EMPLOYEE
TURNOVER AND PRODUCTIVITY AMONG SMALL BUSINESS ENTITIES IN NIGERIA
John N. N. Ugoani
College of Management and Social Sciences,
Rhema University, Nigeria
E-mail: drjohnugoani@yahoo.com
Submission: 02/04/2016
Revision: 12/04/2016
Accept: 19/06/2016
ABSTRACT
This study was designed to evaluate the
problems of employee turnover on productivity among small business entities in
Nigeria, and recommend remedial actions. Employee turnover is the separation of
employees from employers and replacement with other employees. Productive
manpower is a critical element for the economic survival of any small business
entity. The survey research design was used for the study. The sample comprised
of 320 respondents. Data generated were analyzed by using descriptive and
Z-test statistical techniques. It was found that employee turnover adversely
affects productivity in small business entities in Nigeria.
Keywords: absenteeism, turnover,
sexual-harassment, clones, Igbuoge,
psychological implication.
1. INTRODUCTION
In human resource management
context, the employee is the human being who possesses specific abilities,
skills, knowledge and desired work attitudes and whose services are required
for the purpose of undertaking certain specified activities needed for the
attainment of enterprise goals. Generally speaking, turnover occurs when
employees leave organizations and have to be replaced by others.
Turnover is a costly problem that
has adverse effects on productivity. The problem of turnover can be understood
by the popular phrase nowadays that there are no longer any job for life,
suggesting that the length of time employees spend working for others has
reduced very drastically in recent years.
Turnover always rises when the
economy of a country is strong or in a state of boom, and work opportunities
are plentiful for people to change employers. On the contrary, in times of
recession, employee turnover falls because relatively few attractive and
permanent job openings are available. Another way of understanding employee
turnover is to state that it refers to the termination of employees and the
engagement of other employees to replace them.
Such activities are usually divided
into additions and separations. Additions include new hires and recalls.
Separations include lay-offs, quits, discharges, among others. Temporary
employees and transfers between jobs are not considered terminations or
additions in evaluating overall enterprise employee turnover. The incidence of
employee turnover also increases in a situation where physical working
conditions are poor.
Environmental stresses or
distractions such as poor illumination, temperature, unpleasant noise and
ventilation as well as unfriendly co-employees. These can push up turnover
rates to higher degrees than the attitudes towards the enterprise, the pay, or
the job itself. Turnover equally increases where employees have relatively poor
relations with their employers or managers.
The employee who feels that the
manager is unfair or unfriendly will always feel like quitting the job. It is
equally highly important to stress that older employees do generally maintain a
better average turnover record than younger employees. When jobs are surplus
and employment is high there is usually some increase in turnover rates.
The incidence of employee turnover
is higher under the age of thirty after which it generally cools off. The
incidence is also higher among women than men and about 30 percent higher in
married than unmarried women. This perhaps explains the paucity of women in
high management positions.
Turnover is frequently categorized
as voluntary or involuntary and avoidable or unavoidable. Voluntary separations
are initiated by the employees while involuntary terminations are initiated by
the employer. However, Lee, et al (1999) in their model of voluntary turnover
state that it represents a divergence from traditional thinking and suggest
that the phenomenon is primarily based on a theory of decision-making.
Avoidable turnover issues are the
ones the employer has control over such as wages, benefits, working hours, and
work conditions, among others. Unavoidable turnover issues are the ones the
employer has no control over such as chronic illness, retirement, death and
pregnancy, in the case of women. (MCEVOY, et al, 1987, MORRELL, et al 2004).
Inability to minimize turnover among
Small Business entities (SBEs) is a big problem because the employee is the
greatest asset of any business, no matter how big or small it may be,
organizations are social systems and they are made up of structures, technology
and the environment. The common denominator among these three is labour. The
human agent is buffeted with the designing, building and the operations of
organizational structures.
Employees are concerned with the
development and use of appropriate technology for the achievement of enterprise
goals. Also, people in their various endeavors in life directly or indirectly
examine, manipulate or exploit their immediate environments, the consequences
of which are later translated to either challenges or prospects of their
enterprises. The human being is therefore the most important and versatile
resource in any organization.
Controlled turnover can be healthy
because it wipes away non-performers and brings in new hires with fresh blood,
and ideas and approaches to an enterprise. It makes nonsense of enterprise
“clones” that have a specific mindset and much less creative or innovative.
