EFFECT OF LABOUR TURNOVER ON ORGANISATIONAL PRODUCTIVITY

UNIVERISTY OF LAGOS FACULTY OF BUSINESS ADMINISTRATION DEPARTMENT OF INDUSTRIAL RELATIONS AND PERSONNEL MANAGEMENT Proposed Title of Thesis: "The impact of Labour Turnover on Organsiation Productivity: (A study of Mutual Benefits Life Assurance Plc.)" By: Onadele Dare, Jacob Matric No: 070206062 Being a Research Proposal Submitted to the Department of Industrial Relations and Personnel Management, Faculty of Business Administration, University of Lagos. In Partial fulfilment of the Award of BSc in Industrial Relations & Personnel Management. Supervisor: Mr. A. E Badejo May 2011 1 INTRODUCTION The practice of human resource management (HRM) is concerned with all aspects of how people are employed and managed in an organisation (Armstrong, 2009). The strategic business function organ of the organisation sees to the inflow and outflow of employees in the organisaiton. The HRM function of directing the organisation system to ensure that human talents are used effectively to accomplish desired goals is very crucial, thereby not left ignored. Organisations zealous about growth would always intend to develop their respective current human capital and other potentials. But in this world of frequent upgrade and innovations in the business environment and the technological ways of doing things, organisations would commit themselves towards bringing their workforce to the task requiring intellectual and manual growth and development. The idea behind this would be to intensify the additional productivity generated by extra employee hired. All these put together would amount to organisations being cost conscious in making sure that employees with high human capital do not leave their organisations. But in order to be realistic, organizations cannot be everything to all people. No matter how great your company is, it is likely that some of your employees will eventually move

on to other opportunities. That may be costing you a lot and affecting your well enjoyed stabilized organization productivity. Labour or worker or employee or staff turnover has it is often referred to, is the number of permanent employees leaving the company within the reported period versus the number of actual Active Permanent employees on the last day of the previous reported period (physical headcount). According to Business Dictionary (2011), the ratio of the number of employees that leave a company through attrition, dismissal, or resignation during a period to the number of employees on payroll during the same period makes up what is referred to as Labour Turnover. An employee leaving the organization either voluntarily or involuntarily is certain to have positive or negative effects on the organization. This as well would reflect on the productivity of the organization concerned. In other words, high turnover can be harmful to a company's productivity if skilled workers are often leaving and the worker population contains a high percentage of novice workers (Open Forum, 2011). This is especially the case if those leaving are either key to its success and continuity or do so because they think you have treated them unfairly, which could result in tribunal claims (Business Link, 2011). This means maintaining the satisfactory level of productivity might be threatened. Therefore curbing turnover to its optimal level for the organization is a major challenge. However, the research on the consequences of labour turnover is inconclusive, and provides little guidance on how much turnover, if any, is optimal (Siebert, 2006). It hereby leaves us wondering what optimal number is needed for the organizations best productivity. As turnover even poses to be a major and widely studied organizational behavior phenomenon, it fosters why researchers are becoming interested in it more. It is a phenomenon that not just affects a company, occupation or industry, but an issue tackled by organizations all around the world. This is because at one employees voluntary or involuntary time they would have to leave the organization. (Abelson 1987; Campion 1991). 1.2 STATEMENT OF RESEARCH PROBLEM Labour turnover as noticed, if not looked into, could eat deep into the profitability and threaten the sustainability of any organization. As a global challenge as well mandatory confrontation of the technological and environmental diversities which organizations have to face, many brows are raised on its persistence. The Nigerian insurance sector has not been left out as labour turnover has been disrupting their services and relatively their organization productivity. The Human Resource Managers and the executives of these organizations have always been on their toes to proffer solutions to labour turnover. The consciousness of hiring, monetary and time cost recorded when highly frequent labour turnover occurs; thereby affecting productivity which makes this a problem that begs for answer. Organizations lose not just financially, or in productivity when they have an employee with huge human capital permanently departing from their organization. This could have been due to avoidable or unavoidable reasons.

