Job Satisfaction and Employee Turnover

1. INTRODUCTION:

The question of employee turnover has come to gain greater attention especially in this new century. Organizations all over the world, in various industries, have faced this problem at some stage of their evolution. Companies now take a deep interest in their employee turnover rate because it is a costly part of doing business. In order for an organization to be successful they must continuously ensure the satisfaction of their employees. Volatile economic conditions, highly competitive recruitment practices and a diminishing pool of skilled candidates create further problems in the process of retention (Capelli, 2000; Saratoga Institute, 1997).

In 1980, there were nineteen universities and two degree awarding institutes in Pakistan. Today, there are ninety universities and twenty seven degree awarding institutions in the country. This phenomenal change has been caused due to regulatory and statutory changes at the Higher Education Commission (HEC) level. Along with the increase in number there has been a major change in the nature of the business of education. The education has been commercialized to an extent. A number of education parameters have now been related to the revenue. The single most important factor in the increase in the institutions and the universities is due to the increase in the number of projected students.

This paradigm shift has resulted in high turnover among teachers as many opportunities have become available to them. Not only that these changes have influenced how faculty performs their jobs and their perceptions about empowerment, organizational commitment and job satisfaction. They now, can switch jobs and have the choice to select or reject institutions on the basis of factors they consider most important to their job.

Departments of Business and Management (referred to as business schools) are particularly affected by the problem of turnover as there is growing pressure on business schools to produce graduates in order to meet the needs of the country’s dynamically changing business environment. Also, there is limited skilled business faculty available. Business schools, therefore, have no choice but to accommodate these changes and address the issue of turnover. This study will, thus, explore the nature of turnover intentions, to develop a better understanding of the underlying issues of turnover and serve as a guide for university administrators to address this problem.

Retention of employees has been termed as one of the most significant challenges of the 21st century (Drucker, 1999). Studies have differentiated between actual turnover and turnover intent, with more focus on turnover intent. Actual turnover is more difficult to predict because it involves the study of those individuals who have left their organizations. It is difficult to trace such individuals and to retrieve data from them. However, turnover intent is termed to be the most predictive precursor of actual turnover in an organization (Bluedorn, 1982).

Over the past few decades, there have been a large number of researches done on job satisfaction, and the antecedents of turnover. However, there are very few studies that have concentrated on finding out the path that leads from job dissatisfaction to turnover intentions, which in turn leads to actual employee turnover. Mobley, Horner and Hollingsworth (1978) suggested that there are a number of cognitive and behavioral phenomena that occur between the emotional experience of job and the action of quitting. Recent models suggest that a number of individual and organizational factors affect a person’s job satisfaction and commitment, which influence the intentions to quit, and initiate the process of looking for another job and then finally quitting in actual (Michaels & Spector, 1982). ). In comparison, one such model that has received significant attention and describes this relationship, is that job dissatisfaction arouses thoughts of quitting among employees which in turn lead to looking for another job, evaluating the findings and then intentions of quitting and finally to the action of quitting (Locke, 1976; Mobley, 1977).

The most commonly studied antecedents to turnover identified in literature are factors that lead to turnover intentions, and intention to leave, organizational commitment, job search behavior, and economic factors (Locke, 1976; Mobley et al, 1979). However, the antecedent that has received most attention is job satisfaction (Locke, 1976; Michaels & Spector, 1982; Mobley et al, 1979). There are a variety of factors that can influence a person’s level of job satisfaction; some of these factors include the level of pay and benefits, the perceived fairness of the promotion system within a company, the quality of the working conditions, leadership and social relationships, and the job itself (the variety of tasks involved, the interest and challenge the job generates, and the clarity of the job description/requirements)

Study of the issue of turnover revealed that huge concern to most companies, employee turnover is a costly expense especially in lower paying job roles, for which the employee turnover rate is highest. Many factors play a role in the employee turnover rate of any company, and these can stem from both the employer and the employees. Wages, company benefits, employee attendance, and job performance are all factors that play a significant role in employee turnover.

