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Indian Journal of Human Relations
2017, Vol.51 (1), Jan.-June, Page- 147-157
Peer Reviewed International Journal
ISSN-0974-1089
Abstract
The present paper is an attempt to provide an overview of the
problems of employees' turnover in Indian organizations. Due to the consequent
increase in the competition and requirement of appropriate pay in the developing
country like India, people are trying their best to attain a position that is respectable
as well as sufficient for their living. This paper brings in the issues on why
employees intend to leave their organizations. An overview of relevant literature
reveals that employee engagement, cognitive flexibility and pay satisfaction are
potential determinants of turnover intentions and have relevant importance in
retaining best employees in the organization despite of such cut-throat competition.
It is expected that this paper will help the managers to understand the reasons
causing increasing employee turnover as well as the procedures in retaining the best
employees in order to improve the graph of production and encouraging a sense of
loyalty for the organization.
Keywords : Turnover Intention, Cognitive Flexibility, Employee Engagement, Pay
Satisfaction.
The principal aim of every organization is to improve its structure and its
production. To achieve these goals organizations need and try to retain their most
reliable and expert employee. However, the current turnover rate of employees, in
various sectors, in India has turned out to be a critical concern for the performance
and long-term sustainability of the organizations. The results of a recent Mercer
survey (Smith, 2012) indicated an alarming rate of turnover intentions in about 66%
* Assistant Professor, Amity Institute of Behavioural and Allied Sciences, Amity University,
Lucknow Campus, Malhaur, Gomti Nagar Extension, Lucknow, U. P. INDIA- 226028
** Assistant Professor, Department of Psychology, Faculty of Social Sciences, Banaras Hindu University,
Varanasi, U. P. INDIA- 221005
*** Assistant Professor (Corresponding Author), Department of Psychology, Faculty of Social Sciences,
Banaras Hindu University, Varanasi, U. P. INDIA- 221005; Email: tusharsinghalld@gmail.com
Employee Engagement, Cognitive Flexibility and Pay
Satisfaction as Potential Determinants of Employees'
Turnover Intentions: An Overview
Prashant Das*, Virendra Byadwal** and Tushar Singh***
(148)
Indian employees in the 16-25 year age range and about 54% overall employees.
The survey results also showed that about 76% of the employees are reported to be
satisfied with their jobs and 75% indicating that the reason behind this intention is
not because they are unhappy with their job or organization (Smith, 2012). These
results, thus, give rise to a significant question why the employees intend to leave
even though they are satisfied with the job as well as with their organization.
Turnover intention
Turnover intention is a crisis that challenges organizational efficiency and
production. It is defined as the reflection of “the (subjective) probability that an
individual will change his or her job within a certain time period” (Sousa-Poza &
Henneberger, 2002) and there exists a good correlation between turnover intent and
actual turnover (Mobley, 1977). Turnover intention, thus, is an immediate precursor
to actual turnover (Mobley, Horner & Hollingsworth, 1978; Tett & Meyer, 1993). It
is one of the largest though widely unknown costs an organization faces. Employee
turnover costs companies 30 to 50% of the annual salary of entry- level employees,
150% of middle level employees, and up to 400% for upper level, specialized
employees (Sibson and Company, 2007). According to Cascio (2000), turnover cost
can be classified into three categories namely separation, replacement, and training
cost. Separation costs are the costs that incur directly due to the turnover of the
employee. These include the expense of exit interviews with leaving employee,
payments of earned benefits, etc. Replacement costs are the costs involved in the
replacement of the leaving employee, such as the expenses of advertising the vacant
position. Training costs are related to the money that the company spends in
orienting and training the new entrant as the replacement for the former employee
(Griffeth, Hom & Gaertner, 2000). In addition to the financial cost, high turnover
also results in other operational problems such as shortage of staff until the new
recruitment, its resultant stress and the demoralization of other employees which
may lead to even higher turnover.
Consequences of turnover intention
Employees' turnover results in disastrous consequences for the
organization. Three significant effects are the impact on organizational cost,
operational disruption and demoralization of organizational membership.
