THE IMPACT OF EMPLOYEE TURNOVER ON ORGANIZATIONAL

PERFORMANCE IN THE SERVICE INDUSTRY OF BISLIG CITY

CHAPTER II

REVIEW OF RELATED LITERATURES AND STUDIES

This chapter presents facts obtained from a number of researchers

and other sources regarding the topic at hand.

Related Literature

Foreign

It is a known fact that employees are important stakeholders in the

firm, but unfortunately after limited resources have been used in recruiting,

training and developing the employees, they leave for other organizations

(Bilau, 2015).

“Employee turnover” as a term is widely used in business circles.

Although several studies have been conducted on this topic, they mostly

focuses on the causes of employee turnover but little was done on

examining its source and effects that may advise managers on how to

organizational competitiveness. Employee turnover is a ratio of the

number of workers in an organisation who have left voluntarily or

involuntarily in a particular period divided by the number of employees

who remain in the organisation in a period (Ongori, 2007). It is the

decrease in the number of employees in an organisation because of

death, retrenchments, resignation, relocation, or even retirement (Ngcobo,

2014; Yezina, 2014).

Interpersonal relationships in different departments has a

significant impact on employee turnover intention(Zhang, 2016). Training

and learning opportunities will also have considerable effects on

employees staying in the organization (Liu et al, 2006). Turnover intention

could also occur when there are lack of motivation, promotion and

performance in the workplace, which results in the employee to quit the

job and leave the organization (Bhayo, Shah & Chachar, 2017)

Employee turnover is the most important activity of human resource

of a firm in which management is eager to censure. The reason for making

a purposeful resistance is because of reality that organizations make

sufficient investment in their employees in the shape of development,

training, workflow, reimbursement planning and building of viewpoint to

achieve objectives and goals of the organization. Though, the increasing

consequences of employee turnover can cause an effect on the

organization’s growth, the expense of managing as shown in most cases

is reflected on income statement bottom line, showed a downward

tendency in effectiveness. As a result, human resource management view

is actively determining the descending wave of the firm’s turnover rate

(Ghulam, Syed, & Zainab, 2012).

Ibrahim, Usman, & Bagudu, 2013 states that employee turnover

basically occurs due to unhappiness of an individual employee from job

environment. Being unhappy is not merely the reason in a job, why

individuals leave one job for another job. If the employees possess the

skills that are in demand, they may be awarded higher pay, better facilities

or job growth prospective. So it is very important to recognize and know

the difference between those employees who leave the job because they

are not satisfied with their job and those employees who leave their job for

other reasons.

Moreover, Hancock, Allen, Bosco 2011 revealed a negative

relationship between collective employee turnover and organizational

performance. To clarify the nature of this relationship, the authors conduct

a meta-analytic review in which they test and provide support for a portion

of Hausknecht and Trevor’s model of collective turnover.

Local

Viloria, D. D. (2018) revealed that employee engagement involved

emotional, cognitive, behavioral, and physical connection of the employee

to work and organization. Employee engagement, as a relationship, is a

triad of employee, work, and organization and not simply a two-way

relationship between employee and organization. Engagement and

disengagement were found to be conscious decision of an employee. The

precursors of engagement emerged from the study were (1) meaningful

work, (2) trust in leadership, (3) positive and inclusive work environment,

(4) career growth opportunities, and (5) compensation and benefits.

High employee turnover rates are a plague to the business world

today. According to a 2013 study by consumer credit reporting agency,

Equifax, 40% of employees who leave their jobs do so within six months of

starting a position. In a separate study published in 2017, 42% of

millennials expect to change jobs every 1 to 3 years, at the very least.

However, beyond these staggering attrition rates, what’s more bothering

is only 9% of senior managers believe that turnover is an urgent issue.

 Employee retention efforts have to become part of any

organizational culture, even if you’d need recruitment consultants to help

you with it. From the lack of proper onboarding processes to not

incentivizing retention, here are a number of ways high employee turnover

rates can hurt your business.

Moreover, Presbitero, A. (2017) shows that improvements in

human resource management practices, particularly in the areas of reward

management and training and development, yielded positive and

significant change in the level of employee engagement by the use of

social exchange theory.

On the other hand, Lacap, J. P. G. (2019) investigates the

mediating effect of employee engagement on the transformational

leadership and intention to quit relationship. He revealed that

transformational leadership has a significant and negative effect on

intention to quit. Moreover, there is also a significant and positive

relationship between transformational leadership and employee

engagement. Regarding employee engagement and intention to quit, the

results indicated that these two constructs are significantly and negatively

related. The mediation model also suggested that employee engagement

mediates the negative relationship of transformational leadership and

intention to quit with small effect size.

