- Executive Summary
This dissertation has been written to determine why the employee turnover in the retail industry is so high. The reason for this is that managers are not following the basic human resource principles such as offering employees competitive wages, opportunities of promotion or challenging work in order to keep employees motivated. As individuals are not motivated at work, they look elsewhere for better paid jobs where they can develop themselves further so they can progress with their careers. The researcher has also recognised that employees want flexibility at work. This is due to many of the participants of the survey having personal priorities that are more important to them such as children or studying while working. There are clear recommendations for employers stating what can be done with the intention of reducing the employee turnover rate. The most vital are that managers find out specifically why employees are leaving, this can be done by using exit interviews. Once this is determined, they will be able to pinpoint the causes for employees leaving them so that they can then make the necessary changes to keep staff attracted to the job. The study has also shown that it is of vast importance for employers to offer more flexibility in the workplace in order to be able to cater for the employees’ requirements.
The estimated basic turnover cost for a retail assistant is £1,425 per individual. (Taylor, S 2002:47) This total only includes the expenses of the employee leaving i.e. the paper work and the recruitment process to replace the individual. The total does not account for overtime being paid out to the individuals’ colleagues or temporary staffs who may be hired to fill the vacancy on a short-term basis. The employee turnover rate for people working in retail is considerably high at 31.3%; retail has the highest employee turnover rate throughout all sectors. (CBI Labour and Absence Survey 2004)
The researcher has been working in sales for almost four years now and it is of great interest to the individual as to why staff turnover is so high and what can be done to prevent it and how the company can benefit from retaining staffs. To the researcher, it seems more practical to retain staffs rather then recruit new employees. If employers invested money into staffs, they may find that this will save a lot of money in recruiting and training new staffs.
The aims of the dissertation are to:
- Identify the cause of high employee turnover rates within the retail sector
- Find out what employees in this sector want from an organisation
- Establish what can be done by employers to retain people in this particular segment of the labour market.
This dissertation seeks to inform businesses of how high employee turnover can be costly and time consuming which is why the well-known idiom can be used to express the basis of the dissertation: “prevention is better then cure.” In the business context, this relates to investing more in staff in order to retain them rather then recruiting, selecting and training new staff. High staff turnovers can influence a businesses performance as it is the employees who are in direct contact with the customers and if they are not satisfied with their jobs, they will not be providing the best service possible to the customers.
This dissertation is concerned with the retail sector as motivation and retention methods vary in different environments. The proposal does not focus on a particular company but on the retail segment as a whole in order to establish the factors, which account for retention within the sector. The study will be based in London; and will focus on individuals who have had experience of working within the retail sector.
- Literature Review
7.1 Definition of Employee Turnover
When employees leave an organisation, several factors need to be considered which all lead to expenses on behalf of the organisation. The organisation will need somebody to cover the workload of the employee that has left the company and the process of recruiting will need to take place in order to fill the vacancy. The higher the employee turnover rate is of a business, the higher the costs will be to replace these workers which is why it is so important for businesses to calculate. To evaluate the labour turnover, the following calculation can be used:
(CIPD 2004) “Crude Wastage Method”
___Number of leavers in a set period_____ x100
Average number employed in the same period
Once labour turnover rates have been identified, it will then be possible for the organisation to recognise the extent that staff turnover can affect them by. Reducing labour turnover will mean that less people are leaving the organisation therefore; there will be less wastage of employees so that money can be saved, as less people will need to be recruited.
However, not all organisations calculate the cost of employee wastage. In fact, over 50% of organisations believe that this information is not relevant and 31% believe that it takes up too much time and is not worth the effort. (Recruitment, retention and turnover Survey, CIPD, 2004:33) If organisations do not calculate the employee turnover rate, it will be difficult for them to distinguish its affect and recognise the benefits of reducing it.
7.2 The Effect of Employee Turnover on Staff
When an individual leaves a job, either a temporary replacement is hired or the workload is split between the individuals’ colleagues until a suitable replacement is found. Hiring temporary staff can be expensive while at the same time, giving the individuals’ colleagues, an increased workload will cause them further stress. If this was to happen consistently, it could be another cause for people leaving the organisation. The graph shows how employee turnover can have a knock on effect because of the impact it has on staffs.
(Employee retention report, Reed, 2003:4)
The employer must ensure that people are replaced as soon as possible to prevent other staffs from being put under additional stress and pressure. However, if employers tried harder to retain staffs then they would have to put less time and resources into replacing the workforce.