Companies take a deep interest in their employee turnover rate because it is a costly part of doing business. When a company must replace a worker, the company incurs direct and indirect expenses. These expenses include the cost of advertising, headhunting fees, human resource costs, loss of productivity, and new hire training, all of which can add up to anywhere from 30 to 200 percent of a single employee’s annual wages or salary, depending on the industry and the job role being filled .

While lower paying job roles experience an overall higher average of employee turnover, they tend to cost companies less per replacement employee than do higher paying job roles. However, they incur the cost more often. For these reasons, most institutes focus on employee retention strategies regardless of pay levels. Most companies find that employee turnover is reduced when they address issues that affect overall institute morale. By offering employees benefits such as reasonable flexibility with work and family balance, performance reviews, and performance based incentives, along with traditional benefits such as paid holidays or sick days, institutes are better able to manage their employee turnover rates. The extent institutes will go to in order to retain employees depends not only on employee replacement costs, but also on overall company performance. If institutes are not getting the performance it is paying for, replacement cost is a small price to pay in the long run.

Moreover, there are a number of gaps between the relationship of voluntary employeeturnover and employee turnover intentions. Unfortunately, there has been almost no research conducted in Pakistan on issues relating to faculty job turnover intentions.

This study is inspired by the complex and multifaceted nature of turnover intentions in the education industry in Pakistan, particularly in relation to different factors that lead to turnover intentions of the faculty members of business schools of Peshawar. This study could help administrators and educators understand the evolving perceptions of these factors and turnover intentions and improve the work related factors that can lead to more committed, satisfied and empowered faculty members.

PROBLEM STATEMENT:

Employee retention is becoming an important issue for organizations world over. The costs of employee turnover and replacement are huge and becoming less bearable in the fast paced economy. The higher educational industry, especially the business schools of Pakistan are facing the problem of high turnover as more choices have become available to a limited pool of faculty.

Preliminary findings from other industries have focused on turnover intentions and ultimately voluntary turnover. However, without further investigation, the same cannot be claimed for the education industry of Pakistan. This study will explore the relationship of the identified factors that is remuneration, job hopping, work life policies, recognition, and supervisory support with turnover intentions.

OBJECTIVES OF THE RESEARCH:

The objectives of this research are:

• To study the relationship of turnover intentions with the factors that are remuneration, job hopping, work life policies, recognition, and supervisory support of faculty of business institutes.
• To disclose the impact of these factors on turnover intentions among faculty members of business institutes of Peshawar.
• To recommend solutions to the adverse effects of turnover.

1.3 SIGNIFICANCE OF THE STUDY:

This study will contribute to the literature on defined factors and turnover intention in many ways.

Firstly, it will use a survey to better understand the turnover intentions among faculty members of business schools of Peshawar.

Secondly, after doing survey it will give a fair idea about the problem of voluntary turnover within business schools.

Thirdly, the relationship of these factors of turnover intentions will be examined to reach any conclusions about how strongly factors are related with turnover intentions. This study will provide a basis to make amendments to improve the working conditions of faculty in order to retain them.

The result of the study can be extrapolated across the higher education sector in the rest of the areas in Pakistan and quality standard of education can therefore be raised by having satisfied and committed faculty.

2. LITERATURE REVIEW:

This chapter gives the detail about turnover intentions and the factors that determine the turnover intentions. Firstly, this chapter describes the issues pertaining to turnover, both in general and in academia. Secondly, it discusses the work done on the most powerful factors of turnover intentions. Thirdly, researches conducted on faculty turnover intentions are discussed to understand the nature of turnover in university faculty.

2.1 TURNOVER:

Turnover becomes a serious but intractable issue. Unfortunately, despite employee turnover being such a serious problem in Asia, there is a dearth of studies investigating it; in particular studies using a comprehensive set of variables are rare (Khatri, Fern and Budhwar, 2001). Organizational turnover occurs when members of the organization leave and are replaced by new personnel (Carley, 1992). George and Jones (1996) supports that turnover is the permanent withdrawal of a worker from the employing organization.