Related Studies

Foreign

According to the case study of Steve Ogony (2017) entitled: The

effect of employee turnover on performance: A case study of the KwaZulu-

Natal Department of Arts and Culture, shows that the causes of employee

turnover were a lack of career advancement, lack of promotion,

unsatisfactory salary, unsatisfactory working conditions, and work stress.

Additionally, the performance challenges were wastage of

resources, reduction in work productivity, disruptions in service delivery,

increased workload and spending too much time training new staff. The

study recommended that the Department should improve on mechanisms

of getting feedback from its staff members regarding problems that have

been identified as causes of high staff turnover rates

 Another study conducted by Zeeshan Ahmed, Sarwat Sabir, Mishal

Khosa, Imam Ahmad, Muhammad Amjad Bilal, 2016 entitled: Impact of

Employee Turnover on Organisational Effectiveness in Tele

Communication Sector of Pakistan have revealed that employee turnover

depending upon factors such as (firm stability, pay level, industry, work

situation, training and supervision) have significant impact on

organizational effectiveness; these factors are correlated with each other

as well. By using correlation and regression analysis, the research study

found that there is a significant relationship between employee turnover

and organizational effectiveness.

Dejene Taye1 and Bamlaku Getnet (2020) study entitled: The

Impact of Employee Turnover on Organizational Performance: A Case

Study of Mada Walabu University, Bale Robe, Ethiopia shows that high

labor demand and job opportunities in the market, lack of opportunity for

career advancement in the organization, unsatisfied with working condition

and no involvement in decision-making, are the foremost causes of

employee’s turnover on organizational performance.

The study finding also showed that staff turnover causes loss of

some of the very experienced and skilled employees, reduction in work

productivity and quality of services rendered as well as it causes too much

wastage of resources when new staff settles and lose public confidence in

the operation of the organization. In order to return the reduced

university’s capacity in terms of national attrition rates, higher education

access target, quality education assurance, significant community and

technology transfer and standardized research-based problem-solving

culture due to staff turnover. With respect to the trends of employees’ turn

over the finding conclude that there is an increasing trend of employees’

turn over in the university that results a significant impact on the university

performance. Loss of very experienced employees, reduction in work

productivity and quality of services rendering, too much wastage of

resources and lose public confidence in the operation are the foremost

Impact of Staff Turnover on the Organization Performance followed by

breaking team work within the organization, tend not to give off their best

at the workplace, spending too much time in training new staff member,

increasing work stress to present workers.

Additionally, Luciana Carvalho de Mesquita Ferreira, Ciro Barbosa

de Aquino Almeida (2015) study investigates the relationship between

employee turnover and performance in retailing. This study also analyzes

whether Human resources practices, such as rewards, recognition and

training, affect employee turnover. The empirical results indicate a strong

relationship between employee turnover and sales, supporting results

from previous studies.

Local

Lacap, J. P. G. (2019) study on satisfaction, commitment, and

turnover intentions of Employees in Low Cost Hotels in Or. Mindoro,

Philippines shows that all job satisfaction dimensions are important to the

respondents. It is widely believed that turnover adversely affect

organizational effectiveness and productivity. Turnover can have a

negative impact on the functioning of an organization through loss of

cohesion and morale. Having a knowledge as what causes an employee

to leave an organization gives managers the opportunity to curtail turnover

more effectively. It is in this context that this research was conceptualized.

This study was undertaken to determine how job satisfaction dimensions

and organizational commitment influence turnover intentions among

employees in selected low cost hotels in Oriental Mindoro, Philippines.

The study made use of descriptive correlation research design, with 110

respondents conveniently selected from 10 low cost hotels in Oriental

Mindoro. On the other hand, job satisfaction dimensions are related to

turnover intentions in terms of job nature and career development.

Meanwhile, no relationship exists between organizational commitment and

turnover intentions.

Millennials in the workplace have the reputation of being job-

hoppers to meet their perception of career improvement. While job-

hopping may be a way to find better opportunities for these millennials, the

turnover of employees in the workplace creates four different types of

costs which is incurred by the company. Based on the study of Reyes, and

Norona (2019) shows that Promotion and Career Planning, Work-Life

Balance and Training/Career Development were the top three job

satisfaction factors to retain millennials in the workplace.

Based on the results of the survey, millennials in the telco industry

were very satisfied with their relationship with peers/superiors but were

either satisfied or dissatisfied in terms of their salary and benefits. In this

research, results show that Salary and Benefits was proved to be one of

the factors causing the dissatisfaction of millennials in the workplace.

Thus, making it one of the factors causing employee turnover in the

company.

Another study of Sheila Jane L. Gonzales (2014) entitled: Labor

Turnover of a Manufacturing Firm in Tarlac City, Philippines sought to

determine the factors contributory to labor turnover of the firm and to find
out the reasons for such turn over. The data obtained were used to

determine the factors contributory to labor turnover; problems encountered

related to labor turnover; and actions taken accordingly by the firm.

