Assignment

Compensation and Employee Turnover

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Name of Professor
Introduction:
Salary-Salary refers to "the various forms of financial returns and tangible services and benefits that
employee receive as part of the employment relationship" [ CITATION Mor08 \l 1033 ] . Resignation
intention-Resignation intention refers to the employee's willingness to leave the organization. The
modern workforce has become more demanding in terms of their expectations from their workplace.
Gone are the days where lifetime employment was the order of the day and people will tend to remain
with the organization till the time, they get retired. This has thrown up number of challenges for the
organization in terms of retaining high performance employees. An important dimension of this
aspect of retention is compensation. The purpose of this study is to understand the effect of
compensation on employee turnover intention[ CITATION And17 \l 1033 ]
Although it has been argued that some level of turnover is required in the organisation to bring fresh
ideas, energy and techniques which can transform the organisation to higher levels of success; turnover
among key employees which are highly productive is costly .For instance, replacement costs (e.g.
agency fees and training), exit costs (administrative time, exit interviews and pay for leave which are
not taken), recruitment and selection costs (agency fees, lost time, interviews, relocation and travel),
lost opportunities, loss of morale and productivity among the retained workers and sharing of
organisational technology, processes and relationships [CITATION Bro15 \l 1033 ].
For more than one hundred years, management scholars have conducted theoretical research and
empirical research on the reasons for voluntary resignation of employees [ CITATION Hom17 \l 1033 ]
which are usually defined as voluntary resignation or resignation in the research. The impact of
turnover on the organization may damage its business performance and affect its market reputation.
High turnover rates have a negative impact on organizational productivity and financial
performance[ CITATION Wit14 \l 1033 ]. In addition, researchers found that organizations facing high
turnover may lag behind their competitors Recent studies have concluded that the total cost of
employee turnover is between 90% and 200% of the employee's salary [ CITATION Cas15 \l 1033 ]But
resignation also has an intangible impact, affecting organizational culture, employee morale, social
capital and organizational memory [ CITATION Zha12 \l 1033 ].
The employee turnover rate is studied from the perspective of psychology and labor economics.
Psychological prerequisites such as job satisfaction, job performance, salary, and organizational
commitment provide an explanation of the attitude of employee-level personnel turnover. At the macro
level, population, economic factors and geographical conditions have been proposed as prerequisites
for turnover (Felps et al., 2009). Although studies have always shown that the difference in voluntary
turnover rates has been explained by the same set of attitude, organizational, and management
predictive factors (Felps et al., 2009), researchers have introduced different models and survey projects
to try to get rid of this situation. Regarding the turnover model.

Literature Review

Individual voluntary resignation is defined as “the voluntary termination of membership of the

organization by an individual who has received monetary compensation for joining the organization”
(Hom & Griffeth, 1995). The employee turnover rate has been studied from the perspectives of
psychology (ie micro) and labor economy (ie macro). The psychology school emphasizes aspects
related to member emotions and relationships, commitment and organizational climate, while the labor
economics school explains the influence of external variables (such as job opportunities) on the seven
turnover rates (Morrell, Loan-Clarke, and Wilkinson, 2001). . Although there has been a lot of research
on employee turnover, there is no generally accepted framework for why employees choose to leave
the organization (Lee & Mitchell, 1994), and turnover research is dynamic and constantly changing
(Hom et al., 2017). . This literature review summarizes the most important theories developed since
the middle of the twentieth century, focusing on theories representing major trends and the results of a
recent meta-analysis of the precursors of major turnover. The review is organized in chronological
order, as earlier theories form the basis for the development of more complex models. Turnover
research has been developed in terms of predictive index measurement and research design
improvements (Griffeth, Hom, and Gaertner, 2000).
Table 1: Voluntary Turnover Taxonomy (self-elaborated)

Psychologica March and

l Theories Simon (1958)
Distal & Proximal Mobley (1977)
Attitudinal Models Antecedents > Quit Price (1977)
(why individuals Intention > Turnover Price & Mueller
leave) (1981, 1986)
Porter et al. (1974)
Meyer & Allen (1997)
Integrative Unfolding Model Lee & Mitchell (1994)
Frameworks (why and Maertz and Campion
Turnover Decision Types
how individuals (2004)
leave)
Attitudinal Models Mitchell et al. (2001)
Job Embeddedness Theory
(why individuals stay)
Labor Job Vacancy Theory Holt & David (1966)
Economic Search Theory Muchinsky & Morrow
Multidisciplinary model
s Theories (1980)
Objective Job Labor market > Job Hulin et al. (1985)
Opportunities Satisfaction > Turnover

The Psychological Theories.