Although some small business promoters recognize the seriousness of the
problems of employee turnover, they hardly evaluate its implications on
productivity.
Failure to link employee turnover
and reduced productivity frequently results in little or nothing being done to
reduce the problem. If much money and time are put in recruitment and
selection, also some good time and money should be budgeted for keeping them.
The typical notion that the problem of employee turnover is a complex one does
not solve the problem.
According to Natolooka and Otengo
(2011), labour turnover describes “how long employees tend to stay or the rate
of traffic through the revolving-door”. If an employer is said to have a high
turnover relative to its competitors, it means that employees of that
organization have a shorter average turnover than those of the other
organizations in the same industry.
Employee turnover is commonly used
to refer only to wastage or the number of employees leaving the organization.
Employee turnover can be controlled in many ways. Since it is connected to job
satisfaction, matching an employee expectations of rewards and satisfaction to
what is actually provided by the employer may help reduce employee turnover. A
fine way to reduce turnover is to improve selection and better match applicants
to jobs.
Improving the selection process and
employing the right people may be helpful. Good employee orientation can also
help to reduce turnover. Equitable and fair pay, career planning and internal
promotion can help in no small measure in reducing the incidence of employee
turnover. Present day employees tend to move from employer to employer early on
in their careers.
But once they find a job or an
employer that they like, the tendency is to remain for years. For example, many
employees have stayed on in their jobs for over 10-30 years in Nigeria (Udeze,
2000). Employee turnover is neither a local nor recent phenomenon. It is a
global issue that many enterprises are struggling to handle.
According to Halloran (1978), to be
fair to employees, if some employers feel that a person working at the same job
for over twenty years is bound to go stale and that the best way to restore
interest, imagination, vigor, and capacity for growth to those who are
stagnating is to allow long breaks-to rest, to study, and possibly to change
fields. With today’s jet-age becoming a serious problem, the employment culture
is fast changing; it is now very common to find younger people changing jobs
every few years instead of staying with a particular organization for the whole
of the employment life.
This they do, not because of any
accident but rather to suit their ever changing life styles, including the
ever-prominent desire to balance work and family roles. Since productivity
means reaching the higher level of performance, with the least expenditure of
resources – including employees – the need for reducing employee turnover
cannot be over emphasized.
Employee turnover appears to be high
in Nigeria because it is generally perceived that SBEs lack the capacity to pay
or retain good employees, and there is also the problem of what constitutes a
SBE. Over the years, several definitions of a small business have emerged.
Different countries try to define what constitutes a SBE or a Small business
within the context of their economic development. For example, in the U.S, a
small business or a SBE is an individual, partnership, trust or company with
aggregate turnover less than $2m (U.S 1976-83, LONGENECKER, et al, 2006).
Also the basic characteristics of a
small business, irrespective of any definitions, would include: (a) the
managers being the owners, (b) capital being supplied and the ownership held by
an individual or small group, (c) the area of operation being mainly local, but
the markets need not be local. According to the micro, small and medium enterprises
(MSMEs) Act (2006), the meaning of the terms MSMEs is understood with respect
to the investment made in the plant, machinery and equipment.
The Act suggests that in Nigeria
microenterprises or SBEs mean businesses defined by the Act. In this case, a micro
enterprise is an entity with capital investment of not more than N1m only which
includes a working capital but excluding land and or a labour size of between 1
and 10 workers. Small enterprises are the businesses with capital and
investment of over N1.5m only but not exceeding, and a labour size of between
11 and 100 workers, while medium enterprises are business entities with capital
and investment of over N50m only but not more than N200m including working
capital but excluding the cost of land, or a labour size of between 101 and 300
workers.
According to Aganga (2012) Nigeria
has about 17.3m MSMEs. Generally, a small business is one that is independently
owned and operated, but not dominant in its field. In addition to being small
in size, a small business is also usually localized in its operations. Its
owner(s), employees, and customers often reside in the same town in which the
enterprise is located. (AWUJO; URIETO, 1995, IBEENWO, 2015).
According to Nickels, et al (2005)
90 percent of all small business failures are as a result of poor management
including poor human relations and human resource management. SBEs constitute a
vital engine in economic growth and development of a nation. For example,
Nigeria Vision 20:2020 is anchored on the recognition that the people are the
most essential assets of any nation.
With a learning population of over
160 million people Nigeria represents one of the largest markets in the
developing world. Transforming these people into catalysts for growth and national
renewal, and lasting growth underscores the need for SBEs development so as to
improve the wellbeing of the people working there.