7.3 The Effect of Employee Turnover on the Organisation
The impact of employees leaving organisations is that it leads to expenses. Replacing staffs takes up time and money, which are both valuable resources that should be saved wherever possible in order to achieve a more efficiently operated business. When a position is vacant, the amount of paid overtime can rise up to 25%, which accounts for the usual workload that is to be completed by less staffs.
(Employee retention report, Reed, 2003:4)
The graph shows the adverse affects that happen because of employee turnover. Reducing employee turnover will decrease expenses as the company will not have to spend as much money to hire temporary staffs, recruit new staffs or pay so for so much overtime.
7.4 The Importance of Retention from the Recruitment Stage
It is important in an organisation to recruit the right person with the right skills and qualifications for the job.
“People who represent the best ‘match’ in terms of their personality attributes, skills and experience are those who are likely to perform best in the job against a range of criteria. They are also the people who are most likely to remain employed for some time and the least likely to take the first available opportunity to leave.”
(Taylor, S 2002:171)
This is essential as recruiting a person whom is inadequate to do the job would be pointless as they would not be able to complete the tasks of the job to meet the expectations of the company. Therefore, recruiting a person who is not right for the job would be a waste of time and money as the right person for the job will still need to be found for the long-term.
7.5 The Importance of Inductions
Once a suitable candidate is found and hired, they will require preliminary training, which is known as an induction. This is where the employee is introduced to the company, its culture and procedures. This will help to familiarise the employee with the company and the job requirements. As a result, the employees will learn the various procedures of how the company wants to operate.
Inductions are used to welcome the new employee into the organisation and ensure that they feel comfortable in performing their job role successfully.
“Labour turnover is frequently highest amongst those who have recently joined an organisation. The term ‘induction crisis’ is used to describe the critical period when new starters are most likely to leave. A well planned induction course can help to decrease labour turnover by ensuring that new starters settle quickly in their jobs and reach an efficient standard of performance as soon as possible.”
(Kenney, J and Reid, M 1990:241)
The induction is a very significant part of training as if it is not carried out it can lead to the new employee feeling pressured and may lead to feeling that the job difficult to undertake. Poor or even no induction training can be the result of an employee leaving the company within the first few days or weeks of the start date.
7.6 Affects of a Quality Induction Programme
Clarks is a well-established shoemaker company that has developed a valuable induction programme to ensure that its store employees are capable of achieving the company’s targets. Just over 40% of the company’s retail staff has already taken part in the training scheme called Shine. The programme is significantly recognised as it won a UK National Training Award. The scheme is part of a strategic plan to improve performance, productivity and employee retention. New starters receive Shine on the first day off work as on-the-job training. The new trainees are given a workbook which is similar to an employee handbook as it covers safety, the job, pay, hours, rules, selling steps, finding stock and equipment knowledge of products, shoe-care, deliveries, credit cards, cheques and refunds. The programme encourages teamwork and helps the new employees to bond together. It is clear that Clarks has recognised the importance in induction training in order to retain employees which is why the company has devised such a satisfactory training scheme.
(“Shoe shop staffs shine! In training” 2004:91)
7.7 Retention Plan
In order to retain employees, the company must first find out what is causing them to leave. As there can be a wide variety of reasons for people leaving a company, the plan is broken down into key factors:
- Pay and benefits: the company must be able to offer a competitive rate of pay. This is essential as if an employee can perform the same job and be paid more elsewhere then they will most probably leave the company. The company must be able to keep compete with the pay and benefits offered by rival companies. These benefits can consist of; share options, pension schemes, retention bonuses and flexible benefits
- Recruitment and selection: when recruiting employees it is crucial to ensure that the employee’s skills and abilities match what is required of the post in the company. If this is not done then the employee will have problems in carrying out the job role successfully. It is also vital to produce a truthful image of the job as if it is made to sound more glamorous or exciting then it actually is, the employees expectations will not be met therefore they will not be fulfilled in the new job thus causing them to look for a better job elsewhere.
- Training and development: a good induction process is imperative. Employees also need to have the chance to progress through promotion so that they will not feel like they have to be trapped in the same job.
- Job design: the work may be too boring or undemanding therefore the position may need redesigning or a new approach such as teamwork. This makes it easier for job-share therefore employees will be able to work when it suits them better as the job will be flexible.
- Management: ensure that managers and supervisors have the skills and ability to manage effectively and fairly.
(Bevan, S. 1997)
These are the key features, which the organisation has the control to change. The company has no control over circumstances such as people wanting to move to a different location or ill health therefore these factors cannot be influenced in order to retain employees.
