Along the academic history employee turnover has been identified as a phenomenon which has a critical impact towards the quality of the human resources of an organisation. Employee Turnover occur when an employee permanently leaves an organisation. Precisely, employee turnover includes replacement for the departed employee as the word "turnover" itself suggests (Boudreau and Cascio 2008, p.67). Since considering replacements in line with the employee separations sound more complex, in this study the term turnover will only refer to employee separations. According to Boudreau and Cascio (2008, p.68) employee turnover is an external movement "involving moving across the organisation's external boundary".
Employee turnover would be either involuntary of voluntary (Boudreau and Cascio 2008, p.69). Involuntary turnover refers to the incidents where employees are compelled to leave the organisation such as staff layoffs and requested resignations. In most of the cases, involuntary turnover accounts for a very small fraction of total turnover of an organisation. Delmotte et al (2002, p. 5) have explained voluntary turnover as the number of departures during a period at employees' own initiatives. Boudreau and Cascio (2008, p.69) state that voluntary employee turnover is more controllable than involuntary turnover which is more unpredictable. Therefore this part of the study will be more focused on controllable and significantly observed employee voluntary turnover.
Employee turnover models have been emerged over the years with the intention of producing a framework for the Human Resources Development professionals to evaluate their practices on the basis of reduced voluntary turnover (Peterson 2004, p.210). According to Besich (2005 p.2) employee turnover models states that ease of movement and desirability of movement attribute to the voluntary turnover. The first ever inspirational model on employee turnover has been introduced by March and Simon (1958) as a theory on organisational equilibrium which suggested that higher job satisfaction may reduce employee turnover by diminishing the desirability of moving of the employees (Peterson 2004, p.210, Besich 2005 p.2). According to Peterson (2010) the next significant emergent model to explain employee turnover has been developed by Porter and Steers (1973). In their Met-Expectation model, Porter and Steers (1973) stated that individual employees are more willing to quit when their individual set of expectations toward the employer, are unmet.
Regardless of the turnover model discussed, the word Turnover Intention is always go in line with the phenomenon of employee turnover. In Mobley's model (1977) it is explained that thinking about quitting due to job satisfaction, will lead employees towards job search which will result in actual quitting (Peterson 2004, p.212). This model inspired the employee turnover models developed by Dougherty et al (1985), Hom et al (1992), Hom and Griffith (1991,1995) and various other scholars, who suggested turnover intention as a first step of employee turnover (Peterson 2004, p.212). In their Model of Turnover Determinants, Hom and Griffith (1995) introduced the word Withdrawal Cognition to symbolize turnover intention (Peterson 2004, p.212). This model suggested that the withdrawal cognition of employees will lead to active turnover. These different terms emerged from different studies i.e. desirability of moving, willingness to quit, thinking about quitting and withdrawal cognition has been used to explain the turnover intention which further expanded to the turnover decision of the employees .
Consequences of Employee Turnover
Employee turnover is a definite cost to any organization. Boudreau and Cascio (2008, p.68) introduces three basic parameters which affect the employee movements.
The quantity of the movers
The quality of the movers
The costs incurred
Figure 1 represents how employee turnover affect the workforce value. Let's assume only quantity of the movers of domestic LCBs increase, considering quality and the costs do not change with the total turnover. Yet, according to the logic introduced by Boudreau and Cascio (2008) in the Figure 1, Work force value get affected. Simply put, when all other factors remain same, quantity of the employees who leave the organisation, alone can affect its work force value.
