Factors Contributing to Turnover Intention

Employee retention is the most critical issue faced by corporate leaders as result of the shortage of skilled labor, economic growth and employee turnover. High turnover rates adversely affect an organization in other ways such as loss of institutional memory, diversion of management focus, diversion of peers to train new hires, affect the organization’s reputation and poor morale among the remaining employees. Therefore it is important for Human Resource practitioner in an organization to curb these phenomena by minimizing such problems by implementing the strategic employee retention management in their organization. Many employers who are from the small firms have lack of exposure of the strategic employee retention management. The study is conducted to examine the factors that affecting warehouse (logistic) employee turnover intention in SGA Techcordia (M) Sdn Bhd. The findings will help to identify which factors that have strong effect over the turnover intention and its relationship with job satisfaction among the warehouse (logistic) employees. The study is important because it will help to effectively solve the current problems faced by the organization, enables the Human Resource Manager to focus planning on the strategic employee retention management.

1.0INTRODUCTION

1. Background of study

One of the most critical issues in employment faced by many employers is employee retention and employee turnover. Even though during the global economic crisis, in order to maintain the organization stability, some employers took the exercise to downsize their employment, but some employers are struggling to retain their human talent. This is also shown by recent studies conducted by many researchers that employee turnover and retention are crucial issues in many organizations. In today’s workplace, employers are not only having a hard time attracting employees, but are also having a difficult time keeping them (Harkins, 1998). Based on a study by Jardine, 2001, employees leave for a variety reasons, including poor supervision, unchallenging positions, limited advancement opportunities, lack of recognition, limited control over work, perceived pay inequity, and the perception of more favorable opportunities in other companies. Abassi, 2000, stated that high employee turnover is one of the greatest cause of declining productivity and decreased morale in corporate America. Meanwhile Secretan, 2001, added that the morale decreases, recruiting and training costs increase and an organization can find itself in a vicious cycle.

An interview conducted with the management of Techcordia (M) Sdn Bhd and it was found that the company had the difficulties in retaining their employees for being loyal to the company. Staff turnover in the company was high that the company has to bear the cost of recruitment and placement for the employee who had resigned from the company. They also have to train the new employee and such necessary planning is in need. This resulted to the increased in recruitment cost and other complication such as decreased in employee morale, declining productivity of the company. Furthermore there were no research done to find out the reason for the above situation, therefore this study will examine the factors that contribute to the high employee turnover intention in the company and its relationship with job satisfaction and employee turnover intention.

2. Problem Statement

The issue of employee turnover and the difficulties faced by SGA Techcordia (M) Sdn Bhd in employee retention gives greater impact towards the company recruitment and training cost, the declining in productivity, decrease efficiency towards customer services and affect the other employees’ morale. The management of SGA Techcordia (M) Sdn Bhd look into this matter seriously and willing to provides valuable inputs for the purpose of the study. It was reported that the cost of recruitment was RM150,000 for the year ended 2009, the cost incurs the cost of hiring recruitment agencies and vast recruitment advertisement methods, inductions programs and training of new employees. Research by Des & Shaw (2001) stated that cost of learning, reduced morale, pressure on the existing employees and the loss of social capital are indirect cost incurred by an organization due to high turnover.

Table 1 shows the employee turnover rate for the year 2007 – 2009 of SGA Techcordia (M) Sdn. Bhd. Table 2 shows the last quarter (October – December) turnover rate for the year 2009. The table shows an increasing percentage in the employee turnover rate. The statistic shows enough the importance of this research to be carried out in order to examine the factors that contribute to the employee turnover intention in the company and its relationship with job satisfaction and employee turnover intention. With this study will provides the managerial implications of getting closer view and depth understanding of why the employee could not remain their employment with the company for a longer period. From the findings and recommendations of the study will help the management to understand their employees’ needs and to know the importance of implementing strategic retention management in their organization. Table 1

| |2007 |2008 |2009** | |Number of Employees as end of year |149 |154 |176 | |Number of voluntary separations |15 |18 |23 | |Voluntary Turnover Rate |10.1% |11.7% |13.7% | |Number of total separations |15 |19 |23 | |Total Turnover Rate |10.1% |12.3% |13.7% |

*Sources: Employee Turnover Report 2007 – 2009 SGA Techcordia (M) Sdn Bhd (Human Resource Department) **as at 31st December 2009

