. Company image 0.05 0.14 0.10 0.26 0.08 0.18
8. Pay satisfaction (0.12) 0.0 0.34 0.00 (0.27) 0.15 0.17
9. Nature of work 0.07 0.06 0.25 0.32 (0.28) (0.03) 0.33 0.23
10. Nature of peer group 0.24 0.08 0.18 0.00 (0.66)** (0.15) 0.00 0.39* 0.60**
11. Peer comparison 0.18 0.12 (0.05) 0.22 0.14 0.24 0.10 0.03 0.24 (0.11)
12. Inside career 0.05 0.04 0.56** (0.03) 0.02 0.16 0.26 0.62 0.05 0.10 0.01
opportunity
13. Outside career 0.03 0.06 (0.39) * 0.19 0.22 (0.23) 0.06 (0.47)** 0.30 (0.21) 0.19 (0.75)**
opportunity
14. Expectations reality (0.01) 0.06 0.30 0.20 (0.38) 0.00 0.30 0.30 0.39* 0.68** (0.01) 0.19 0.33
match
15. Intentions to stay 0.35 0.09 0.37 0.44* (0.10) 0.14 0.40* 0.16 0.47** 0.16 (0.22) 0.08 0.06 0.26
16. Turnover perception (0.13) 0.13 (0.29) (0.11) (0.07) 0.10 0.29 (0.12) 0.00 (0.08) (0.14) (0.12) (0.04) 0.03 0.28

* p = .05
** p = .01
( ) = indicates negative correlation

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 To Be Or Not To Be? A Study of Employee Turnover

Regression analysis results portray a better picture of the predictor variables influence on
intentions to stay, as it removes the interactional influence by taking a partial correlation
coefficient into consideration (Table 5).

Table 5 Stepwise Regression (Organization2)

Variables
Dependent Independent Predictor for R β f-ratio
variable entered square
on step no.
Intentions to Nature of work 1 0.219 0.532 9.56**
stay
Peer 2 0.336 (0.379) 8.36
Comparison
Age 3 0.480 0.414 9.85*
Turnover 4 0.554 0.275 9.61**
Perceptions
Constant (2.360) (2.000)
** Significant at 0.05 * Significant at 0.01

Independent variable nature of work emerges as a predictor variable in step 1 (R square=0.22)

indicating that the variance in intentions to stay can be explained by nature of work. However,
value 22% is not an independent statistic since it includes the influence of other variables in it.
The next variable extracted was peer comparison. The negative beta sign indicates that higher
the employee evaluates himself in relation to his peer group, lower would be his intentions to
stay. Age accounted for 48% of the variance in the dependent variable. Table 5 shows that
55% of the variance in intentions to stay can be explained by turnover perception in the
organization.

Taking the beta value (slope) and the constant (y intercept) into account, a linear turnover
model predicted for Organization 2 is:
K = -2.36 + 0.53 NW + 0.42 age + 0.28 TP - 0.38 PC .. (equation 2)

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 To Be Or Not To Be? A Study of Employee Turnover

The results suggest that nature of work is a strong determinant of intentions to stay for
organization 2. Hence, poor nature of work in terms of being routinized, not result oriented,
low on skill enhancement and low on stimulation results in dissatisfaction with the job, thereby
causing turnover. The finding is in agreement with Markey & Parks (1989) study of
occupational change where results indicated that workers switched jobs because of better
working conditions and advancement opportunities. A number of researchers have focused on
the relationship between job characteristics and turnover intentions. Mobley (1977) identified
job satisfaction as the primary variable among the chain of variables that determine turnover.
Hackman & Sulltle (1977) with the help of job characteristics model specified how job
characteristics and individual differences interact to affect satisfaction and productivity of
individuals in the organization.

Age appears to be a predictor of intention to stay in organization 2. Werbel & Bedeian (1989)
investigated the influence of age as an antecedent of intentions to quit and found age to be a
significant moderator of performance and intentions to quit. However, another study found a
small and near zero relationship between age and turnover (Healy et al., 1995). It is possible
that in the present case, age and tenure being very closely correlated, age comes to acquire
similar significance as that of length of service. Longer the stay with an organization, narrower
becomes the focus for an individual. Hence to have intentions of quitting, one needs to
overcome a number of constraints like acquiring new skills.

T test result for demographic characteristics of marital status and designation may be discussed
in this context. Married and unmarried individuals were found to be significantly different in
age. Similarly middle and lower level professionals were significantly different in age. It may
be inferred that the married, middle level professionals who fall in the higher age bracket have
greater intentions to stay. Viewing age within the context of marital status and designation
offers more plausible explanation for senior employees having greater intentions to stay. It is
possible that family commitments have a strong influence on the occupational mobility of an
employee.

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 To Be Or Not To Be? A Study of Employee Turnover

Turnover perception, was the only common predictor variable between the two organizations.
Employee`s perception of workforce stability in the organization is a strong predictor of
employees intention to stay. Individuals in an organization are not independent actors. They
influence each other, and in turn are influenced by other`s decision making. It can be said that
keeping all other factors aside, `group think` implicitly influences an individuals decision to
stay on with the organization. Peer comparison negatively influences intention to stay for
employees of organization 2. The higher the individual rates himself in comparison to his peer
group lesser would be his intention to stay.

Implications

With the advent of a work scenario where more and more companies have to concede that their
valued employees are leaving them, a new concept of career planning is bound to emerge. The
focus of this new paradigm should be not only how to motivate and retain key knowledge
workers, but also how to reinvent careers when the loyalty of an employee is to his/her
`brainware` rather than to the organization. Career development has to take into account the
changing world of employment. With lifetime employment in one company not on the agenda
of most employees, jobs will have to become short term. The present generation wants work to
be exciting and entertaining. This suggests designing work systems that leverage the thinking
of all employees. Opportunities for continuous up gradation of skills must be provided. The
organization must commit to lifelong learning. As employees gain greater expertise and
control over their careers, they will reinvest their gain back into their work.

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 To Be Or Not To Be? A Study of Employee Turnover

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