Figure - Logic of Employee Turnover
Source - Boudreau and Cascio (2008, p.69) Starting Workforce Value
Quantity of the employees
X
Quality of the employees
Effect of Separations
Quantity of the employees removed
X
Quality of the employees removed
Effect of Acquisitions
Quantity of the employees added
X
Quality of the employees added
Ending Workforce Value
Quantity of the employees
X
Quality of the employees
Change in Workforce Value
Minus the Transaction Cost of Processing the Separations and Acquisitions
The employee turnover may associate not only with separation costs but also with the acquisitions costs incur in the replacement process. The effect of employee turnover on an organisation is very high when considering Dysfunctional Turnover. (Boudreau and Cascio 2008, p.70) This refers to a situation where high performing staff who are difficult to replace, leave an organisation. In absence of proper succession planning process, this may lead to a vacuum in the organisational hierarchy. According to Boudreau and Cascio (2008, p.79) there are 08 categories of replacement costs to an organisation to tolerate in such a situation;
Communication of job availability
Pre-employment administrative functions
Entrance interviews
Testing
Staff meetings
Travel expenses
Post-employment acquisition and dissemination of information
Employment medical exams
According to the logic of employee turnover, the quality of the movers is a key variable in determining the effect of the turnover towards the organisation. According to Boudreau and Cascio (2008, p.70) the quality of the movers depends on two variables; the Replaceability and the Performance. They further distinguished between Dysfunctional and Functional turnover considering the above variables (Figure 2). When highly performing employee whose replacements are difficult , leave an organisation it is categorized under dysfunctional turnover. When consider along with the logic of employee turnover, dysfunctional turnover will result a difference in the workforce value which is negative.
Replaceability
Easy
Difficult
Performance
High
Low
Functional Turnover
Dysfunctional Turnover
Figure - Performance and Replaceability of Employee Separations
Source - Boudreau and Cascio (2008, p.70)
Employee Turnover in Banking Industry
Factors affecting the Employee Turnover Intention
Bartel and Borjas (1981, p. 69) distinguish between personal and job related aspects as major reasons for voluntary turnover. They have segmented job related turnover in to two categories; voluntary turnover due to job dissatisfaction (Push) and due to better employment opportunity (Pull). CIPD (2005, as cited in Loquercio 2006, p.12) indicates that push factors are organisational and make employees actively consider to leave. It further suggests pull factors appear because of the aggressive competitors in the market. The same argument of push and pull factors has been presented by Bordia, Chang and Ridge (2002, p.108 - 109) with a different perspective. Even though they abide the same idea when defining these two terms, the personal aspects of employee turnover has been categorized under push factors with other job related aspects. (Figure A). In fact, personal factors push employees to quit from their jobs but the related decisions are independent from organisational issues he faced.
Figure - Push and Pull Factors that influence Employee Turnover
Source - Bordia, Chang and Ridge (2002, p. 107)
By exploring more literature on employee voluntary turnover intention it is found that often personal aspects has been treated separately from job related push and pull factors. Ali Shah et al (2010, p. 169 - 172) states that demographic, personal, pull and push factors could affect employee turnover intention. They also consider personal aspects as a different branch.
Bringing out mostly the same definitions as other scholars have indicated, Ali Shah et al (2010) have distinguished push and pull factors as controllable and uncontrollable factors respectively. Controllable push factors always occur within the organisation and uncontrollable pull factors arise from the environment.
According to CIPD (2005) "The most popular measures are those trying to alleviate "push" factors - those that erode employee commitment and make them actively consider a move - rather than combat "pull factors", notably by improving pay and benefits to "diminish the allure of preying competitors." Hence, understanding the value of preventing the occurrence of push factors within the organisation, this study will further be focused towards the push factors affecting the employee voluntary turnover intention.
Pull Factors
Individual Employee
Push Factors
Organisation
Environment
Figure - Role of Push and Pull Factors in Turnover Intention
Source - Own Diagram
Employer-Employee Interdependence as a Push Factor of Employee Turnover
Social Exchange Theory (SET) is among the most influential conceptual paradigms for understanding workplace behavior which combined many disciplines such as anthropology, social psychology and sociology (Cropanzano and Mitchell 2005, p.874) . According to Brewster et al (2012, p.607) the importance of the social factors at the work place is stressed out in the SET and it explains how interdependent and contingent interactions create obligations between people (Emerson 1976, Blau 1964 as cited in Cropanzano and Mitchell 2005, p.874). Blau (1964) states that the social exchange as demanding unstipulated obligations (Conway and Coyle-Shapiro 2005, p.3). Cropanzano and Mitchell (2005, p.875) argue that employment relationships " evolve over time into trusting, loyal, and mutual commitments". They further pointed out that these interdependent transactions have significant impacts on quality of the relationships formulated throughout the employment span. These organizational-level collective relations would influence the exit decisions of the employees as well (Brewster et al 2011, p.606). Hence, it is argued that the negative nature of employment relationship could positively influence the turnover intention of the employees. Since these relationships are formulated and carried out within the organisational context, employee-employer interdependence could also be considered as a push factor for employee exit decisions.
