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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: 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 employees 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.

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 crossfunctional 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).

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 countrys 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 worlds 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

To Be Or Not To Be? A Study of Employee Turnover 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 reevaluate 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 clients 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).

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 employers 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

To Be Or Not To Be? A Study of Employee Turnover 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 employees 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 employees intentions to leave? 7. Does outside career opportunity influence employees 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?

To Be Or Not To Be? A Study of Employee Turnover 9. Does perception of employee stability influence intentions to stay with the organization?


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 companys 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

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

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 organizations 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 individuals 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.

To Be Or Not To Be? A Study of Employee Turnover Table 1 Mean and SD for Organization 1 & 2 Org 1 (N=71) MEAN 3.35 3.45 3.17 3.82 3.59 3.39 2.68 3.60 2.80 3.09 Org 2 (N = 36) MEAN 3.53 2.22 3.64 3.68 3.68 2.28 3.39 3.89 3.00 2.69 df105 T VALUE 1.15 9.46** 2.64** 1.02 0.61 5.63** 3.61** 1.46 1.50 2.11*

VARIABLE Company Image Pay Satisfaction Nature of Work Nature of Peer Group Peer Comparison Inside Career Opportunity Outside Career Opportunity ExpectationsReality Match Turnover Perception Intentions to Stay *p=05 **p=.01

SD 0.85 0.69 1.04 0.70 0.71 1.07 1.02 1.02 0.67 1.03

SD 0.45 0.52 0.45 0.49 0.59 0.69 0.81 0.88 0.59 0.71

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 10

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


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 individuals 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


To Be Or Not To Be? A Study of Employee Turnover 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. Prices (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 jobs utility in fulfilling employees 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. OReilly 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.


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

Table 2 Correlation Matrix (Organization 1)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Variable Age Sex Marital status Length of service (mths.) No. of organizations Designation Company image Pay satisfaction Nature of work Nature of peer group Peer comparison Inside career opportunity Outside career opportunity Expectations reality match Intentions to stay Turnover perception 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

(0.42) 0.62** 0.15 0.46** (0.04) 0.47** 0.43** 0.07 0.23 0.05 (0.26) (0.16) 0.00 0.17 (0.12) 0.17 0.11 (0.04) 0.07 (0.35)* 0.10

0.18 0.41** 0.28* 0.03 0.08 (0.09) (0.27) (0.08) (0.15) (0.23) 0.41** (0.07) 0.13 0.02 (0.30)* (0.14) 0.00

0.06 (0.04) (0.07) 0.09 0.09 (0.04) 0.02

0.08 0.00 0.06 (0.08) 0.00 0.00

0.29* 0.53** 0.18 (0.02) 0.57**

0.32* 0.11 0.18 (0.12) 0.14 (0.11) 0.49** 0.58** 0.42** (0.14) (0.27)

(0.19) (0.08) 0.15 0.34* 0.07 0.05 (0.03) 0.28

(0.03) (0.09) 0.11 0.19 0.08 0.02

(0.02) (0.01) (0.30)* (0.28)* (0.24) (0.06) 0.32* 0.14 0.05 0.18 0.07 0.48** 0.35** 0.63** 0.10 0.45** 0.38** 0.42** 0.02 0.22 0.06 0.09 0.19

(0.09) 0.42** (0.37)** (0.07) 0.36** (0.40)** 0.56** (0.20) 0.23 (0.01) 0.03 0.24

0.39** 0.09 (0.05) 0.03

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


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 employees intentions to stay. Stepwise regression was carried out (Table 3). Table 3 Stepwise Regression (Organization1) Variables Independent Dependent Predictor for variable entered on step no. Intentions to Expectations 1 stay Reality match Length of 2 service Turnover 3 perception Outside career 4 opportunities Constant ** Significant at 0.0000

R square 0.318 0.465 0.523 0.552


0.483 0.381 0.239 (0.184) 0.55

32.11** 29.59** 24.43** 20.29** 0.921

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 15

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

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 employees expectation of the job and 16

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

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 employees 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 & Porters (1986) snowball metaphor may offer an explanation here. The snowball explanation of turnover suggests that patterns of turnover are 17

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.


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. consistent with previous literature cited in the area (Gerhart 1990). This is

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.


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. 16. Age Sex Marital status Length of service (mths.) No. of organizations Designation Company image Pay satisfaction Nature of work Nature of peer group Peer comparison Inside career opportunity Outside career opportunity Expectations reality match Intentions to stay Turnover perception 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

0.04 0.61** 0.08 0.74** 0.02 0.14 0.53** 0.05 (0.12) 0.07 0.24 0.18 0.05 0.03 (0.02) (0.10) 0.14 0.0 0.06 0.08 0.12 0.04 0.06

0.57** (0.09) 0.44* 0.10 0.34 0.25 0.18 (0.05) 0.56** (0.09) 0.58** 0.26 0.00 0.32 0.00 0.22 (0.03)

0.00 0.08 (0.27) (0.28) (0.66)** 0.14 0.02 0.22 (0.38)

0.18 0.15 (0.03) (0.15) 0.24 0.16

0.17 0.33 0.00 0.10 0.26

0.23 0.39* 0.03 0.62

0.60** 0.24 (0.11) 0.05 0.10 0.01 (0.21) 0.19 (0.75)** 0.33 0.06 0.26 (0.04) 0.03 0.28

(0.39) * 0.19 0.30 0.20

(0.23) 0.06 0.00 0.14 0.10 0.30 0.40* 0.29

(0.47)** 0.30 0.30 0.16 (0.12) 0.39*

(0.01) 0.06 0.35 0.09 (0.13) 0.13

0.68** (0.01) 0.19

0.37 0.44* (0.10) (0.29) (0.11) (0.07)

0.47** 0.16 (0.22) 0.08 0.00 (0.08) (0.14) (0.12)

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


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 0.532 (0.379) 0.414 0.275 (2.360)


Intentions to stay

Nature of work

Predictor for variable entered on step no. 1 2 3 4

R square 0.219 0.336 0.480 0.554


9.56** 8.36 9.85* 9.61** (2.000)

Peer Comparison Age Turnover Perceptions Constant ** 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)


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.


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.


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

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