This school of psychology studies the turnover rate from the perspective of causality to understand
the reasons for employee turnover, and from the perspective of process to understand how the
decision to leave has evolved over time. From a causal point of view, most turnover models adopt the
following structure: remote antecedent factors (such as job characteristics, personality), attitudes or
near-end antecedent factors (such as job satisfaction, performance), outcome (willingness to
withdraw and voluntary withdrawal) () & Griffeth, 1995).

The attitudinal models:

March and Simon (1958) 1 proposed the first formal theory of employee turnover. Their research
established the basis for explaining the attitude path model of employee turnover. The authors believe
that there are two factors that lead to an employee’s decision to leave: the perceived willingness to
move (the current perceived value of working conditions or the degree of satisfaction with the job) and
the perceived convenience of mobility (perceived alternative evaluation, or alternative Quality and
availability)). Although the model does not include any other important variables that affect employee
turnover, such as employee satisfaction or organizational commitment, and has not been empirically
verified, its theoretical basis was later extended through the work of Mobley (1977). Incorporating
working conditions and perceived job opportunities into the attitude model to explain resignation in a
direct way: employee dissatisfaction leads to the idea of resignation, which leads to search decisions
and resignation intentions, and finally realizes actual resignation.

Mobley (1977) proposed a similar linear order of events that finishes in job quits, with the addition
of the subjective expected utility (SEU), an evaluation made by the individual about the value of the
job search and the estimation of the quitting cost as intermediate connections between satisfaction
(or dissatisfaction) and quits. According to Mobley, job search and perceived alternatives are key
tenets explaining turnover and intermediate steps or linkages in the quit decision course that follows
the initial job dissatisfaction that triggers the withdrawal process. At every step, the individual
evaluates the expected utility of a job search and the cost of quitting. If the expected utility of a job
search outweighs the cost of quitting, then the individual moves to the next step in the withdrawal
process, completing an actual job search where all the alternatives are evaluated against the existing
job. If alternatives are feasible, the process continues until the individual finally quits. Mobley’s
constructs have been utilized and validated by different studies to date

Job Satisfaction

Thoughts of
Quitting

Search
Intention

Probability of
Quit Intention Turnover
Alternatives

Figure 1: Turnover Linkages Model (Mobley et al., 1978).

Price and Mueller (1977, 1981, 1986) contributed to the attitude model work by adding a broad set
of determinants of turnover. These factors include: a) job satisfaction, which refers to employees’
positive attitude towards employment in the organization The degree of emotional orientation
(Gurney, Mueller, and Price, 1997), and b) organizational commitment, which is a term originally
used by Porter, Sters, Mowday, and Boulian (1974) to explain that the difference in turnover cannot
be explained by Job satisfaction to explain. Both job satisfaction and organizational commitment are
considered important prerequisites for resignation, and their empirical relationship has been firmly
established through a lot of research. Price and Mueller proposed in their research that determinants
of turnover (excluding job opportunities)
+
are indirectly+ related to turnover by influencing job
satisfaction, commitment or intention to leave, which in turn is the first determinant of turnover.

Figure 2: Causal Model of Turnover (Price & Mueller, 1981).

Empirical verification of their model confirms that most explanatory structures play a role in the exit
process (see, for example, De Gieter, Hofmans, and Pepermans, 2011). Gaertner (1999) conducted a
meta-analysis of nine empirical studies by Price and Muller to examine the empirical relationship
between structural determinants of turnover and job satisfaction and organizational commitment. He
found that most of the structural determinants in the model are directly related to job satisfaction, and
concluded that the negative impact of these determinants can lead to dissatisfaction and low
investment, which leads to turnover intentions and actual turnover. Salary is an exception, which is
directly related to turnover.