Most studies have been made on labor turnover in the Philippines

but these were focused on its causes rather than examining the sources of

the turnover, its effects and the various options and strategies that maybe

used by the managers to ensure there is employee continuity in the

organization and therefore enhances organizational competitiveness and

even survival.

There is no doubt business organizations invest so much in their

people in terms of induction, training, and developing while maintaining

them in the organization. Managers must therefore, at all cost, minimize

employee turnover. A wide range of factors have been found useful in

interpreting employee turnover although there is no standard framework

for understanding the employees’ turnover process as a whole. There is a

need to fully understand employee turnover, the effects and strategies that

managers can put in place to minimize turnover.

High turnover often means that employees are unhappy with the

work or compensation but it can also indicate unsafe or unhealthy

conditions, or that too few employees give satisfactory performance due to

unrealistic expectations, inappropriate processes or tools or poor

candidate screening. The lack of career opportunities and challenges,

dissatisfaction with the job scope or conflict with the management has

been cited as predictors of high turnover.

Labor turnover generally indicates how content a workforce is

within a business. An increasing turnover rate could be an indication that

employees are dissatisfied with their job or the business. The causes of a

high labor turnover could be both due to internal or external factors.

Internal factors may include: leadership that is ineffective or

management styles that are inappropriate; the level of pay that is being

offered by the business is less than comparable jobs within other

organizations; communications between management and employees

may be poor; employees may feel that working conditions are inadequate

or they may not like certain working practices and; the wrong people

maybe being selected for the wrong types of jobs due to flawed

recruitment and selection processes.

Synthesis
 The citations above shows different studies when it comes to

employee turnover and its effect on organizational performance on

different business sectors. This will be used in determining the key impact

of employee turnover on service industry and what are the possible

underlying causes of such scenarios.

References

Book

Fineman, S. (Ed.). (2000). Emotion in organizations. Sage.

Mowday, R. T., Porter, L. W., & Steers, R. M. (2013). Employee—

organization linkages: The psychology of commitment, absenteeism, and
turnover. Academic press.

Pinder, C. C. (2014). Work motivation in organizational behavior.

psychology press.

Journal Article

Abelson, M. A., Baysinger, B. D. 1984. Optimal and dysfunctional

turnover: Toward an organizational level model. Academy of Management
Review, 9: 331-341.
Google Scholar | Medline | ISI

Ahmad, S., Schroeder, R. G. 2003. The impact of human resource

management practices on operational performance: Recognizing country
and industry differences. Journal of Operations Management, 21: 19-43.
Google Scholar | ISI

Alexander, J. A., Bloom, J. R., Nuchols, B. A. 1994. Nursing turnover and

hospital efficiency: An organization-level analysis. Industrial Relations,
33: 505-520.
Google Scholar | ISI

Bilau, Ade Abdulquadri and Ajagbe, Akintunde M. and Sholanke, Anthony

Babatunde and Sani , Tolani Abdulrahman (2015) Impact of Employee
Turnover in Small and Medium Construction Firms: A Literature
Review. International Journal of Engineering Research & Technology
(IJERT) , 4 (2). pp. 977-984. ISSN 2278-0181

Brief, A. P., & Weiss, H. M. (2002). Organizational behavior: Affect in the

workplace. Annual review of psychology, 53(1), 279-307Carter, M., &
Tamayo, A. (2017). Entrepreneurial and intrapreneurial skills of managers
as determinant of organizational performance of small and medium
enterprises in Davao region, Philippines. Philippines (March 6, 2017).

Chiat , L. C., & Panatik, S. A. (2019). Perceptions of Employee Turnover

Intention by Herzberg’s Motivation-Hygiene Theory: A Systematic
Literature Review . Journal of Research in Psychology, 1(2), 10-15.
[Link]

Chih, Y. Y., Kiazad, K., Zhou, L., Capezio, A., Li, M., & D. Restubog, S. L.
(2016). Investigating employee turnover in the construction industry: A
psychological contract perspective. Journal of construction engineering
and management, 142(6), 04016006Chowdhury Abdullah Al Mamun and
Md. Nazmul Hasan (2017). Factors affecting employee turnover and
sound retention strategies in business organization: a conceptual view.
Problems and Perspectives in Management , 15(1), 63- 71.
doi:10.21511/ppm.15(1).2017.06

Dayrit, J. S., & Lacap, J. P. (2020). The Influence of Work life balance on
Employee engagement among workers in Pampanga. Philippines: A
Structural Equation Modelling Approach. International Journal of
Psychosocial Rehabilitation, 24(04).

de Waal, A., & Goedegebuure, R. (2017). Investigating the causal link

between a management improvement technique and organizational
performance. Management Research Review.

