Employee Turnover Can Mean Poor Organizational Performance

Topic(s): performance, turnover
Publication: Journal of Applied Psychology (2013)
Article: Turnover rates and organizational performance: A meta-analysis
Authors: T. Park, J.D. Shaw
Reviewed by: Scott Charles Sitrin

The relationship between turnover rates and organizational performance has been examined by various disciplines, such as industrial and organizational psychology, human resource management, organizational development, and organizational management. Conveniently, a study (Park & Shaw, 2013) has statistically combined all of the research on this relationship, a process known as a meta-analysis.

DEFINING TURNOVER AND ORGANIZATIONAL PERFORMANCE

In this study, turnover can mean one of four things: voluntary turnover, which refers to employees choosing to leave the company; involuntary turnover, which refers to employees being forced to leave the company; reduction in force, which refers to a company’s decision to downsize its workforce due to the overall economy; and total turnover, which is the sum of involuntary turnover, voluntary turnover, and reduction in force. Simply put, voluntary turnover is quitting, involuntary turnover is being fired, reduction in force is losing your job because fewer people are buying the product that your company is selling, and total turnover is the sum total of these types of turnover.

There were many measures used to measure organizational performance, including financial performance, stock price, sales growth, revenue per employee, profit, customer satisfaction, operating expenses per employee, number of sales, and personnel costs over value added. These indicators were contingent upon the organization’s industry. For example, the organizational performance indicator for a call center could be customer satisfaction while the performance indicator for a retail company could be number of sales.

RESULTS AND ORGANIZATIONAL IMPLICATIONS

The results of the study indicated that turnover rates and organizational performance were negatively correlated. In other words, as turnover rates increased, organizational performance decreased. This finding provides incentive for organizations to find ways to limit employee turnover or the conditions that lead to it.

 

Park, T., & Shaw, J. D. (2013). Turnover rates and organizational performance: A meta-analysis. Journal of Applied Psychology, 98(2), 268-309. doi:10.1037/a0030723