Table 2
| |October |November |December | |Number of Employees as end of year |223 |189 |176 | |Number of voluntary separations |43 |17 |23 | |Voluntary Turnover Rate |19.3% |9.0% |13.7% | |Number of total separations |43 |17 |23 | |Total Turnover Rate |19.3% |9.0% |13.7% |

*Sources: Employee Monthly Turnover Report (October – December) 2009 SGA Techcordia (M) Sdn Bhd (Human Resource Department)

3. Research Objectives

The objectives of this study are as following:

i. To examine the factors that contributes to the employee turnover intention in SGA Techcordia (M) Sdn. Bhd.

ii. To examine whether there is a relationship between the factors identified with job satisfaction and employee turnover intention in SGA Techcordia (M) Sdn Bhd.

iii. To identify the most significant factors that contributes to employee turnover intention.

iv. To propose and give recommendations to the management of SGA Techcordia (M) Sdn Bhd in minimizing its employee turnover.

1.4Scope of study

The study will be conducted on all the employees of SGA Techcordia (M) Sdn. Bhd. that will cover all level of employees from the general workers, production employees, clerical staff, supervisors, executives and the managers. Due to time constraint, the study will examine only the four areas of human resource practices as describe in Bergiel et. al (2009) studies which were (1) Compensation, 2) Supervisor’s support, 3) Growth Opportunities, and 4) Training and Development Opportunities, employees’ job satisfaction and its relationship with employees turnover intention, the variables identified to be the potential sources of employee turnover intention for this research was also adapted from the previous research which have been used quite frequently in turnover literature and have demonstrated an influence on employees’ intention to quit (Shaw et al.,1998).

Though there are a number of factors that can be posited to affect employee turnover, the four areas were selected not with the intention to provide a comprehensive analysis but it is to be examined its relationship and to find which factors gave stronger effect towards job satisfaction and employee turnover intention. Studies by Bergiel et. al (2009) used the four areas of human resource practice as above to be empirically tested with job embeddedness as a mediator and its relationship with intention to quit. While in this study job satisfaction will be the mediator (moderating variables) to employees’ turnover intention.

1.5Significance of the study

The study will provide an important contribution to the company’s Human Resource Strategic Planning for employee retention management in examining the factors that are contribute to the warehouse (logistic) employee turnover intention in SGA Techcordia (M) Sdn Bhd. By understanding the causes to employee turnover intention and its relationship with employee’s job satisfaction and turnover intention will enable the company to redesign the Human Resource Manpower Planning, implement the strategic employee retention management and to develop suitable training and development programs for the employees. It also helps the company to plan the needs to create a better working environment for the employees so that it may creates the employees to feel that they are important to the organization and feels they belongs to the company that they will stay and be loyal with the company.

1. Literature Review

2.1Introduction

Nowadays many organizations put a lot of investment to develop their employees in terms of induction and training program, employees’ development, and retaining the employees’ talent in their organization. In this effort the HR managers must ensure that they are at all costs to minimize the employee’s turnover in their organization. Many studies have been conducted on this topic and most of them are focusing on the causes of employee turnover and only a few research done on examining the factors that contribute to the employee turnover intention, the effects and the strategies that can be implemented by managers to ensure that they are able to retain their employees in the organization in order to ensure that the company would be able to continue gaining their organizational competitiveness. Globalization gives more emphasize towards competition and gaining competitive advantage, organizations continue to develop more tangible products and efficient services that is supported by the strategies that was created by the employees. Therefore our employees are the important and invaluable assets in our organization and they are valued extremely crucial to the organization.

Studies by Meaghan et al. (2002) stated that these employees are extremely crucial to the organization since their value to the organization is essentially intangible and not easily replicated. In a study by Abbasi et al. (2000) stressed out that managers must recognize that employees as major contributors to the efficient achievement of the organization’s success. Managers must have to control employee turnover and try to retain them for the success of the organization to gain their competitiveness. According to Min (2007) stated that a research dealing with warehouse employee turnover or recruitment and retention strategies is scarce. Studies by Griffeth et al. (2000) found that the causes of turnover are including job satisfaction, organizational commitment, comparison of alternatives and intention to quit. Meanwhile in a study by Mobley et al. (1979) in his earlier research found that age, tenure, overall satisfaction, job content, intentions to remain on the job, and commitment were all negatively related to turnover which the higher the variable, the lower the turnover.