Gonzales, Sheila Jane L. (2014). Labor Turnover of a Manufacturing Firm

in Tarlac City, Philippines. Retrieved from
[Link]
:text=Finally%2C%20volatility%20also%20moderates%20the,suffer
%20the%20most%20negative%20effects

Lacap, J. P. G. (2019). The mediating effect of employee engagement on

the relationship of transformational leadership and intention to quit:
Evidence from local colleges in Pampanga, Philippines. Asia-Pacific
Social Science Review, 19(1), 33-48..

Macey, W. H., & Schneider, B. (2008). The meaning of employee

engagement. Industrial and organizational Psychology, 1(1), 3-30.

Mobley, W. H., Griffeth, R. W., Hand, H. H., & Meglino, B. M. (1979).

Review and conceptual analysis of the employee turnover
process. Psychological Bulletin, 86(3), 493–
522. [Link]

Montalbo, A. F., & Agong, H. (2017). Employee engagement and areas of

worklife of call center agents in the Philippines. International Letters of
Social and Humanistic Sciences, 77, 44-55.

Morris, J. A., & Feldman, D. C. (1996). The dimensions, antecedents, and

consequences of emotional labor. Academy of management review, 21(4),
986-1010.

Ongori, H. (2007). A review of the literature on employee turnover.

Academic Journals. Retrieved from
[Link]
Ooi, T. P., & Teoh, K. B. (2021). Factors affecting the turnover intention
among employees in Penang manufacturing industry. Annals of Human
Resource Management Research, 1(1), 29-40.

Presbitero, A. (2017). How do changes in human resource management

practices influence employee engagement? A longitudinal study in a hotel
chain in the Philippines. Journal of Human Resources in Hospitality &
Tourism, 16(1), 56-70.

Reyes, John Jerjie C., and Norona, Marvin I., (2019). An Employee
Retention Model for Millennials in the Philippine Telco Industry. Retrieved
from [Link]

Saporna GC, Claveria RA (2013) Exploring the Satisfaction, Commitment

and Turnover Intentions of Employees in Low Cost Hotels in Or. Mindoro,
Philippines. J Tourism Res Hospitality 2:1. doi:10.4172/2324-
8807.1000112

Sophie De Winne, Elise Marescaux, Luc Sels, Ilke Van Beveren and Stijn
Vanormelingen ( ). The Impact of Employee Turnover and Turnover
Volatility on Labor Productivity: a Flexible Non-Linear Approach. The
International Journal of Human Resource Management

Steel, R. P., & Ovalle, N. K. (1984). A review and meta-analysis of

research on the relationship between behavioral intentions and employee
turnover. Journal of Applied Psychology, 69(4), 673–
686. [Link]

Steve M. Ogony (2017). The effect of employee turnover on performance:

A case study of the KwaZulu-Natal Department of Arts and Culture.

Taye D. and Getnet B. (2020). The impact of employee turnover on

organizational performance: a case study of Mada Walabu University,
Bale Robe, Ethiopia. Am. J. Pure Appl. Sci., 2(3), 51-63.
[Link]
Tubay, J. B. (2019). The Role of Job Satisfaction and Organizational
Commitment on Turnover Intentions of Accounting Professionals in Big 3
Auditing Firms in the Philippines with Moderating Effect of Leader-Member
Exchange. International Review of Management and Marketing, 9(2), 84.

Viloria, D. D. (2018). Exploring a socially-constructed concept and

precursors of employee engagement in the Philippine setting. Review of
Integrative Business and Economics Research, 7(4), 1-25.

Zeeshan Ahmed, Sarwat Sabir, Mishal Khosa, Imam Ahmad, Muhammad

Amjad Bilal (2016). Impact of Employee Turnover on Organisational
Effectiveness in Tele Communication Sector of Pakistan. IOSR Journal of
Business and Management (IOSR-JBM). 18(11). PP 88-96

Internet Sources

Camille Brouard (2019, October 16). The Effects of High Staff Turnover on
Businesses. My HR Toolkit. Retrieved April 07, 2021 from
[Link]

Dr. Sumbul Tahir. (2020, December 09). Organizational Performance:

What it is and how to Measure and Improve It. Retrieved April 08, 2021
from [Link]
to-measure-and-improve-it

Editors Choice. When Numbers Fall: Four Negative Effects of Employee

Turnover. Retrieved March 25, 2021 from [Link]
turnover/numbers-fall-4-negative-effects-employee-turnover
Irina Palesciuc, (2019, July 16). Consequences of Employee Turnover on
Organizational Performce. Articles, Organizational Performance.
Retrieved April 07, 2021 from
[Link]

Nicole Roder, (2019, June 17). What is Employee Turnover (and Why it
Matters). Workest by Zenefits. Retrieved April 07, 2021 from
[Link]
matters/

Ron Cullimore (2017). How Employee Turnover Hurts your Business.

Retrieved April 30, 2021 from [Link]
recruitment-articles-advice/employee-turnover-hurts-business/