The technological and business demands of electronic dealings have also affected ways in which operations are carried out in the Nigerian insurance industry. Some new fresh ideas have been witnessed with the opportunities for new transfers and promotions, but those still have to be compared to the contributions or reductions which are now available. This study would look into how the effects of the voluntary or involuntary labour turnover have impacted on the productivity level of the organization observed. As well to what extent, the organizations need to plan in anticipating an optimal level of labour human capital that can yield the needed productivity in the Nigerian insurance sector which is becoming labour shortages. 1.3 LITERATURE REVIEW Employee turnover has benefits and costs for organizational performance (Ableson & Baysinger, 1984). But a study is not just being carried out to have the positive sides analysed. The human resource management literature has traditionally viewed labour turnover in a negative light. Human capital theories of labour turnover point to loss of firm-specific human and social capital (Dess and Shaw 2001). This negative view is supported by the results of several empirical studies. For example, Huselid (1995) finds high labour turnover negatively linked to labour productivity in his sample of 968 U.S. firms. Also Baron, Hannan and Burton (2001) find turnover to be disruptive in their study of hi-tech start-ups in California in the early 1990s. Many studies have concentrated on quits specifically, and have found a negative impact of quits on firm performance, as in Batt (2002) for U.S. call centres, McElroy, Morrow and Rude (2001) for branches of a U.S. financial company, etc. But some have since been reporting the optimistic side of the coin. Job matching theory (Jovanovic, 1979) predicts that workers less suitable for the organisation would result into leaving it earlier; hence, there is room for labour turnover to improve performance (productivity) by clearing the workforce of poor worker-job matches. In the same vain, McEvoy and Cascios (1987) meta-analysis of twenty-four reported correlations between performance and turnover concluded that good performers are less likely to leave than are poor performers, which supports the main prediction of job matching theory (p. 758). Williams and Livingstones (1994) further meta-study of turnover supported McEvoy and Cascio (1987) and proved an even stronger negative relationship between worker individual performance and voluntary turnover when pay is contingent on the organisations productivity. Ilmakunnas, Maliranta and Vainiomki (2005) report a positive impact of turnover on total factor productivity growth in Finnish manufacturing. However, the Nigerian insurance sector may be faced with such ups and downs as regards to impact of labour turnover on organisation productivity. But relatively unlike most of the research on the topic, Bingley and Westergaard-Nielsen (2004) look at hires and quits simultaneously in their study of personnel policies and profit in a panel of 7,118 Danish organisations over 1992-95. In contrast to the popular result, they conclude that quits increase profit and hires reduce it. They argue, consistently with job matching theory that the least productive workers are more likely to leave. The finding on hires is interpreted in terms of turnover costs, since hires incur recruitment and training costs.

Thus, reconciliation of job matching and human capital theories of labour turnover is assisted by distinguishing between quits and hires a path we will follow. Those were observed by W. Stanley Siebert, Nikolay Zubanov, Arnaud Chevalier, Tarja Viitanen (2006). The case of a firm in the Nigerian insurance sector on the impact of labour turnover on productivity may take along the practice of the HRM. Guthrie (2001) found a dichotomy in the impact of turnover on productivity depending on the type of human resource management (HRM) system in the organisation. Glebbeek and Bax (2004) using data from offices of a temporary employment agency in the Netherlands over 1995-98 indeed find an inverted U-shape relationship between worker turnover and productivity. The same relationship between labour turnover and productivity is reported in a study of 2,435 workplaces in Australia over 1995-97, by Harris, Tang and Tseng (2002). However, Shaw, Gupta and Delery (2005: 61) report the opposite result for U.S. and Canadian concrete plants and U.S. transportation companies, where they conclude that the relationship between voluntary turnover and workforce performance is negative but becomes attenuated as turnover increases. This particular study, however, would look into ups and downs earlier known to rock an organisations productivity if it has employee turnover. Particularly, an organisation in the Nigerian insurance industry being studied if the earlier affirmations can be upheld or restructured to show our societys diversified business environment. 1.4 PURPOSE OF THE STUDY The purpose of this study is to achieve the following: i. To affirm the relationship between labour turnover and organization productivity. ii. To investigate the impact of business diversities requirement like technology amounting to organization productivity on labour turnover. iii. To investigate how organisations can reduce unfavourable labour turnover on productivity. iv. To examine labour turnover impact on MBLA 1.5 RESEARCH QUESTIONS The following are the research questions developed for the course of this study. They are: i. Does Nigerian insurance sector witness labour turnover? ii. Is labour turnover a challenge to organization? iii. Is organization productivity disrupted when organization labour turnover takes place? iv. Does an organization have any positive productivity advantage when labour turnover occurs? v. Are there measures of curbing labour turnover when organization sees it could halt productivity?