Min (2007) in his study on examining the sources of warehouse employee turnover had identified the key variables that affect warehouse employee turnover. According to him job security turned out to be one of the most important factors for recruiting and retaining warehouse employees, whereas monetary incentives have little or nothing to do with warehouse employee turnover. Base on this statement the situation in SGA Techcordia (M) Sdn Bhd is totally different from the later findings but these factors will also part of the questions to be examined. While Autry and Daugherty (2003) examined the relationship between person-organization fit, job satisfaction, coping behavior, and their impact on warehouse employee turnover. In their studies, they found that person-organization fit have significant effect over employee turnover. This is because the employees’ expectation towards the company and their supervisor characteristics are not match that they are likely to leave the organization. This statement also gives the idea to the research question for this study. While Bergiel et.al (2009) investigates job embeddedness as the mediation effect on the relationship between employees’ intentions to leave and the four areas of human resource practices which were 1) Compensation; 2) Supervisor support; 3) Growth Opportunity; and 4) Training.

Job Satisfaction

Job satisfaction is defined as how people feel about their jobs and different aspect of their jobs (Spector, 1997). The relationship between job satisfaction and turnover has been long established (Spector, 1997). Previous studies also have reported a consistent and negative relation between job satisfaction and turnover intention (Arnold and Feldman, 1982; Bluedorn, 1982; Mobley, 1982; and Price 1977) as dissatisfied employees are more likely to leave the organization than the satisfied employees. A study conducted by Mobley et al. (1979) found that overall job satisfaction is negatively linked to turnover and it explained little on the variability in turnover. This statement is also supported by Griffeth et al. (2000) that the study found that overall job satisfaction is modestly predicted the turnover. His analysis also showed that organizational commitment was a better predictor of turnover than overall job satisfaction. While Boxall et al. (2003) found that the main reason employees leave their employer was for more interesting work offered elsewhere and this showing that the effect of job satisfaction on turnover is less than that of organizational commitment.

While Kinicki et al. (2002) reported in his meta-analysis on job satisfaction that no other dependent variables studied in industrial organizational psychology more than job satisfaction. According to Kinicki et al. (2002), job satisfaction has been repeatedly found to correlate with organizational commitment and correlate negatively with the intent of individuals to leave the organization or profession (Chelladurai and Ogasawara, 2003; Hom and Griffeth, 1995; Meyer and Allen, 1997). Chelladurai, 1999 noted that one critical facet of job satisfaction which is frequently measured on job satisfaction scales such as the Job Descriptive Index (JDI) or Job Diagnostic Survey is satisfaction with pay. In a study by Ryan and Sagas (2009) found that satisfaction with pay was significant in predicting occupational turnover intentions. As we know that satisfied employees always clearly knows what is expected from him, therefore a continuous communication between the management and the employees is important that an employees deliverables at work must be communicated at him clearly and thoroughly.

Turnover Intention

Turnover intention can be defined as the intention of employees to quit their organization. Many empirical research models of turnover conducted by Badawy, (1973); Bluedorn (1982); Dunham (1976); Joreskog and Sorbom (1994); and others suggested that behavioral intentions constitute the most immediate determinant of actual behavior. Bluedorn (1982) have recommended using intent to leave attitudes rather than actual staying or leaving because it is less expensive to collect data rather than the actual turnover. Steel and Ovalies’s (1984) meta-analysis studies shows a strong relationship between turnover intentions and turnover. It also demonstrates turnover intention as a better predictor to actual turnover.

Compensation

According to previous research, compensation is found to be related with employee turnover. Appelbaum et al. (2000) stated that both direct and indirect compensation is to enhance employees’ motivation and attachment to the organization. Hom and Griffeth (1995) and Shaw et al. (1994) studies showed a negative relationship between high relative pay and/or pay satisfaction, and employee turnover. Trevor et al. (1997) found that strong salary growth significantly reduces turnover for high performing employees. Bennett et al. (1993) wrote researchers also have demonstrated a relationship between indirect compensation (fringe benefits) and employee turnover.

