CHAPTER ONE

INTRODUCTION

1.1  Background to the Study

The term “Employee turnover” is an expression broadly used in business organisations worldwide. Employee turnover indicates the rate at which employers’ gains and losses employee (Marisoosay, 2009); how long the staff tends to leave and join the organisation (Armstrong, 2006). Employee turnover is a vital issue which cannot be minimized or ignored by management in any organisation.  Horton (2007) states in his book that employee turnover is becoming a major issue for organisation.

 Every organisation needs manpower to run efficiently and effectively (Bortwick, 2011). Without employees machines would not function, policies would not be implemented and objectives would not be attained. The concept of employee turnover is usually used interchangeably with labour turnover. In simple term, it is the rate at which employees leave an enterprise (Hedwiga, 2011). Several other terminologies have been used interchangeably with employee turnover; such terms include exits, mobility, quits, attrition, migration, or succession (Morrell et al., 2004).

Abbasi and Hollman (2000) describe employees’ turnover to be a measure of the number of employees leaving and being replaced during a particular period, usually a year, and expressed as a percentage of the total labour force at the beginning of the period. Managers analyze employee turnover as the whole process associated with filling a vacancy (Feldman, 1994). Each time an employee resigns from a position, either voluntarily or involuntarily, a new employee has got to be hired and trained. According to Woods (1995) this replacement cycle is well-known as turnover.

Human resource management in any organisation is crucial for continuous performance and success. Today’s competitive business scenario, deteriorating social conditions of human resource leads to employee turnover. According to Aman (2015) employee turnover has become a very important issue in human resource management which is significant to the organisations, individuals and management. Employees rarely quit on the spot. The nightmare begins with three words (I am leaving). Generally, employees become dissatisfied and stays disengaged for quite a while before leaving. However, from the instant of disengagement, most employees are no longer as dedicated or productive as they once were.

According to Shahnawaz and Jafri (2009), employee turnover leads to sleepless nights for organisations and human resource managers. Organisations invest so much on their employees in terms of induction and training, developing, maintaining and retaining them in their organisation (Barb and Jancy, 2001). Recruiting employees consume enormous time and effort, bringing them up to speed even takes more time, replacing employees entails money and in general high turnover often puts customers and employee in the lurch; departing employee goes away with a great deal of knowledge. Martin (2005) denotes that when employees depart from the company, the employer incurs a considerable amount of direct and indirect expenses. According to Linda (2002) these expenses of employee turnover can surprisingly range from consuming quite a considerable amount of annual wage that an employer would otherwise paid to its workforce. Harrie (2002) express employees’ turnover cost to in general include; advertising expenses, headhunting fees, resource management expenses, loss of time and efficiency, work imbalance, and employee training and development operating expense for new joiners.

Employee turnover is a challenge of all organisations today, be public or private due to negative consequences organisations face (Shamsuzzoha & Shumon, 2007). Employees in any firm are required and expected to make a total commitment toward desired standards of performance so as to achieve a competitive advantage and better performance for sustaining the competitive advantage at least for a prolonged period, if not forever. Currently, employee turnover permeates most of the organisations in both developed and developing nations (Tariq et al., 2013). It is prevalent in every type and size of organisation and at every organisational level (Beadles et al., 2000). Abbasi & Hollman (2000) state that turnover is “one of the most significant causes of declining productivity and sagging morale in both the public and private sectors”. Employee turnover according to Tettey (2006) is considered a natural part of doing business.

According to Dailey & Kirk (2010), employee turnover is been considered to be one of the challenging concern in businesses nowadays. Employees’ turnover represents a common problem for most business enterprises in recent times, due to its unfavourable consequences on such enterprises (Shamsuzzoha & Shumon, 2010). The effect of turnover has received significant attention from senior management, human resource professionals, and industrial psychologists. Dailey & Kirk (1992) denote that employee turnover has demonstrated to be one of the most costly and seemingly intractable human resource challenges faced by several organisations globally. High turnover in organisation indicates dissatisfaction of employees on what the organisation provides as needs and desires (Thomas, 2009). Empirical studies done in both public and private organisations have come up with similar results. Augustine (2011) comments that labor turnover is becoming solemn trouble in today’s business setting. This situation threatens many organisations and has been termed as one of the management and organisational challenges (UNICEF Annual Report 2011, TBA Newsletter 2007, Mrara 2010, Ernest and Young Report 2012).