Another author says that turnover occurs when people quit their jobs. An organization usually incurs costs in replacing individuals who have quit, but if turnover involves productive people, it is even more costly. Turnover seems to result from number of factors, include aspects of the job, the organization, the individual, the labor market and family influences. In general a poor job fit is also a likely cause of turnover (Graffint, 1997).

High turnover is found to be the major source of poor morale in many organizations (Khatri, Fern and Budhwar, 2001). “Inventory” is the population of employees, and “demand” correspond to turnover (Zhou, Gans, 1999). Retention has become the greatest challenge for organizations to deal with in today’s world. Retention becomes a potential problem when employees leave their jobs voluntarily (Drucker, 1999).

Wastage generally refers to the rate (ratio) of employees who leave an organization, through resignation, retirement or death during specified periods (i.e. movement out of an organization). Turnover, on the other hand, concerns Human Resource Management within organizations (i.e. employees moving from job to job through transfer, promotion or relocation) (Compton and Baird, 2002). Turnover is generally measured in terms of the number of employees hired or separated per one hundred employees on the average payroll during a given time `period (Lurie, 1966). Taras (1997) study on IT professionals says that a heavy investment in the implementation of HR practices may contribute to organizational success, specifically by reducing the turnover of IT professionals.

Employee turnover occurs when an individual exits an organization either voluntarily or involuntarily. Although some organizational turnover is unavoidable, and may even be desirable, voluntary turnover is difficult to predict and can reduce the overall effectiveness of an organization (Smith & Brough, 2003). On the other hand Naumann (1990) defines voluntary turnover occurs when the employee quits or requests and receives a transfer. Involuntary turnover occurs when an employee is fired or transferred at the will of the organization .Dysfunctional turnover damages the firm in some way by having a valued employee quit or request an early transfer. The voluntary turnover of desirable employees is generally considered detrimental to the organization, both in replacement costs and work disruption. In an effort to promote clarity, theorists have sought to explain factors that predict turnover (Hellman, 1997).

Decision to quit is not usually made lightly but is instead the result of a carefully thought process (George and Jones, 1996), in addition turnover often causes disruptions for existing members of organization, it may result in delays on important projects and it can cause problems when workers who quit are members of team. Structure and culture are also affected by turnover.

Bluedorn (1982) suggested that the transmission of culture gets very difficult. It gets haphazard and incomplete if the turnover rates are high and the structure becomes difficult to maintain as there are lesser experienced people left to help with socialization of the new comers and to teach them the established norms and procedures.

Various studies show an inconsistent relationship between employee turnover and productivity but there is general opinion that high turnover rates can have a great effect on organization’s performance (Bluedorn, 1982) because turnover can cause disruption and disruption is negatively related to efficiency. Thus turnover can affect an organization’s finances, efficiency, productivity and resources. Turnover reduces organizational performance because portions of the institution’s memory leave as personnel leave (Carley, 1992). Koh and Goh (1995) support that while the turnover of employees can have positive consequences (E.g. displacement of poor performers, infusion of new ideas and increased opportunities within the company), the costs associated with employee turnover can be substantial. These include the cost of training and recruitment, loss of continuity and productivity, and poor company morale and image. Job attitude factors, such as job involvement and autonomy, do not appear to affect turnover intention either.

2.2 TURNOVER INTENTIONS:

Valle, Harris and Andrews (2004) define Actual turnover is directly influenced by only one factor, turnover intentions. Turnover intention is one step removed from actual turnover (Khatri, Fern and Budhwar, 2001).Turnover intention is as behavioral withdrawal reactions (Geurts, Schaufeli and Rutte, 1999). Specter and Carsten (1987) in their meta-analysis summarized that behavioral intentions are a stronger predictor of employee turnover than job satisfaction. It appears that intentions are an important intermediate linkage between satisfaction, commitment, and involvement and turnover (Naumann, 1990).

Rosin (1991), in his review concluded that intentions of leaving are the strongest predictor of an actual leave decision. Kieslowski (1991) strengthened the above arguments by showing that 29 attitudes precede turnover intention (which in turn precede actual turnover}, but not the other way round. Turnover intention though is widely used in turnover study, specifically in models of turnover decision process; its concept is not clearly defined.