With the intention of retaining employees, keeping individuals motivated is another way to prevent them from leaving the organisation and to ensure that the employer is getting the best from each individual.
“Boredom and frustration at work is often the result of an employee’s lack of involvement with the company’s goals and feelings that their ideas are not wanted or listened to. Companies that involve their employees in achieving company goals are able to motivate employees.”
(Chapman, M 1997)
For individuals to fulfil their full potential this must be motivated thus The harder an employee works, the more / bigger reward(s) they should gain which will keep them motivated to continue working hard. Motivated staffs lead to a more productive workplace therefore; it will be more profitable.
(Maslow’s Hierarchy 1954) states that people first needed to fulfil there basic needs before they can progress to achieve self-actualisation. This is best shown in a pyramid, each person first starts from the bottom and through work, the individual fulfil each stage and works his or her way up.
(Maslow’s Hierarchy of Needs 1954)
- Physiological needs: food, water, air, rest
- Safety needs: security, job security
- Social needs: affection, love and friendship
- Esteem: recognition, achievement and status
- Self-actualisation: personal growth and self-fulfilment.
The hierarchy of needs shows that:
- Employees need money to pay for necessities such as food, rent etc. This is the basis of satisfaction
- Employees need to know that their job is safe so that they do not have to worry about looking for a new job.
- It is best to work in teams to encourage socialising between employees as individuals can learn from one another and share knowledge.
- Employees will be motivated to work harder if they know there is a possibility of promotion.
- This is the hardest to achieve, as most people want to be the boss. This will take a lot of time and very hard work to achieve.
Maslow’s theory explains how individuals have needs and by employers meeting these needs, they are able to motivate them to keep on progressing. It is vital for the needs of individuals to be met as if they are not it will lead to individuals feeling unfulfilled thus leading them to look elsewhere for another job.
(Herzberg’s Two Factor Theory 1968) This consists of satisfiers and hygiene factors. A satisfier is what motivates an employee, e.g. achievement, recognition, responsibility, advancement, personal growth and the actual work itself. Hygiene factors are elements that do not motivate people e.g. pay and conditions, status in the organisation, job security and benefits. The theory expresses that employees will be motivated by good wages, promotion and other benefits etc. Employees are not motivated by poor wages, poor working conditions, no job security etc. Ultimately, employers need to offer staff satisfiers to motivate them to work hard. As long as individuals are happy and fulfilled in their jobs and feel that they are progressing, they will continue to work hard and stay within the organisation.
7.9 How to find out why Employees are Leaving
The organisation needs to find out why its staffs are leaving so they can then devise a plan to try to prevent this from reoccurring in the future. The methods of finding out why employees are leaving can consist of:
- Exit interviews: these interviews are normally held soon after the employee has resigned. The interviewer can take the opportunity to find out why the employee is leaving, the conditions under which they would have stayed and improvements the company can make in the future.
- Leaver questionnaires: these are either completed during the interview or sent to people once they have left the company and normally consist of closed questions to make it easier to analyse. (Leavers questionnaire are also known as Attitude Surveys)
“The exit interview is an increasingly common procedure when an employee leaves an organisation. Ostensibly these are conducted to gain information about the reasons for the employee’s departure, information which can then be used to improve human resource management.”
(Furnham, A 2001)
Once the reasons for employees leaving has been established, they can be put into separate categories so the organisation can see what the most popular reasons are for people leaving. They can then go on to make relevant changes in order to help retain workers.
7.10 Conclusion of literature
Overall, it seems that in order for the retail industry to grow, organisations must improve their retention methods to ensure they have enough employees to cope with the increase in productivity. It is the sales assistants that have the majority of contact with customers which is why it is so vital to ensure that they receive sufficient training in order to serve customers effectively and efficiently while at the same time providing a service to encourage them to come back.
A key way to reduce employee turnover is to keep staffs motivated, so the industry will be investigated to find out how this is done and how successful current methods are. The employee turnover rate is so high within the industry so there must be something that is going wrong to cause such a high turnover rate.
Exit interviews seem to be the most crucial method of finding out why people are leaving the industry. It is vital to find out why people are leaving so that action can be taken to prevent staffs to from leaving for the same reasons in the future. Therefore, it will be important to find out if retail organisations carry out exit interviews; and if they do not, then why not?