Employee turnover has received a great deal of attention in the organisational psychology literature based on production cost. productivity, the performance of employees, psychological intention in the precedent few decades (Justin et al., 2011; Ongori, 2007).Talented employees often encompass the organisations core human capital, making it noteworthy to highlight their turnover behavior that influences the organisations competitive advantage (Deery & Shaw, 1999; Houkeslnge, 2001). Competent and dedicated employees greatly enhance the productivity of any organisation. Frequent employee turnover can deteriorate the dedicated emotions of other employees along with skills in the concerned area. Some employees can stayor remain in the disliked job than venture into the unknown. Often, such employees leave mentally, even though they show up to work regularly (Bluedorn, 1982; Lee & Maurer, 1997).

According to the Chartered Institute of Personnel Development (CIPD, 2016) in the United Kingdom (UK), the average turnover rate is approximately 15% every year. However, it is different according to the type of industry (CIPD, 2016). Schlechter et al. (2016) find that employee turnover is one of the biggest challenge numerous organizations worldwide are faced with. According to Nobscot Corporation, the average turnover rates in the United States in 2016 varied between around 15 % annually for durable goods manufacturing employees to as high as 56 % for the restaurant and hospitality industry.  According to Catalyst (2016), about 59 million employees in the United States of America left their employment in 2015.  Obiero (2011) expresses that the medical services segment in the USA would achieve a turnover rate at a level of 29% by the year 2020. The report projects that employee turnover will continue to be an issue in the years ahead.

Robbins (2003) denotes that staff turnover is costing millions of rands to South African organisations in decreased efficiency. Staff turnover according to him is estimated at 40 billion rands a year. The cost of staff turnover and the impact thereof on productivity alone is enough to sadden any human resource manager and the organisation. There might be a holdup of service delivery while waiting for the substitute staff to arrive. Also, there might be production losses while assigning and employing replacement staff (Ziel &Antointette, 2003). Often, the organisation experiences a waste of time due to inexperienced replacement of staff. Management and other staff spend costly time not doing their job but trying to adjust the replacement staff.

Cameroon is not spared from employee turnover. In Cameroon, the financial systems contribute substantially to the growth of the economy. Cameroon has the largest financial system within the CEMAC region. In the 1990s, the country witnessed the harmonization of banking regulation in CEMAC and allowed players to consider now the future of the region. The banking sector is highly concentrated with credit unions, microfinance, and commercial banks.  Each institution providing similar services gives room for stiff competition in terms of employee talents and customer base. Besides the financial institutions, the advent of the socio economic crisis in the North West and South West region has given rise to humanitarian organisations and nongovernmental organisations. These organisations are in search for skilled and qualified talents.  This prompts employees to search for better opportunities making them leave present jobs encouraging employee turnover.

Micro Finance Institutions (MFIs) emphasising more with Credit unions is of great importance to the Cameroon communities socially and economically (Krirtensen et al., 2010). The importance of credit unions cannot be underestimated in any given society; its role on a general note has been the most vital institution amongst other community based businesses (Gwasi & Ngambi, 2014).Given the fact that Cameroon, like any other developing country as revealed by the 2015 World Bank Report has approximately 78 percent of its population situated between the low and middle income class, the establishment of Credit Unions in such a society fills some of the gaps created by the major financial institutions (Nembhard, 2013). Competition within the financial sector could be a driving force to improve performance in microfinance institutions. These institutions would need qualified and dedicated employees to work effectively and efficiently.