From content to process: Integrative Frameworks.

In the mid-1990s, with the publication of the "deployment model of turnover" (Lee & Mitchell, 1994),
a different approach to turnover theory was introduced that combined turnover theory and turnover
content theory. This model is a retrospective ledger of voluntary resignations. It is believed that
resignation is the culmination of the decision-making process, not affected by the cause of
dissatisfaction, but by some kind of turbulence event, which caused the person to have a relationship
with him or her. The relationship is evaluated. Therefore, the model first analyzes the reasons why
people leave (content), and secondly analyzes how people leave (process) (Hom et al., 2017). The
unfolding model is based on image theory (Beach, 1992), which describes how individuals use
schematic knowledge structures to make rational choices to organize their thinking about decision-
making. Faced with shock, “this is a very significant incident that prevents employees from making
wise judgments about their work” (Lee & Mitchell, 1994: 60), the employee believes that leaving and
different decision-making paths are unfolding. In the first path, the individual executes the previously
envisaged plan (script) to exit.
 Figure 3: Unfolding Model of Turnover (Lee & Mitchell, 1994). Examples self-elaborated.

Although some studies have provided evidence to support the effectiveness of the model (Lee et al.,
1996; Holtom et al., 2008; Felps et al., 2009; Kammeryer-Mueller, Wanberg, Glomb and Ahlburg,
2005), there is still no "unfolding model". A meta-analysis of basic research. Russel (2013) reported
that the lack of a meta-analysis of basic research to test unexpanded model predictions is due to the
fact that basic research does not report estimates of good forecasts for unexpanded model predictions,
thus surpassing the attitude path model and gradually improving voluntary Attendance rate forecast.

Morrell et al. (2001) raised four objections to the "deployment model". First, they found that a
single survey item is related to more than one structure, which makes the tool easy to impose data
on more than one structure, thereby destroying the validity of the discrimination. Second, the
original investigation did not ask why the leavers left. They believe that raising general questions
about the reasons for leaving can provide clear contextual information and highlight the
understanding of the reasons for leaving. Third, the model uses too many dichotomy, so because the
respondents’ score is based on fewer data points, it simplifies the complexity of the exit
phenomenon
Following a similar research direction, Maertz and Campion (2004) proposed a turnover model that
combines how people leave the job (process) and the reason for leaving (why). Based on the
construction of the "expansion model", the author proposes a classification model of leavers that
uses four types of paths and eight types of leaving motivations. From a process point of view, their
four general turnover decision types are: 1) Impulsive exit: leaving the job due to low attachment; 2)
 Relative resignation: switching to an alternative job; 3) pre-planned resignation, and There is a pre-
planned plan; 4) Conditional resignation and conditional plan. In addition, the author puts forward
eight categories of driving forces for personal turnover. 1) Emotion: Commitment to the
organization; 2) Contractual: Desire to fulfill the perceived obligation; 3) Component: Commitment
to the person/group; 4) Alternative plan: perceivable alternative to work; 5) Calculation: Future
satisfaction with the continued membership of the organization; 6) Normative: the burden of staying
or leaving; 7) Behavioral: the behavioral commitment to the organization; 8) Ethics: the moral
dilemma of quitting smoking. Based on the process type and dynamic model of Maertz and
Campion, Maertz and Boyar (2012) proposed a turnover change motivation survey (TAMS). The
instrument is composed of 18 rulers, which can help diagnose the cause of turnover more
systematically. Research using this tool shows evidence of internal consistency and predictive
evidence of its effectiveness, so it is necessary to use it to assess the cause of turnaround (Maertz
2012; Oliveira et al., 2016), proving that it is like "unfolding model", turnaround Both the content
and process factors can be integrated into a unified framework (Hom et al., 2017).
Why employees stay:
The last significant shift in turnover research happened in 2001 when the Job Embeddedness Theory
was introduced by Mitchell, Holtom, Lee, Sablynski and Erez (2001). The central argument of the
theory is that the reasons that people have to leave their jobs could be different than the rationale for
staying. Although departing is the opposite of staying, turnover drivers (eg, unfair or low pay) may
differ from what induces a person to stay (eg, training opportunities) (Hom et al., 2017). The theory is
anchored in a set of mechanisms linking socialization that happens on the job (organization) and off
the job (community) with employee retention happening through: 1) the links between the individual
and other people and groups; 2) the perceptions of their fit with the job, organization,
 And the community; 3) Belief that they will lose after resignation. Basically, when employees see
the relationship with the organization as support, care and need for active social communication,
they will be integrated into the organization. In this respect, the premise of the embedded theory is
the social communication theory, which affirms that an organization is an environment for personal
transactions, and the degree of support of its members affects job satisfaction, commitment, and
turnover intention (Randall, Cropanzano, Bormann and Birjulin, 1999 year).
Links-Organization