The impact of turnover on organizational cost
Every turnover costs money to the organization. The turnover of an
employee results in the wastage of organization's money invested into that
Prashant Das, Virendra Byadwal and Tushar Singh
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employee through training and management. It costs further money to the
organization to do the same for a new employee. The company also pays to advertise
the vacancy and to recruit the new employee. Tziner and Birati, (1996) however
discuss the distinction between functional and dysfunctional turnover. If bad
performers choose to leave, known as functional turnover, this could carry
beneficial outcomes for the organization. However, dysfunctional turnover (cost of
the reduced productivity of the new worker during the period required for the level
of performance of the former employee is reached) can engender a loss of
productivity.
Operational Disruption
Staw (1980) argues that the turnover of the core and the central members
who are interconnected, highly interdependent and specialized can influence the
ability of other remaining members to fulfil work task. He further argued that argued
that “the higher the level of the position to be filled the greater the potential for
disruption” (Staw, 1980). He further suggests that organizations must train back up
personnel or employees with multiplicity skills to overcome this problem (Staw,
1980).
Demoralization of Organizational Membership
Turnover of an employee also impacts on the attitudes and behaviours of the
remaining members of the organization. Turnover of an employee for another
position in an external organization provokes a reflective sentiment with remaining
members, such as questioning their motivation to stay in the organization. Thus
turnover can cause the additional turnover by stimulating deterioration in attitudes
towards the organization (Staw, 1980). According to Staw (1980), the perceived
reason for turnover is an essential determinant for the demoralization of
organizational membership. If the reason for quitting is non-organizational (such as
family issues or location change), then the feeling of demoralization is less, but if the
reason is related to the organization (such as pay or supervisory support), then it will
likely lead to demoralization.
Factors associated with turnover intentions
Many factors can lead to employee turnover in an organization. These
factors might be related to the employer, the employees and/or the work
environment. Researchers have considered wages, company benefits, employee
attendance, and job performance to be important determinants of employee turnover
(Mobley, Griffeth, Hand, & Meglino,1979). Mobley et al. (1979) have noted two
factors that are related to the employee's turnover intention. The first factor is related
Employee Engagement, Cognitive Flexibility and Pay Satisfaction as Potential Determinants of Employees' Turnover Intentions: An Overview
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to employee's evaluation of the organization's future expected value and the second
factor is related to the tension associated with the employee's present work
conditions. Recent researches in this area have considered the importance of
employee engagement, pay satisfaction and cognitive flexibility in bringing
organization's stability and improved production.
Employee Engagement
Kahn (1990) have defined employees' engagement regarding the
harnessing of organization members' selves to their work role by which they employ
and express themselves physically, cognitively, and emotionally during role
performances. While for Schaufeli and Bakker's (2004) definition of engagement
has somewhat differed. According to them, engagement is “a positive, fulfilling,
work-related state of mind that is characterized by vigor, dedication, and
absorption”. Lockwood (2007) has described the cognitive, emotional, and
behavioural components of employee engagement. Cognitive engagement,
according to him refers to the belief of the employees about their company, their
leaders and the workplace culture. The emotional aspect is related to the feeling
employees have about their company, their leaders and their colleagues. The
behavioural component refers to the number of effort employees put into their work
(e.g., brainpower, extra time and energy).
Employee engagement and turnover intention
For any organization to grow, the 'engagement' of the employee within the
organization has to be perfect, and it should be taken care of. Aleweld and Von
Bismarck (2002) reports three behaviours that Hewitt Associates considers for an
engaged employee. To them, an engaged employee is the one who always "say"
positive things about his/her organization to his/her fellow employees and
customers, wishes to "stay" with the organization and put additional discretionary
efforts to "serve" his/her organization.