According to Awujo and Urieto (1995)
a study of small business owners in Nigeria showed a significant correlation of
human relations ability and small business success. Human relations ability is
comprised of ascending emotional stability, sociability, personal relations,
considerations, and co-operation that should exist between owner(s) and the
employees.
Valuing people as critical assets,
being fair to people at work, developing cordial labour-management partnerships
as well as the appreciation of learning and new ideas are among the essential
ingredients that would help in reducing employee turnover in SBEs. This is important
because there may not be a single objective performance criterion, rather, the
great thing may be the fairness of the employment arrangement, and weather
people feel that the process treats them equitably. According to Ugoani (2013)
fair treatment of employees and sound employee diversity management are
critical for employee attraction and retention.
1.1.
Statement of the Problem
Some SBEs fail to appreciate that
the human element is important to the survival of any business. This is in
contrast to the classic views of Wren (1987) that organizations should take
steps to assist employees in adjusting to organizational life by fostering
collaborative systems between labour and management. This over-sight leads to
the neglect of employees resulting to poor remuneration, conditions of service,
lack of recognition, discrimination, and lack of career path among others.
People come to work so as to find a
window of opportunity to serve, develop themselves and ultimately solve some
personal problems which they may not be able to solve alone. It is logical that
when employees experience difficulties or notice that what they had expected
from the employment arrangement does not seem to be working out, the tendency
is always to think of leaving the job.
For example, an entry level employee
who observes that his employer is not the type interested in his personal
development would only use such an employment as a stepping stone, a waiting
time, Igbuoge, before leaving for an alternative and probably better employment.
The existence of all or most of all these problems lead to employee turnover
and affect productivity among SBEs negatively.
1.2.
Objective of the study
This study was designed to explore
the impact of employee turnover on productivity among SBEs in Nigeria.
1.3.
Hypotheses
To properly guide this study, two
hypotheses were formulated and tested at 0.05 level of significance.
- H0:
Employee turnover has no adverse relationship with productivity among SBEs
in Nigeria
- Hi:
Employee turnover has adverse relationship with productivity among SBEs in
Nigeria.
1.4.
Delimitation of the study
This study was delimited to
South-East Nigeria.
1.5.
Limitations of the study
The
study suffered the lack of research grant and the pains of poor road network
that did allow for the extension of the study to other states. However, these
limitations did not affect the validity of the study.
2. LITERATURE REVIEW
Employee turnover relates to the
numbers of workers leaving employment and being replaced within a given period
against the ratio of the average labour force maintained at a time. People
leave employment for many reasons, some of which are outside the power of the
employer to influence, known as outside factors, and unrelated to work, such as
people moving away when a spouse or partner is relocated.
Functional turnover includes all
resignations which are welcomed by both employers and employee alike. The major
examples are those which stem from an employee’s poor work performance or
failure to fit in comfortably with an organizational or departmental culture.
Others are the push factors and the pull factors leading to unwanted turnover.
A wide range of pushes can be
mentioned to explain such turnover problems. For example, insufficient
development opportunities, boredom, ineffective supervision, poor levels of
employee involvement and personality clashes are among the most common push
factors for employees leaving employment. The reverse side of the coin is the
attraction of rival employers. For example, salary levels are often a factor for
employees leaving in order to improve their living standards.
Also there are broader notions of
career development, the wish to move into new areas of work for which there are
better opportunities elsewhere, the chance to work with particular people, and
more practical questions such as commuting time. For an employer losing
employees as a result of such pull factors there are two main lines of actions
to take.
First, there is a need to be aware
of what other employers are offering and to ensure that as far as possible this
is matched – or at least that a broadly comparable package of pay and
opportunity is offered. The second requirement involves trying to ensure that
employees appreciate what they are currently being given. The emphasis is on
effective communication of any unique selling points, and of the extent to
which opportunity comparable to those offered elsewhere is given.
For example, Taylor (2002)
interviewed 200 people who had chased employers about why they left their last
jobs. It was found that a mix of factors at work in most cases were responsible
but concluded that push factors were a great deal more prevalent than pull
factors as causes of voluntary resignations. The study indicated that very few
people appear to leave jobs in which they are happy in search of something even
better.