According to Cropanzano and Mitchell (2005, p.875) most common exchange rule in these nature of social exchange relationships is reciprocity. Reciprocity appears where an individual does a favor for another and expecting something unspecified in return (Blau 1964, as cited in Coyle-Shapiro and Kessler 2002, p.69). Simply put, both employer and employee expect something in return for what they have done for each other. Nonetheless, these all aspects of employment relationship do not cover from a legal employment contract. Supporting this argument Splinder (1994) states that the exchange relationship of employment "ranges the entire contract spectrum of strictly legal to purely psychological" (Hrishikesh 2012, p.49). The hidden aspect of the employment exchange has been identified as the psychological contract. (Greenberg 1990, Rousseau 1989, Schein 1982 as cited in Maguire 2002 p.2)
Psychological Contracts and the Perceived Obligations as a Mediator of Employment Relationship
The concept of psychological contract is a result of this employer-employee interdependence and its reciprocate nature, which has been emerged over the decades to define the relationship between employees and their organisations. In most literature, worker psychological contract has been identified as a important feature of the employment relationship (Ho, Levesque, and Rousseau 2006, p. 460, Maguire 2002 p.2). According to Hrishikesh (2012, p. 49) "Psychological Contract is an increasingly relevant aspect of workplace relationships and wider human behavior".
There is no universally accepted definition for psychological contracts. According to Guest and Conway (2002) psychological contract could be viewed as "a two-way exchange of promises and obligations" (Puchala 2008, p.03). Sims (1994) defines psychological contract as the set of expectations held by the individual employee which specifies what the individual and the organisation expect to give and reciprocate during their employment span (Hrishikesh 2012, p.50). According to Shore and Tetrick (1994) psychological contract is the commonly used exchange concept for the understanding of hidden aspects of employment relationship (Hrishikesh 2012, p.49). According to Hrishikesh (2012, p.50) "employee's unexpected beliefs, expectations, promises and responsibilities with respect to what constitutes a fair exchange within the boundaries of employment relationship" refers to the term psychological contract.
According to Hetrick and Martin (2006, p.123) psychological contracts are subjective, unique and idiosyncratic and based on beliefs and perceptions held by individuals.
As discussed above the concept of psychological contract is all about obligations and their fulfillment. Obligations related to the psychological contract are twofold; employer obligations and employer obligations .
Psychological Contract
Figure - Balancing the Psychological Contract
Source - Own Diagram
Employer's Perceived Obligations towards Employees
Obligations are the foundation of psychological contract (Robinson et al.,1994 as cited in Ho, Levesque, and Rousseau 2006, p. 460). Since this study will be focused on violation of employer's perceived obligations and its impact on intention to quit, it's worthwhile to take a glimpse of the existing literature on employer's perceived obligations.
Employer's perceived obligations have been an interesting topic over the years. Attempts were taken by various scholars ( Ehrlich 1994, Kissler 1994, Morrison 1994, Rousseau, 1989) to distinguish between old and modern aspects of employer's perceived obligations (Litter and Maguire 1997, p.55 ). According to Robinson (1996) employees perceive following obligations from their employers (Litter and Maguire 1997, p.55 ). Litter and Maguire (1997) consider these obligations under old perspective of psychological contract.
High Salary
Promotions and advancement
Pay based on performance
Long term job security
Sufficient power and responsibility
Training
Career Development
According to Litter and Maguire (1997, p.57) the above quantum of employer's perceived obligations has been modified, based on a major study done regarding the impact of restructuring on the employee psychological contract which is known as "ONEBANK Study" carried out in Australia. The variables used to measure the said obligations in the ONEBANK study is as follows.