Links-Community

Fit-Organization

Individual Job Individual

Embeddedness Turnover
Fit-Community

Sacrifice-Organization

Sacrifice-Community

Figure 4: Job Embeddedness model (Mitchel, Holtom, Lee, Sablynski, Erez, 2001).

Working embedding theory is widely cited (Allen & Griffeth, 2001; Allen & Shanock, 2013; Karatepe,
2013; Robinson, Kralj, Solnet, Goh & Callan, 2014; Porter, Woo and Campion, 2016). However, there
is no consensus among the researchers on the influence of community connections as other predictors
of smoking cessation behavior. Zhang, Fried, and Griffeth (2012) made a good summary of recent
research and found that the empirical results on the relationship between unemployment factor
(community) and turnover rate are quite different. In many cases, all three aspects of community
embedding (community connection, adaptation, and sacrifice) are not significantly related to job loss.
The author concludes that, compared with organizational embeddedness, community embeddedness is
not a stable predictor of turnover.
Table 2: Relationship between Community Embeddedness and Turnover (Adapted from Zhang et
al., 2012).
Study Industry Sector or Links (*) Fit (*) Sacrifice (*)
Demographic Group Community Community Community
Mitchell et al. (2001) Hospital Significant Significant Significant
Mitchell et al. (2001) Grocery stores Significant Not Signific. Not Signific.
Lee et al. (2004) Financial Significant Significant Not Signific.
Crossley et al. (2007) Public Org. Not Signific. Not Signific. Not Signific.
Ramesh & Gelfand (2010) Call Center Not Signific. Not Signific. Not Signific.
Mallol et al. (2007) Caucasian employees Not Signific. Not Signific. Not Signific.
Mallol et al. (2007) Hispanic employees Not Signific. Not Signific. Not Signific.
* Community embeddedness and turnover relationship was negative in all cases.

The Labor Economics Theories

From a macro perspective, economic research usually focuses on specific industries or regions to
explain how market forces such as unemployment or job supply and demand affect how often people
leave their jobs (Banerjee & Gaston, 2004). These variables affect the individual’s perception of the
ease of mobility, the expected benefits of finding a job, and leaving. Some empirical studies support
this view, suggesting that labor market conditions affect the turnover rate (see, for example, Terborg
& Lee, 1984; Mortensen & Pissarides, 1999; Heckman & Pages, 2000; Clement & Law, 2016;
Schmidt, Willness, Jones, & Bourdage, 2016; Andersen, 2017) . Morell (2001) confirmed that
although the turnover rate viewpoint in labor economics enables researchers to develop theories and
models based on quantifiable variables, this can only be done if all parties in the labor market have
complete knowledge of opportunities. It can be done under circumstances, which is not feasible in
practice. reality. In order to solve this imperfect job market knowledge, some theories have been
proposed.
 Individual
Individual Factors
Consequences

Organizational
Consequences -
Economic Social
Opportunity Turnover
Factors Organizational
Consequences -
Economic

Societal
Work-related Factors
nsequen
Coces

Figure 5: Multidisciplinary Model. Muchinsky and Morrow (1980).