March and Simons (1958) took it as desirability of movement. Locke (1968) treated it as motivational determinant of choice of turnover. But, very often turnover researchers adopted operational definition to stand for the concept. Examples are “Do you want to quit?”(Michaels & Spector, 1982), “How long do you think you are likely to leave Company X? (Nicholson, 1977). Declining worker attitudes do not instantly result in the formation of intentions to quit. For example, an expatriate may experience low levels of attitudes for several months before thinking about quitting and then ultimately forming the intention to quit (Naumann, 1990).Customs and traditions must play a very important role in the determination of job-turnover intentions and, thus, of job mobility in general (Poza and Henneberger, 2004).

The author (Kraut, 1975), has suggested that an employee who wants to quit his job tries to separate himself psychologically from that organization. An employee’s attitude towards his job plays a vital role in determining his/her intention to leave, and these intentions actually indicate if an employee will actually leave the organization. He suggested that employee attitude surveys must be carried out periodically in order to measure employee job satisfaction, work related problems and intentions to leave so that pre-emptive steps towards improvement can be taken by the employers.

The problem to the conceptualization is that it is difficult to distinguish action-prone inclination of quitting or no action-prone subjective desire of leaving. Many modern organizational withdrawal researchers use the job opportunity as a criterion to distinguish the two dimensions of intention of leaving (Gerhart, 1990; Mobley, 1979; Steers & Mowday, 1981; Michaels & Spector, 1982 and Muchinsky & Morrow, 1980). Auditors who perceive that their workloads are reasonable and are balanced also have lower intention to leave the current accounting firm (Huang, Lawler and YiLei, 2007). Satisfaction with career future, company identity, kind of work and financial rewards significantly affect turnover intention. The higher the satisfaction with any of these variables, the lower the turnover intention (Koh and Goh, 1995).Finally over time, turnover intentions translate into turnover behavior (Richer, Blanchard and Vallerandi, 2002).

(Mobley et al., 1977) improved the preliminary research by gauging the effect of labor, organization, individual and job variables. This study also proved that job satisfaction along with job alternatives can lead to a person’s intentions to leave an organization and search for an alternative job. Intent to leave is an immediate antecedent of turnover.

Bluedorn’s (1982) research about turnover includes a unified model that job dissatisfaction leads to job search behavior which leads to intentions of quitting or staying with the organization. Eventually, the person either actually quits or stays with the present organization.

Combination of age, occupational level, length of service, perceived prospect of promotion and job satisfaction have a significant impact upon the intent to leave the current employer (Weisberg and Kirshenbaum, 1991). Temporary employees and permanent employees are similar in the sense that a satisfied employee is more committed employee and a more committed employee will have less intention to quit (Slattery and Selvarajan, 2005). Job and organizational factors predicted commitment and satisfaction while commitment and satisfaction predicted turnover intentions. Employees with higher commitment and job satisfaction should be less likely to consider leaving their facility. The results also showed that satisfaction and especially commitment predicted intentions to turnover (Karsh, Booske and Sainfort, 2005).

An early study conducted by March and Simon (1958) concluded that the turnover is the result of a person’s perceptions about desire his/her desire to leave the organization and the ease of movement from one organization to the other. The “desire to leave the organization” was later equated with “job satisfaction” (Jackofsky & Peters, 1983) and the “ease of movement” was equated with “perceived job alternatives” (Lee and Mitchell, 1994).

Mobley (1977) concluded in his first research that four steps lead to turnover: (a) job dissatisfaction initiates thoughts of quitting, which leads to (b) evaluation of searching for a new job, which results in (c) intention to search and eventually, (d) actual job search behaviors. This could lead to (e) an analysis of alternative job opportunities, which could lead to (f) intentions to quit and then (g) action of quitting. In 1982, Mobley concluded further from his study that people who leave an organization and those who stay longer with an organization differ in job satisfaction, expectations of the present job and the intention to leave.