Pay (instead of high salary and pay based on performance)
Promotion (instead of promotions and advancement)
Job security (instead of long term job security
Responsibility/Autonomy (instead of power and responsibility)
Training
Opportunity for personal growth (Instead of career development)
Terms and conditions of employment
Work load
Sense of achievement
Opportunity for staff input
Recognition
The employee perception towards employer and employee obligations, which has been derived from the one bank study is illustrated in Figure 8 below. It's clear that the in the employees' point of view, they expect more from their employer than the obligations they are ready to fulfill.
Employee Obligations
Psychological Contract
Employer Obligations
Reasonable level of effort
Reasonable level of performance
Commitment to their employer
Loyalty to their employer
Equitable pay
Opportunity for promotion
Job Security
Responsibility
Autonomy
Training
Opportunity for personal growth
Reasonable terms and conditions of employment
Opportunity for staff input
Reasonable workload
Recognition
Figure - Employee perception on psychological contract at ONEBANK
Source - Littler and Maguire (1997, p. 57)
Based on the widespread literature review and the empirical evidence gathered from the ONEBANK study, the Three-Tier Model of Psychological Contract has been developed. (Figure 6). This model has explored new dimensions of human resources development prospects (Hrishikesh 2012, p.51).
Figure - Three Tier Model of the Psychological Contract
Source - Maguire (2002, p. 6)
Relational Aspects
Career Aspects
Transactional Aspects
Employer Contributions
Employee Contributions
Loyalty Trust in Management
Commitment to Bank
Reasonable Levels of Pressure and Responsibility
Competent Management
Sense of Belonging
Opportunity for Input
Career Path with Internal Labour Market,
Education and Training to increase Employability
Appropriate Levels of Rewards
(Working Condition, Job Satisfaction)
As its name suggests the three-tier model of psychological contract consists with three layers of obligations. The obligations lay in each level are twofold namely, employee and employer obligations. With regard to this study the expected employer contributions will be further discussed using relevant literature.
Tier 01 - In this level of psychological contract employers are obliged to provide employees with appropriate levels of rewards in exchange to the reasonable levels of pressure and responsibility (Working hours, Work Load, Stress, Autonomy) tolerated by the employees. These rewards include proper pay, suitable work environment, job satisfaction etc. (Maguire 2002, p. 7) This is referred as transactional aspects of the psychological contract. Marks et al (1996) have identified this level of psychological contact as an "Effort Bargain" (Hrishikesh 2012, p.51). Transactional aspects always cover tangible and quantifiable obligations of the employers. According to Grimmer and Oddy (2007, p.155) transactional obligations are described as economic and extrinsic obligations. According to Rousseau (2000 p.5) in the transactional level of the psychological contract obligations are narrow and short- term. In this level employer and employee obligations are very limited. Employees are doing only what they have been paid to do while employers involvement with the personal or development of the employees is very limited (Rousseau 2000 p.5). According to Rousseau and Wade-Benzoni (1994) these contracts could be explained as s (Hrishikesh 2012, p. 51)
Tier 02 - The second level consists with career aspects. In this level employers are considered to be obliged to increase the employability of the employees. Providing fair career path, training and development is expected from the employers. (Maguire 2002, p. 7). Even though, in the this model career aspects are considered separately, in most available literature career aspects are considered as a part of relational obligations of the employer (Grimmer and Oddy 2007, add some more)
Tier 03 - At the third level employers are expected to consider relational aspects of their employees. Sense of belonging, participatory decision making, competent management etc. are to be provided to the employees (Maguire 2002, p. 7). Grimmer and Oddy (2007, p.155) state that the relational obligations are based on the exchanges of socio-emotional factors. By contrast to the transactional aspects, in relational obligations employers are expected to provide more than monetary rewards. Cavanaugh and Noe (1999) argued that these relational components of the psychological contract would intervene the work experiences (Violation of perceived obligations) and work outcome such as intention to remain with the current employer. (Grimmer and Oddy 2007, p.157). According to Rousseau (2000 p.4 ) main characteristics of a relational psychological contracts are twofold; Stability and Loyalty. When relational aspects of a psychological contract are met employees are obliged to be loyal and remain in the organisation. While employers are obliged to provide long-term employment and support the well-being of the employees and their families in return.