1.6 STATEMENT OF HYPOTHESES The hypotheses to be used in validating this study project are stated as follows: H0: There is no significant relationship between the labour turnover and organization productivity of MBLA. H0: There is a significant relationship between labour turnover and organization productivity of MBLA. H0: There is no impact on labour turnover and organization productivity of MBLA H0 : There is an impact of labour turnover on organization productivity of MBLA. 1.7 SIGNIFICANCE OF THE STUDY The significance of this study is tailored towards the evaluation, analysis and addition to the current existing body of knowledge. It would assist the human resource managers in capturing adverse labour turnover effect which could halt their organizations effectiveness and efficiency. Knowing the costly effect of an unchecked labour turnover on the organization productivity, this study would help HR managers on other logical steps to militate against employee turnover. The recommendations can be used in helping organizations not just in the Nigerian insurance sector but as well other sectors of the economy. By using this study different organization can reduce the rate of employee turnover and increase their productivity and profitability. 1.8 RESEARCH METHODOLOGY 1.8.2 Population of the Study Due to the uneasy access to the entire population of this study, a sample would be drawn up. According to Levin and Rubin, (2002), a population is the whole collection of all elements that a research is studying and from which generalization will be drawn from. The study would make use of a branch of MBLA and a generalisation would be utilized. However the organisation has about 500 staff with about 15 of them taking charge of the executive functions of the company. Also the administrative functions are run by over 60 of their staff. Besides, the other population are either their marketers or ther junior workers.

1.8.3 Sampling and Sampling Techniques With application of a stratified sampling, the employees of the organisation would be unbiasedly picked. This would be enforced among both the senior and junior employees of the organisation. All these effort is to have a reasonable conclusion from which generalisation would be ascertained.

1.8.4 Strategy for the Collection of Data The primary data generation would be through dissemination of quesstionaires and some other additional interview briefs. The other earlier publications would be added to have a concrete information. These would be used in getting the necessary source of data in generating findings on the impact of labour turnover on organisation productivity in the Nigerian insurance sector. 1.8.5 Data Presentation The new advancement in statistical analysis, SPSS, would be utilized in presenting the data generated. The mean, median, mode, frequency and percentiles would be explored for a clearer data presentation 1.8.6 Test of the Conjuctural Statement With the use correlation, regression and t-test, the hypotheses of the study would be put to test. 1.9 SYNOPSIS The outline of this five-study would wear the face of having the first chapter introducing the topic and its subject matter of labour turnover and its corresponding effect on organisation productivity. Also, the second chapter of the study would contain the prior knowledge and study done on this topic. From this some theories and standings of previous scholars would be incorporated into this particular present topic. Besides that, the third chapter would have the methodology to apply in carrying out this study. The instruments and sources of data that would be applied at MBLA in assuring that the right information are gathered within the confinement of the ethical stands, in other to have a good research work in the study. However, the fourth study would look at the data presented and analysed in the format that is generally acceptable. This would enhance the genuineness of this study. Also, the fifth chapter would see to the conclusion and recommendation of the project. This is where the findings and results of the study would be concluded and any recommendation suitable for MBLA and other organisations of its kind would be issued for their discretional adoption. REFERENCES http://www.businesslink.gov.uk/bdotg/action/detail? itemId=1074411249&type=RESOURCES http://www.openforum.com/idea-hub/topics/money/article/the-high-cost-of-employeeturnover-scott-allen Batt, R. 2002. Managing customer services: Human resource practices, quit rates, and

sales growth. Academy of Management Journal, 45: 587597. Batt, R., Colvin, A. J. S., & Keefe, J. 2002. Employee voice, human resource practices, and quit rates: Evidence from the telecommunications industry. Industrial and Labour Relations Review, 55: 573594. Becker, B., & Huselid, M. 2006. Strategic human resource management: Where do we go from here? Journal of Management, 32: 898925. GHAURI, P. & GRONHAUG, K. (2002),Research Methods in Business Studies: a practical guide, London, Prentice Hall GREEN, F., FELSTEAD, A., MAYHEW, K. & PACK, A. (2000),The impact of training on labour mobility: individual and firm-level evidence from Britain British Journal of Industrial Relations, 38, 26 1-275. James K. Harter, Frank L. Schmidt, Theodore L. Hayes (2002), Business-Unit- Level Relationship between Employee Satisfaction, Employee Engagement, and Business Outcomes: A Meta-Analysis, Vol. 87, No. 2, 268279 Judge, T. A., Thoresen, C. J., Bono, J. E., & Patton, G. K. (2001), The job satisfactionjob performance relationship: A qualitative and quantitative review, Psychological Bulletin, 127,376407. K. Morrell, J. Loan-Clarke and A. Wilkinson (2001), Unweaving Leaving: The Use of Models in the Management of Employee Turnover, Business School Research Series, Loughborough University. M. Armstrong (2006), Human Resource Management, Kogan Page, United Kingdom