Using a multidisciplinary model, Carsten and Spector (1987) conducted a meta-analysis to establish
the relationship between job satisfaction-cross-study turnover correlation and the unemployment rate
at the time these studies were conducted. The authors found evidence that the potential unemployment
rate may affect the relationship between job satisfaction and turnover rate, and the correlation between
unemployment rate and satisfaction is between –.18 and –.52 throughout the study. Similarly, other
studies have confirmed Muchinsky and Morrow’s view that market conditions regulate the relationship
between personal and work-related factors and turnover (see, for example, Gerhart, 1990; Steel, 1996;
Trevor, 2001) ; Latzke, Kattenbach, Schneidhofer, Schramm, & Mayrhofer, 2016; Lee, Fernandez and
Chang, 2018)

Objective job opportunities.

This research branch seeks to explain why unemployment data are not useful when it comes to
explaining or predicting individual decisions to quit. Hulin, Roznowski and Hachiya (1985) reviewed
articles and empirical studies on job opportunities in relation to turnover and found a discrepancy
between the labor market studies and research done at the employee decision level. At a macro level
(labor market), unemployment rate correlated high with employee turnover rate in a geographical area
or industry sector
1) Different economies produce different labors. As the economy develops, job vacancies and rising
wages may attract workers who are not normally part of the formal labor force into the labor market.
2) Job opportunities directly affect job satisfaction. A large number of opportunities in the labor
market have created greater expected utility and reduced job satisfaction, which may indirectly affect
turnover through behavioral withdrawal willingness.
3) Job opportunities, rather than giving up willingness, directly affect turnover. This explanation
suggests that job opportunities will directly affect the individual's decision to leave, rather than through
the relationship between "behavior to give up" and "actual withdrawal."
Analysis:
In order to provide a more complete overview of job churn research, it is important to mention a meta-
analysis study of all major churn theories and models, with an emphasis on the most relevant and up-
to-date reviews. Hom and Griffeth (1995), and Griffeth et al. (2000) Completed an extensive
quantitative review of the forecast intensity of many turnover precedents. The Hom and Griffeths
study included the results of 42 studies and more than 500 correlations, and included an analysis of
pre-turnover relationship moderators. Their analysis shows that moderators, such as regional
unemployment or occupational type, will influence the scale and direction of various determinants,
depending on the situation and the population.

The data set represents an unbalanced panel in which some cross-sectional units lack some
observations during the sampling period from 2011 to 2015. Given that the person with missing data
occurs when someone does not exist in the data, the missing observations are randomly considered
Set the range of the entire sampling period. For example, new employees in 2013 have no
performance records for 2011 and 2012. Similarly, employees who resigned in 2012 also
have no post-resignation records. Turnover data are treated as binomial variables, coded as
holders (0) and leavers (1) respectively, and a discrete choice model is implemented. Both
linear probability model (LPM) and Probit model are used to estimate the impact of
different variables on personal turnover.
Since the OLS coefficient can be directly explained as a marginal effect on the predicted
probability of leaving the company, the discussion of the results mainly involves the
estimated value obtained using LPM. In addition, as long as the explanatory variable is not
correlated with the error term (ie, exogenous covariate, E(X, u) = 0), OLS is unbiased and
consistent. However, econometric models that emphasize individual behavior should also
be important to recognize that there is unobserved heterogeneity. The explanatory variable
can be correlated with the error term, leading to deviations in the regression coefficients.
Therefore, the causal explanation of the regression results cannot be strictly given. Instead,
the results can be used to describe turnover phenomena based on conditional relevance.
Conclusion:
All in all, this research aims to answer whether certain personal, organizational, and
management factors affect turnover decisions. This result confirms the results of previous
studies that show that a set of personal, organizational, and management factors can
explain approximately 20% of the difference in voluntary turnover rates (Russell, 2013).
One aspect to be emphasized is the use of information from the human resource system
and the longitudinal analysis of dynamic factors such as performance, salary or supervisor
conditions. From the perspective of employee life cycle, turnover is more abundant than
static analysis. In addition, the results of the interaction between variables indicate that the
relationship between factors that support turnover may be complex, and may require
managers and leaders to associate seemingly unrelated concepts, such as between the
scope of control and the perceived level of supervisor support Find the right balance.
Among the employees.