He tried to explain this void between job satisfaction and turnover and suggested that there are a number of intermediate steps between the two, for example, intention to leave was more strongly related to turnover and is termed to be an intermediary in the process of job dissatisfaction and turnover. Resnick & Bond (2001) suggested that it is overly simplistic to conclude that job dissatisfaction leads to turnover. However, they continue to believe that job satisfaction is predictive of turnover and remains to be one of the most important variables in understanding turnover.

Different researchers have conducted research on turnover intentions and to understand the factors. Teachers quit their jobs at twice the rate of other professions. Annually, 8% of teachers quit teaching and another 8% transfer to another business school. For nearly half a century researchers have investigated the causes of employee turnover. Much of the research has been focused on investigating individuals’ decisions to leave their job. Over time, the models have developed to include more individual and organizational predictors, more causal

2.3 FACTORS DETEMINING FACULTY TURNOVER:

2.3.1 Remuneration:

The basic salary paid, without bonuses. While pay rate is not considered a motivating factor, it can be a cause of dissatisfaction (Azfar & Danninger, 2001).If an employee is happy with pay, it is quite likely that this employee may be committed to the organization in which he or she is currently working (Slattery and Selvarajan, 2005). Khatri, Fern and Budhwar (2001) find that Satisfaction with pay is negatively associated with turnover intention. As the following is a quote by one HR manager, after one of the executives in the company left, suggests: He worked for only three months and complained that we didn’t use his brain or talent; the job is not interesting; the pay is not enough so he quit. Level of income is negatively associated with turnover intention. Turnover intention is primarily predicted by unmet career expectations regarding salary, job security, and career opportunities. (Houkes et al., 2001).

While some of the graduates identified level of pay as a source of dissatisfaction, for many these did not appear to be as important and influence on loyalty to their employer.

As the type of work they are given to do, the responsibility they have makes them enjoy working for their organization. Most of the graduates claimed that they would put a challenging, interesting job before money, if given the choice: (Sturges and guest, 2001).

Satisfaction with career future, company identity, kind of work and financial rewards significantly affect turnover intention. The higher the satisfaction with any of these variables, the lower will be the turnover intention (Koh and Goh, 1995).

While not directly predictive of turnover, employee perceptions of the fairness of pay rules and equality of pay among coworkers and of supervisor control of the work pace were strongly predictive of job satisfaction. Employees who perceive their supervisors as fair in administering rules related to pay and promotional opportunities (pay administration) and in general supervision of the work environment (rule administration) will be more satisfied with their supervisors. Perceptions of unjust distribution of pay (pay level) and unjust rules governing those allocation decisions (pay rules) would lead to pay dissatisfaction. (Griffeth and Gaertner, 2001). It simply may be that men who hold the majority of the high status administrative and professional jobs desire more pay and consequently intend to leave if higher paying jobs are found (Martin and Jr, 2008). Employees are less likely to quit because pay is high relative to what they can find on the external market and because they have opportunities for growth and development inside the organization. (Batt and Valcour, 2003). It might be that staff are motivated to leave the university because of low salaries and decreased funding (Manger and Eikeland, 1990).

2.3.2 Recognition:

It is defined as respect and acknowledgement for any achievement. McInnes (1999) found that academics were internally motivated by factors such as discipline-base recognition by peers and student-teacher relationship factors. There is a definite link between the intention of people to stay at their place of employment and reward/recognition. Indeed, recent Business Research Lab studies have shown that the correlation between the length of time people intend to stay with their current employers and the recognition given for work that is well done is .27, a positive and statistically significant relationship. The relationship between monetary rewards and intention to stay also is positive, but somewhat less so. From this we can extrapolate that rewarding and recognizing positive results is an important factor in retaining employees. Appropriate reward and recognition should be viewed as an important component in the creation of an overall positive environment in which both employees and employer can thrive. Our data also suggest that reward/recognition is important to employee motivation. We have one attribute worded “I feel I am contributing to this company’s mission.” While this attribute is comprised of factors in addition to “motivation,” it certainly includes motivation (www.busreslab.com). Authors support this idea that to help diminish the high turnover, the firm needed a recognition program to help improve morale and retain their current employees (www.crystal-d.com).