But according to Min (2007) conclusions drawn from some prior studies regarding the effect of pay on turnover are inconsistent or conflict with each other. Speh et al. (1999) was one of the first to identify motivational and reward programs as most effective for warehouse employee retention but they did not investigate which factors attributed to employee turnover. In Min (2007) studies indicate common belief that competitive pay and favorable fringe benefits for warehouse employees will increase their job satisfaction and thus reduce employee turnover, such monetary incentives were not the primary cause of employee turnover. His studies found that job security turned out to be the most effective motivator for recruiting and retaining warehouse employees. He also added that warehouse employees seem to favor family-friendly working environments that are conducive. However contrary with this study, compensation will be the factor variables to be examined its relationship with job satisfaction and employee turnover intention with the supports from previous studies, compensation have negative relationship with employee turnover.

Supervisor support

There are many reasons why employees tent to quit from their jobs. Firth et al. (2004) found that the experience of job related stress (job stress), the range factors that lead to job related stress (stressors), lack of commitment in the organization; and job dissatisfaction make employees to resign from the company. Studies by Tor et al. (1997) found that insufficient information on how to perform the job adequately, unclear expectations of peers and supervisors, ambiguity of performance evaluation methods, extensive job pressures, and lack of consensus on job functions or duties may cause employees to feel less involved and less satisfied with their jobs and careers, less committed to their organizations, and eventually display a propensity to leave the organization. Lack of clear job responsibilities and role as employees by the management or their direct supervisors would increase the degree of employee turnover. Min (2007) stated that larger warehouse does not have closer personal interaction between the management and the employee and among the employee themselves where they can develop more good working relationships and mutual trusts among the employees. Min (2007) also suggested that the best strategy to cope with warehouse employee turnover is to increase the chances active involvement and enhance the community environment among the employees and place a greater emphasis on employee-management relationship.

Birgiel et. al. (2009) stated that by providing guidelines, suggestions, assistance, trust in and praise for their subordinates, supervisors can help employees better fit with their jobs and the organization, as well as build better links to colleagues. Furthermore previous studies (Hatton and Emerson, 1998; Stinglhamber and Vandenberghe, 2003) also found that supervisor support related directly and indirectly to voluntary turnover. Autry and Daugherty (2003) in their findings suggested that person-organization fit could significantly affect employee turnover, this is because employees whose expectation about their company and supervisor characteristics are unmet are more likely to leave their companies.

Growth Opportunity

Career advancement in an organization is part of the factors in employee retention strategies. Organization that allow for career advancement and development are mostly preferred. Idson and Feaster (1990) reported that only large organizations which are financially stable can provide their employees with better chances for advancement and higher wages and hence ensure organizational attachment. According to Birgiel et al. (2009) growth opportunities implies that employees would have better positions, better salaries, or better work environments. Moreover the author also stressed out that growth opportunity means employees can have chance to develop and demonstrate their potential. Their studies found that growth opportunity is negatively related to turnover. Mobley et al. (1979) indicated that “job content factors,” “promotion opportunities,” “centrality of work value, “peer group interaction’ show significant relationship associated with employee turnover intention.

Training

Based on previous research showed that training helps organizations to retain their employees (Hequet, 1993), but training also may provide opportunities for employees to quit their current jobs (Lynch. 1991). Shaw et. al. (1998) stated that by providing employees with sufficient training opportunities is an investment strategy for job stability. Indirectly such actions have fulfilled the informal contract between the employees and the employer in the sense to deepen employees attached with the organization. Studies by Bergiel et. al. (2009) found that training is directly related to employees’ intention to quit.

The effects of turnover and Turnover Intention

Employee turnover gives greater impact towards an organization performance, effectiveness and adversely affect the organization in many ways such as loss of human talent which regard as key capital for an organization, affect the organization’s reputation, diversion of management focus, diversion of peers to train new hires, poor morale among the remaining employee and towards the customers relation and expectation. Kemel et al. (2002) stated that turnover gives an effect on customer service and satisfaction. Such affect was due to loss of productivity as those employees who have some capabilities and skills leave the organization. Catherine (2002) also stressed out in her research that turnover include other costs, such as lost of productivity, lost of sales, and management’s time. Mitchell et al. (2001) stated that individuals gives several reasons for leaving an organization and the most common reasons were dissatisfaction with one’s job, new job offers, life changes or desire to pursue different career or higher education. Their studies and other researchers have examined the antecedents and consequences of turnover within the workplace because the impact turnover has on an organization. For an organization, employee exits disrupt the effectiveness of an organization as those employees not only leave with their valuable assets such as experience and expertise. Not only that, high employee turnover will also gives bad reputation to the company.