Instead the picture is an
overwhelming one in which dissatisfied employees seek alternatives because they
no longer enjoy working for their current employers. The same study found
relatively few examples of people leaving for financial reasons. Other factors
found to influence voluntary resignations include; dissatisfaction with the
conditions of work, especially hours, a perception that they were not being
given sufficient career development opportunities, and bad relationships with
their immediate supervisors.
The issue of bad relationships was
most commonly mentioned according to Taylor (2002), lending support to the
often stated point that people leave their managers and not their
organizations. High levels of turnover can destabilize a business and
demotivate those who attempt to maintain levels of service and output against a
background of vacant posts, inexperienced staff and general discontent. High
rates of turnover can be reduced through good internal communications, because
most employees who leave their employment do so because they never heard what
they expected to hear.
Organizations function by means of
collective action of people, yet each person is competent of taking independent
action which may not be in line with policy or instructions or may not be
reported properly to other people who ought to know. Since employees are most
frequently influenced by the push factors, the issue of good internal
communications cannot be ignored.
Obviously, employees want to hear
about, and to comment upon the matters that affect their interests. These of
course will include changes in working methods, and conditions, changes in the
arrangements for pay and other conditions of the employment arrangement.
According to Armstrong (2004), employers should try to understand what
employees want to hear and plan its communication strategy to suit it.
This can easily be done through open
communications such as conducting focus group discussions which bring together
groups of employees to focus on particular issues that concern them, by means
of attitude surveys, by asking employee representatives, by informally
listening to employees and hear grievances to see if improved interactions
could modify them and thus reduce the rate of voluntary turnover.
Good internal communications ensures
that employees are given an opportunity to voice out their suggestions and
fears and that the organization is in a position to amend its strategies in the
light of employee’s observations. Daisy, et al (2013) argue that organizations
that put in place practices like effective and equitable compensation
structure, appropriate promotional scales,
enhanced development and training opportunities, will motivate their
employees to stay.
Sutherland (2004) further explains
that proficiently planned and well-executed employee retention strategy will
significantly enhance productivity and reduce employee turnover. According to
Middleton, et al (1993) “Both common sense and economic research support the
idea that the gravity of a nation’s workforce is important to economic growth
and social development. Two factors are generally considered to be the prime
determinants of the quality of a work force.
One is labour productivity, or the
value of the goods and services produced by a worker. The second is the
flexibility of the work force or the ability of workers to move across sectors
of the economy and between industries as the structure of the economy changes”.
This can better be achieved through turnover reduction in organizations.
Productivity is a critical determinant of organizational profit ability and
survival.
The term productivity is usually
used in a general sense with little differences in the meaning. When used as a
general term it is applicable to a wide area of economic activities, contexts
and other circumstances. Accordingly productivity applies virtually to all
disciplines and spheres of human endeavour. Productivity is related to a much
combination of factors necessary to achieve predetermined organization goals.
The level of productivity in an
organization depends on two major factors, namely human performance and
technology. Human performance is directly related to employee productivity. In
the context, productivity is an index that measures output relative to the
input used to produce them. This is often expressed as the ratio of output to
input.
Productivity has important
implication for the business organization and for the entire nation. For
example, for nonprofit organizations, higher productivity means a lower cost,
for profit-based organizations, productivity is an important factor in
determining how competitive an organization is. For a nation, the rate of
productivity growth is of great importance. Productivity increases add value to
the economy while keeping inflation in check (STEVENSON, 2002).
Productivity measurement on the
other hand provides productivity data which is used to ascertain the level of
organizational effectiveness and efficiency (AKANWA; AGU, 2005). Productivity
declines in a situation of high employee turnover that may be caused by adverse
work conditions.
According to Shaw, et al (1998)
employee turnover is a much studied phenomenon, but there is no universally
accepted account for why people choose to leave organizations. Hom and Griffeth
(1995) reviewed many studies on employee turnover and posit that predominantly,
there are instances where the employee makes the decision rather than in the
cases of involuntary turnover.
To some extent therefore, voluntary
turnover issues are of interest because in a majority of cases, these represent
the bulk of turnover within the organization. Such category of turnover equally
represents a significant cost proportion to the organization (MORRELL, et al,
2004).
Morrell, et al (2004) believe that
there is no accepted theoretical framework for clearly understanding the
turnover characteristics and processes completely, but that factors such as job satisfaction and
dissatisfaction, labour market situation, equity variables, the question of
psychological contract, are among the important factors that influence employee
turnover (HOM; KINICKI, 2001).