(Sturges and guest, 2001) found out in their research is that what was extremely important to the graduates was recognition by their employer of their achievements and their performance. This recognition was not necessarily financial but could be expressed in much more personal terms, as some kind of acknowledgement by the organization to the graduate. (Castillo & Cano, 2004) It seems that a successful employee whose work performance is recognized by his superiors and his peers will tend to do more than what is formally required of him. The most obvious form or recognition comes in the form of salary increases and bonuses. But in the broader terms positive work environment, recognition can take many forms from a formal award program to a thank you note for a job well done. Poza and Henneberger (2004) focused that job satisfaction, job security, perceived labor market opportunities, and pride in one’s firm all play an important role in explaining turnover intentions. (Castillo & Cano, 2004) Opportunities for growth, recognition of individual contribution and good work and expanded job responsibilities form the essence of compelling places to work

2.3.3 Work-Life Policies:

The most well-documented pressures family members experience in balancing work and family are overload and conflict due to multiple roles. They have too much to do and too little time in which to do it (Lewis & Cooper, 1987). While some leading employers are adopting such supportive policies, many companies and many managers are still neither aware nor responsive to work/family issues (Galinsky & Stein, 1990).

(Yasbek, 2004) is of the point that even in the absence of work-life balance policies there are costs and externalities associated with unresolved conflicts between work and personal lives. These costs are borne by the firm (through reduced productivity) as well as by employees and their families and communities. Work-life balance policies can affect business performance in a number of ways. In a competitive labor market, employers can attract better recruits by offering work-life balance policies alongside competitive remuneration packages. Work-life balance policies can reduce costs by improving staff retention rates. Work-life balance policies can enhance productivity. Policies can also reduce extended hours and fatigue, which have a negative effect on productivity. Other arguments use an exchange framework and suggest that in return for the ‘gift’ of work-life balance policies, employees offer the ‘gift’ of discretionary effort, thereby increasing productivity. Work-life balance policies can also minimize stress and contribute to a safer and healthier workplace by combating fatigue, thus reducing the chance of accidents occurring in the workplace.

When work extends into family time, it can create stresses which then extend into the workforce. One meta-analysis suggests that there is a consistent negative relationship between work-family conflict and job satisfaction. As far as work-life balance policies can reduce the conflict between work and family, they can increase job satisfaction

(Konrad and Mangel, 2000). Other commentators suggest that work-life balance policies can increase organizational commitment. Higher levels of organizational commitment are then correlated with lower turnover and better job performance (Eaton, 2001).

Even though firms have cost-benefit considerations of work-life balance policies, a growing number of studies find that work-life balance policies generate performance benefits for firms by enhancing recruitment and reducing absenteeism and turnover (Helen, 2002). And firms that seek to increase employee morale, commitment and satisfaction, and reduce source of stress and problems at work, will improve their ability to recruit and retain talented and valued employees (Cappelli, 2000).

If organizational practices can help employees integrate work and life demands and in turn lower their voluntary turnover rates, then employer’s investment in work-life balance practices is more cost- justified Flextime system is a stronger predictor of women tenure and the strongest predictor of tenure gap between men and women (Hui-Yu and Takeuchi, 2008).

Some of the graduates felt that, whatever their circumstances, if the balance between work life and home life became out of kilter, they would consider leaving their organization (Sturges, guest, 2001).employees who have less flexibility at work; including longer work hours and more travel are likely to report higher work-family conflict, less control over managing work and family demands, and more probability of quitting (Batt and Valcour, 2003).

2.3.4 Supervisory support:

Workers wish to leave an organization when they have conflicts with their supervisors or colleagues (Houkes and Janssen, Jonge and Nijhuis, 2001). Sturges and guest, (2001) threw light that different kinds of work relationships are valued for different reasons. Healthy peer relationships were essential for the graduates to enjoy work, to feel that they were part of the organization, and as a source of support at the beginning of their career. It is therefore not surprising to see the emphasis placed on the role of establishing a set of friends and colleagues and the concern for career support from more experienced managers. It is important for