2.2Theoretical Framework

To guide the research, a theoretical framework was developed to describe the relationship between the four areas of human resource practices which were 1) Compensation –both direct and indirect compensation, 2) Supervisor’s support, 3) Growth Opportunities, and 4) Training, and job satisfaction as the mediator with turnover intention. The relationships between the various factors are displayed in Figure 1. This framework use job satisfaction as the mediating variables and contrary to framework construct by Bergiel et al (2009) which use job embeddedness as the mediating variables to be examined its relationship with employee turnover intention.

The employees’ compensation, supervisor support, growth opportunity and training will represent as independent variables of the framework, while job satisfaction is the moderating variables and the dependant variable is employee turnover intention.

Figure1: Theoretical Framework

Independent variables Moderating variable Dependent variable

From the diagram above shows that the dependent variable of employee turnover intention is influenced by the independent variables of four areas of human resource practices – Compensation, Supervisor Support, Growth Opportunities, and Training. While the Job Satisfaction explained as mediating variables that result to employee turnover intention. In this study Job satisfaction will have a strong contingent effect on the independent variable-dependent variable relationship. In other words, those employees who are not satisfied with their job would be likely to leave the organization due to not satisfying with the compensation offered by the organization, lack of supervisor support, insufficient growth opportunities programs and training.

2. Research Methodology

The study uses questionnaires which were distributed to all the employees of SGA Techcordia (M) Sdn Bhd. The questionnaire comprised of Section A with five questions on demographics such as questions on respondent’s age, gender, length of employment, range of salary, level of position and level of education. While in Section B, C, D and E were questions on employees’ compensation- both direct and indirect benefits, Supervisor support, growth opportunities and training received by the employees respectively with the use of interval scales. Section F consist of 11 questions on Job Satisfactions and Section G will be on Turnover Intention questions. The questionnaire can be found in Appendix A.

1. Sample and Procedures

For the purpose of the study 176 employees who were with the company from the year 2008 and 2009 will constitute the samples. Questionnaires were distributed to each of the employees.

3.2Sources of Data

3.2.1 Primary Data

The population is defined as all the employees working in SGA Techcordia (M) Sdn Bhd. A total of 176 questionnaires will be distributed to the Human Resource manager of the company with instructions that the questionnaires should be allocated to all employees from various level according to their departments including the managerial levels, executives and officers, supervisors, clerical staffs, production and general workers.

3.2.2 Secondary Data

Information was also gathered from, internet search, articles, journals, books, the organization’s reports on employee’s turnover and company’s profile. These sources are very much relevant to this research topic as it provides the information on theories, statistical figures and other research findings to support this study. It also provides an insight into the procedures, findings and recommendations of the previous research which is very much related to the topic of this study. An interview were also conducted with the managers of the company to understand the issues faced by the company relating to the employees behaviors and performance, training programs provided by the company and other information that is related to the topic.

3.3Data Collection

The questionnaire will be allocated to all the employees to complete within the time given and to be submitted to the Human Resource Manager. The HR manager will ensure that all the employees have submitted the questionnaire. An interview will be conducted during office hours at the company’s meeting room with 10 selected employees at their convenient time. The purpose of this interview is to strengthen the findings of this study. The interview questions were structured based from the questionnaire.

3.4Data Analysis

Once the data are collected, the information will be analyzed with the appropriate data analytic techniques by using SPSS software Version 18.0 for windows. The analyzed data will be used to examine the four factors of Human Resource practices and its relationship with job satisfaction and employee turnover intention. In this research will use the correlation analysis to identify the relationship that have an influence between one variable to another and multiple regression analysis to predict the variance in the dependent variable by regressing the independent variables against it (Sekaran, 2003).

4.0Limitation of the study

Due to time constraints of the semester, the study was limited to encounter more on other factors that can be discovered further. Therefore the study will examine only the four areas in Human Resource practice and its relationship with employees’ job satisfaction and employees’ turnover intention.

5.0Schedule of Research Project

The schedule in Appendix B shows the estimated time and activities for the purpose of this research.

Report

A written report will be submitted on the seventeenth week of the semester which is in the first week of May 2010.

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