There are varieties of methods that can be put into practice to assist the researcher to seek out relevant information in order to find out the answer to the research question. Examples of such methods are; observations, case studies, interviews, questionnaires and focus groups. If would be difficult to make observations to find out why people are leaving their retail jobs as people resigning can happen randomly so its not guaranteed to happen when the researcher has scheduled to make an observation. Case studies will not be used as the dissertation is based on the retail industry as a whole, not on specific shops or department stores. Interviews will not be used either as although they lead to a large amount of information being uncovered, they take up quite a lot of time of so the amount of people being interviewed will be limited. A broad selection of peoples opinions need to be taken into consideration therefore, the researcher has chosen to use focus groups and questionnaires in order to obtain both qualitative and quantitative information.
As the study is based on the whole retail industry, a wide variety of people who have worked or still work in retail need to be targeted to find out the main causes of employee turnover within the sector. The study will be based on primary research, which will be put into practise to find out peoples viewpoints of the topic.
8.2 Primary Research
It will be ideal to use questionnaires to find out information, as it seems to be the most efficient way to use a large sample so a wide amount of information can be collected. Another advantage of using questionnaires is that they are not very time-consuming therefore; more people are likely to respond to them. In addition, they are relatively cheap to produce so the researcher will not need to worry too much about the costs. The questionnaires will be anonymous so people will not feel obliged to answer in a specific manner; hence, they will be able to express their own opinions without feeling obligated. An additional feature of a questionnaire is that people can randomly be asked to fill one out as long as they have had a job in retail. This means that no appointments need to be arranged and that the survey can be conducted at any time or place.
However, there are some disadvantages with questionnaires such as the structure of the questionnaire needs to be simple and easy to understand so that people do not get confused. This could ruin the results of the questionnaire as if people misunderstand the questions or the layout they will not answer or complete it properly. If people have literacy problems, it may make it difficult for them to complete the survey accurately. Some people may leave out some of the questions, which could cause a problem when recording the data. This could also lead to the wrong conclusions being drawn to as if people skip questions the results will differ. Consequently, this will need to be taken into consideration when recording the results of the survey. Another possible problem is that the response rate is not guaranteed to be one hundred per cent so some questionnaires maybe wasted. The questionnaire will need to be short and straight to the point, if there are too many long questions it may discourage people from completing it as they may feel that it will take up too much of their time. One more problem with questionnaires is that they are limited so people will only be able to give feedback on what they have been asked so a different perspective may be overlooked.
With the intention of preventing any issues being overlooked, two focus groups will be instigated before the questionnaires are created. This will be done with the intention to stimulate the topic and look at it from a variety of angles. The focus groups will allow for the upward and downwards approach to be put into use, as the information gathered from the focus groups will then be used to develop the questionnaire. One focus group will be made up of university students whom have worked or still work in retail; therefore, the viewpoint of part-time retail workers whom have other commitments can be established. The other focus group will consist of full time retail workers so that their perception of the issues raised can be distinguished. These group members may have responsibilities such as children, another job, a mortgage etc that is why the researcher feels it is relevant to use two focus groups. Each focus group will have between four to six group members. The focus group will be started by introducing everybody to each other, followed by a summary of the topic. A Dictaphone will be used to record the discussion so that all the information can be recorded so that nothing is left out. The following questions have been prepared to ensure that the discussion is kept on track;
Q1) Where does everybody work? / Where has everybody worked?
Q2) How long have you all been at these jobs?
Q3) Do/did you enjoy it?
Q4) What do you like best about it?
Q5) What do you hate about it?
Q6) Do you feel that your organisation seems to constantly be recruiting new people?
Q7) Do you feel that this affects you? i.e. do you have to help train them? Are you often left with a bigger workload? How does this make you feel?
Q8) When you have left a job did u receive and exit interview?
Q9) Do you think this procedure would help the organisation to find out why they are
Q10) If you were the manager, what would you do to retain staffs?
A copy of the minutes of the meeting is available in appendix A.
The problems associated with focus groups are that some of the members may feel uncomfortable, as they do not know each other so they may keep their opinions to themselves. However, the researcher will introduce all the members to each other and start the conversation off in a relaxed way to help everyone feel more at ease. Another problem is that it may be difficult to get all the members together at the same time as some people maybe working or have other responsibilities like studying or children.
8.3 Pilot Study
When the focus groups have been carried out, the information will be used as the foundation for the first draft questionnaire. This will then be tested in order to get feedback on it for improvements. This process will continue until all feedback has been taken into account and all the necessary changes have been made. When this is all completed, the questionnaire will go through a pilot study of about ten people to ensure that all the questions run smoothly and are not misunderstood. The final version of the questionnaire is available in appendix B.