Most often, this is not the case. Some employees leave the institution before their due time. This happens due to varied reasons. These employees are either deceased, go on compulsory or voluntary retirement, terminated, resign or abscond. According to Kazi (2011) employee turnover is caused by the factors that are outside of management control. These factors include for instance death of an employee, chaos in the country, fulfillment of basic needs of life and health issues. There exist other factors experienced by an employee in due cause of achieving personal the fulfillment. This includes satisfaction with pay, nature of work and supervision, and organisational commitment.  For the purpose of this research we would be emphasising on employee turnover causes by resignations; also known as voluntary turnover. The actual turnover of employees is basically resulted from their intention to quit their jobs or leave the organisations. The process of employee turnover can be described with job dissatisfaction as it’s first step, followed by intention to leave, which finally, can result in actual turnover (Mobley et al. 1979; Bannister & Griffith 1986). Turnover intention is one’s behavioral intention to quit. According to Bigliardi et al. (2005) intention to leave refers to individuals’ perceived likelihood that they will be staying or leaving the organisation.

 Employee turnover intention according to Mobley (1982) is considered as part of a sequence in the psychological withdrawal of an employee from the job process. Scholars have argued that generally most employers do not pay serious attention to this concept, but rather with dealing with the actual turnover; which is a manifestation of the intention to leave (Samuel & Chipunza, 2009). In addition, it is difficult to gain access to people who have already left to determine why they really quit, thus making the study of intention to quit more appropriate than actual turnover, Lastly employees who are thinking of quitting may still be persuaded to stay yet it is too late to change the work environment for those who have already left employment (Lambert & Hogan, 2009; Mitchell, et al., 2001).

 For this study, employee turnover refers to their “intention to leave‟ which is the subjective estimation of an individual‟s probability of leaving an organisation in the near future. Employee turnover is significant because it has negative effects on the operations of the organisation and largely shocks the organisational performance (Abdali, 2011). Price et al. (2003) denotes that if employee turnover is not dealt with precaution it will have effects on the organisation in terms of workforce and then later it will affect its liquidity position. Armstrong (2006) argues that if the company determines the most common causes of employee turnover, it would certainly be able to take steps for recruiting and retaining well qualified personnel. From the foregone, it is evident that the management of microfinance institutions needs to understand employees’ perceptions about their intention to leave the institution. Such an   understanding would help them gain better insight on reasons which prompts workers to leave the establishment. Thus create mitigation strategies to curb employee turnover. This study will be looking at the determinants of employee turnover and its effect on the performance of some selected microfinance institutions.

• Statement of the Problem

The role of manpower in financial institutions is very important being a service sector. Employee turnover is a well-known and common problem among the microfinance institutions (Abdali, 2011). It involves all level of employees and been encouraged by the feeling of being taken advantage of; undervalued; and where employees feel their working environment and job situation does not suit their need; the availability of jobs in the banking industry and many organizations willing to offer great packages.

Employee turnover in microfinance institutions’ often involve the knowledge or intellectual asset exiting the organization. When they leave it poses a problem to the institution (Maxwel, 2010). The organizations operational aspect of the affected department changes considerably (Martin, 2005). This creates disruptions and inability for services to be rendered timely and efficiently. As a result: productivity, quality and profitability are greatly affected due to the loss of knowledge and technical skills. The absence of skill and knowledge of new replacement employee, also affects customers view of customer relationship and satisfaction for not being able to meet or exceed the customer’s expectation (Brian, 2009). When customers are dissatisfied it becomes disastrous to the image of the institution. Thus high turnover can be a serious obstacle to productivity, quality, and profitability of the organisation.

From the foregone, there is a crucial need to undergo a comprehensive study on employee turnover intention. The results would present another perspective to the findings on previous studies. The main purpose of this research is to investigate the determinants of employee turnover and examine its effect on the performance of some selected microfinance institution in Bamenda.

• Research Questions

The above problem ignites a major question: what determines employee turnover in an organisation and what effect does it have on organisational performance? More specifically;

• What are the determinants of employee turnover in an organisation?
• What is the effect of employees’ turnover on the performance of an organisation?
  • Objectives of the Study

The main objective of this study is to investigate the determinants of employee turnover and examine its effect on organisational performance. Specifically,

• To investigate the determinants of employee turnover in an organisation;
• To examine the effects of employee turnover on the performance of an organisation.