Violation of Employer's Perceived Obligations - How does it encourage Turnover Intention?
The SET assumes that employees always expect a fair and balanced relationship between themselves and their employer (Homans 1994 as cited in Mai, Suazo and Turnley 2005, p.26). According to Levinson et al (1962) and Schein (1965) when both parties to a psychological contract are significantly benefited it leads to a situation of psychological contract fulfillment (Puchala 2008, p.04). In contrast, it could be argued that either one party or both parties are not benefited or suffer significant losses (tangible/intangible) there is a violation of the said contract.
When employees feel that the relationship is not reciprocate and perceive inconsistency between what they have been promised and received, their psychological contract is more likely to be violated in terms of the employer's perceived obligations (Morrison and Robinson 1997, Rousseau 1995 as cited in Mai, Suazo and Turnley 2005, p.26). According to Shore and Tetrick (1995) the psychological contract is violated when an employee perceives that organisation has failed to meet its obligations (Anderson 1996, p.1403). This could be further explained using Hetrick and Martin's framework to understand the employment relationship (Figure - 9). This framework illustrates the linkage between psychological contract, trust and employee engagement. According to Hetrick and Martin (2006, p.116) psychological contracting is set of processes at work. These processes are distinctive but over lapping and link employees to their organisations.
Gap = (E x Ve ) - D
Which expectations do employees most value? (Ve)
What do employees feel they are entitled to expect from employers? (E)
Do they perceived these valued expectations? (D)
E x Ve
Psychological contract and trust
The Employment Relationship
Who am I? (Identity)
Will I Stay? (Commitment)
What do I believe? (Internalization)
Is it mine? (Ownership)
Engagement behaviours
Figure - A Framework for understanding the employment relationship
Source - Hetrick and Martin (2006, p. 118)
Most scholars have attempted to find out the consequences of imbalanced employer-employee interdependence. Lester, Turnley, Bloodgood and Bolino (2002), Robinson (1996), Robinson and Rousseau (1994) have pointed out the negative relationship between attitudes toward job, organisation and violation of the Psychological contract in the side of the employer (Mai, Suazo and Turnley 2005, p.26). Further Fogler and Konovsky (1989) have also supported the same argument (Anderson 1996, p.1403). According to Robinson and Rousseau (1994) and Tekleab et al (2005) the correlation between the psychological contract violation by the employer and the employee job satisfaction has proven significantly negative (Mai, Suazo and Turnley 2005, p.26). Furthermore, Kickul (2001) has mentioned the relationship between the violation of employer's perceived obligations and the employees' commitment to the organisation is negatively correlated (Grimmer and Oddy 2007, p.156). This fact is also proven in by the work of Bunderson (2001), Lester et al (2002) and Raja et al (2002) (Mai, Suazo and Turnley 2005, p.26). Further, violation of employer's perceived obligations may be resulted in doubt on the mutual benefits of the employment relationship Mai, Suazo and Turnley 2005, p.26)
The relationship between violation of employer's perceived obligations and employee turnover has been extensively researched by various scholars. Sparrow (1996) argues that the role of the psychological contracts in organisational context is very similar to the same of the hygiene factors. Good psychological contracts may not always lead to better performances but violated psychological contracts could be resulted in lower commitment, high absenteeism and employee turnover (Maguire 2002 p.3). Turnley and Feldman (1999) has pointed out that the increased levels of exit could be experienced where violated psychological contracts exist (Grimmer and Oddy 2007, p.156). In her study of MBA alumni, Kickul (2001) has found out the positive correlation between employee's intention to quit and violated employer's perceived obligations. The same fact has proven in the studies of Mai, Suazo and Turnley (2005), Bunderson (2001) and Raja et al (2002) (cited by Mai, Suazo and Turnley 2005, p.26)
Conclusion