8.4 The Survey
After the required changes if any have been edited, the survey will be carried out at Charing Cross train station on a sample of one hundred people whom work or have worked in retail as a sales assistant. The people completing the survey must meet the specific criteria, which are that everybody who takes part must work or have worked in retail. The location was chosen as it is very busy and it should be easy to find a variety of people that meet the criteria that could spare five to ten minutes to fill out the questionnaire while waiting for their train.
8.5 Analysis of Data
Once the survey has been carried out, the data gathered would be entered into an Excel spreadsheet where the data will be put together to analyse it and to find out what are the main reasons for employee turnover within the industry and what can be done by employers to reduce the amount of employee wastage. The data will then be evaluated in order to identify if there are any trends or relationships that can be established. This information will then be examined to find out what the industry’s employees require so that employee turnover can be reduced.
It was too difficult to get a group of full time workers from different retail segments together at the same time to hold the second focus group. Some people refused to be part of it and others who said they would participate were not able to agree to a specific time where they would all be free. Therefore, only one focus group of university students could be conducted.
The survey will be carried out on one hundred people whom have worked in the retail industry. In addition, the survey will be based in central London, if the survey was carried out around the whole of England, the results could differ.
8.7 Secondary research
The dissertation focuses on primary research carried out by the researcher however, secondary data in the form of academic books, reports, articles and CIPD studies have been used to look at the existing trends in the labour market. Information has been gathered from various human resource textbooks to look at employees’ behaviours more closely and to define what factors motivate individuals within the working environment. The Internet was used to find out reliable facts and statistics about the retail industry in order to examine it closer and determine what has already been established so the researcher could identify if these trends were also shown in their research.
9. Analysis and Findings
From the information found out through the focus group, the researcher decided to use open-ended questions in the questionnaire as a means to find out what people really thought. People’s opinions have then been categorised so that relationships can be identified more easily. One hundred questionnaires were handed out and fifty-four were handed back fully completed thus the response rate for the survey is 54%.
The results from the survey show that out of the fifty-four respondents, only 22% were male.
In 2003, the retail workforce was made up of 63% females and only 37% males. (Learning and skills, research report, 2004:8) According to the survey, just over a third of the industry was made up of men meaning that women dominated the workforce. These results are not biased, as the researchers sample resembles the trends in the industry, as just over three-quarters of the sample are female. Therefore, although the gender is not evenly split, it will not affect the findings of the survey.
The results of the survey also showed that the majority (fifty per cent) of the sample fell between the twenty-one to thirty age-range. However, the sample did consist of a variety of ages as shown in the graph below:
This graph clearly shows that women dominate the sample and that no men over the age of forty-one took part in the survey. In fact, only seven per cent of the sample are over the age of forty-one. The under twenty category is the only age range which shows there is an even gender split; nine per cent are male and eleven per cent are female. Overall, the survey was completed by respondents with a variety of ages to ensure that different generations of workers could give their viewpoints on employee turnover within the sector.
The majority of participants have no children under the age of fourteen:
only seventeen per cent have children; forty-four per cent are male and fifty-six per cent are female. Out of these candidates, fifty-six per cent are married, twenty-two per cent are single and twenty-two per cent are divorced. Forty-four per cent have left the industry due to having children while twenty-two per cent are working full time and thirty-four per cent are working part-time. The thirty-four per cent that are working part-time consist of the individual that are single or divorced. These candidates have to work part-time as they are single parents and they have their children to care for.
9.3 The length of time people have worked in the industry and the amount of different retail jobs they have experienced
Almost a third of the participants have worked in retail for between three to five years and only four per cent of participants have worked in the industry for ten years or more. This is a very small amount considering that the most amounts of jobs undertaken in retail by a participant were twelve. This was by only one person who worked in the industry for between five to seven years. Seventy-six per cent of respondents have had between one to four retail jobs which seems to be fairly high considering the fact that over a quarter have worked in retail for a year or less.
Out of the whole sample of respondents, only eighteen per cent are still in the retail industry, which means that just over two thirds of the sample have actually left the sector and changed careers.
9.4 The reasons for employee turnover
Seven per cent of the survey is still in their first retail job, of which, eighty-five per cent have only been in the first job for one year or less. These candidates are all under twenty, therefore the reason they may still be in their first retail job is that they are so young and are just coming to terms with working life. The research has shown that older candidates are likely to have had more jobs in retail as
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