3. METHODOLOGY:
3.1.
Research design
Survey research design was used for
the study. This design is used so as to gain a fuller understanding of a topic
of interest to the investigator (ASIKA, 2004).
3.2.
Participants
The sample comprised of 320
participants (195 males, and 125 females) ranging in age from 21 to 70 (M = 46
years; SD = 25). The participants were generated from the population in
Nigeria.
3.3.
Instrument
Data were generated through a 5 –
point 20 item Likert-type questionnaire titled “Employee Turnover and
Productivity Questionnaire (ETPQ)” adapted from Cook and Wall’s (1980) British
Organizational Commitment scale. The scale has previously been subjected to
development and validation procedures and with Cronbach’s Alpha established at
about .81.
3.4.
Procedure
Copies of the questionnaire were
personally administered on the participants by the investigator and two
research assistants. They were required to answer questions in the areas of
poor working conditions, pay, communication, supervision, etc. All the
questionnaire copies were returned and the responses found suitable for
analysis.
3.5.
Data Analysis
Data were analyzed using descriptive
and Z-test statistical methods, and the results presented in tables.
3.6.
Presentation of results.
Figure 1 was used to illustrate the
typology of SBEs in Nigeria.
Figure 1: SBEs Model in Nigeria
Source: Adapted from
Ibeenwo (2015)
Table 1 reflected the
characteristics of respondents.
Table 1: Demographic Breakdown of the
Sample (n = 320)
|
Demographic
features |
Measures |
Frequency |
Percentage |
|
Age |
21 – 50
|
215
320 |
67.19 32.81 100.00 |
|
Gender |
Male
|
195
320 |
60.94 39.06 100.00 |
|
Employment |
Entrepreneurs Small business managers
Others |
85 101 70
320 |
26.56 32.56 21.88 20.00 100.00 |
|
Education |
FSLC GCE Dip/Others
|
132 108 33
320 |
41.25 33.75 10.31 14.69 100.00 |
|
Experience |
1 -10 11 – 20
|
65 175
320 |
20.31 54.69 25.00 100.00 |
Source: Field work, 2016.
Table 2 showed that 192 respondents,
representing about 60 percent agreed that the problems of employee turnover
negatively affects the productivity of the SBEs,
Table 3: Analysis of Responses
|
S/N |
Problems
of Turnover |
No of Respondents (Agree) |
Scores of respondents |
Mean Scores of Respondents |
Standard deviation |
No of Respondents (disagree) |
Scores of respondent |
Mean score of respondent |
Standard deviation |
Total no of respondents |
|
1 |
Apathy of employees |
180 |
810 |
4.50 |
2.62 |
140 |
280 |
2.00 |
1.36 |
320 |
|
2 |
Poor working conditions |
210 |
840 |
4.00 |
0.35 |
110 |
273 |
2.50 |
2.01 |
320 |
|
3 |
Poor supervision |
200 |
900 |
4.50 |
3.90 |
120 |
314 |
2.60 |
1.47 |
320 |
|
4 |
Poor pay |
200 |
850 |
4.25 |
0.35 |
120 |
240 |
2.00 |
5.13 |
320 |
|
5 |
Ineffective communication |
194 |
873 |
4.50 |
2.02 |
126 |
315 |
2.50 |
1.70 |
320 |
|
6 |
Inadequate training opportunities |
210 |
945 |
4.50 |
6.92 |
110 |
230 |
2.09 |
6.32 |
320 |
|
7 |
Unethical behaviours |
152 |
700 |
4.61 |
11.80 |
168 |
420 |
2.50 |
9.60 |
320 |
|
|
Total |
1346 |
5918 |
30.86 |
27.96 |
894 |
2072 |
16.19 |
27.59 |
2240 |
|
|
Aggregate mean |
192 |
845 |
4.41 |
4.00 |
128 |
296 |
2.31 |
3.94 |
320 |
Source: Field Survey,
2016
while about 40 percent (128
respondents) differed in this opinion.
Table 3: Z-test Statistical Analysis
|
Responses
(options) |
No of
Respondents |
Mean scores
X |
Standard
deviation |
Degrees of
freedom |
Z –
calculated |
Z – critical
|
Level of
significance |
Decision |
|
Agree |
192 |
4.41 |
4.00 |
4 |
+3.28 |
1.96 |
0.05 |
Rejected |
|
Disagree |
128 |
2.31 |
3.94 |