Several researchers have shown employee engagement to be positively
associated with intent to remain with one's organization (Harter, Schmidt & Hayes,
2002; Schaufeli& Bakker, 2004). The positive association between job satisfaction
and intent to remain with one's organization is established in the literature (Mobley,
1977), it is, therefore, obvious that employee engagement would also have a positive
relationship with intent to stay. In fact, this relationship is substantially supported by
the literature. Towers Perrin Talent Report (2003) have shown that about 66% of
highly engaged employees reported that they have no plans to leave as compared to
36% of moderately engaged individuals and 12% of disengaged employees.
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Furthermore, 2% of highly engaged employees reported they are actively looking
for another job compared to 8% of moderately engaged and 23% of disengaged
employees. Gubman (2004) has also found that disengaged employee are more
likely to search for a new job actively. In his meta-analysis of the engagement
literature (Halbesleben, 2010) has observed that employee engagement and
intention to leave are strongly related (see also Koyuncu, Burke, & Fiksenbaum,
2006). Employee engagement also leads to the higher achievement of individual
work goals (i.e., productivity) (Schaufeli& Bakker, 2004); customer satisfaction
and profitability (Harter, Schmidt & Hayes, 2002). Engaged employees cause better
business outcomes. In fact, the Towers Perrin (2006) research reports that highly
engaged employees have beliefs that they can positively affect their company's
products quality, can do better customer service, and can positively affect the costs
in their job. The study also reported that highly engaged employees plan to stay with
their organization and perform 20% better on the job.
Cognitive Flexibility
The term 'cognitive flexibility' refers to an individual's ability to shift
cognitive sets and to adapt to one's changing environment (Dennis & Vander Wal,
2010). Martin and Anderson (1998) considers three dimensions of cognitive
flexibility namely awareness, willingness, and self-efficacy. According to them, the
essence of cognitive flexibility is the ability to seek novel solutions to problems and
be adaptive in various situations. Further, a cognitively flexible individual must be
aware of the options and alternatives to choose and s/he must be agreeable to such
adaptations, in multiple given situations. Finally, a cognitively flexible individual
needs to believe that he/she has the capacity to be flexible in any given situation
(Martin and Anderson, 1998). Flexible employees in the organization are the
crystals who allow the light and refract it to the whole organization for its
betterment. Here the term 'light' stands for the innovative idea and proactive skill of
the employee. With flexibility comes employees' interest in the work schedule and
reduced intention to turnover and disengagement. Cegala (1981) has indicated that
individuals who are more cognitively flexible are more attentive, perceptive, and are
more responsive to social interactions than those who have less flexibility.
Employees high in cognitive flexibility are thus expected to be more willing and
able to accept job transition that entails the possibility of failure.
Cognitive flexibility and turnover intention
Spiro and Jehng (1990) in their cognitive flexibility theory have proposed
that people who can create multiple representations of the task can easily interpret
Employee Engagement, Cognitive Flexibility and Pay Satisfaction as Potential Determinants of Employees' Turnover Intentions: An Overview
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situational changes in the environment and, therefore, are cognitively more flexible.
They considered these people to be able to restructure their knowledge quickly and
to adapt their responses to radically changing situational demands. This theory
states that flexible employees have their way to interpret problems and necessitate
solutions to problems rather quitting job role.
Cognitively flexible individuals can perform any task assigned to them and
are willing to accept organizational goals, thereby bringing about greater affective
attachment to the organization (McDonald & Siegall, 1992). Because these
employees tend to have a less negative emotional response to the organization, we
infer that employees who are more cognitively flexible are better able to accept
challenges and willing to stay in the organization for their growth personally as well
as organizationally.
Studies suggest that cognitively flexible employees are more active in
organizational activities (Lau & Woodman, 1995). Thus, it can be assumed that
these employees will have a more positive opinion about their stay in the
organization and thus be less likely to doubt the necessity to leave and adapt
themselves to all situations profitably.
Employees' propensity to resist organizational change is largely determined
by their openness to experience (Zimmerman, 2008). Generally, employees who are
more open to experience consider the situation in which their organization is placed
and are more likely to accept changes needed to be taken. We infer that cognitively
flexible employees will probably not complain about, or have an uncooperative
attitude towards, any dimensions which would predict intent to turnover or actual
turnover.
Pay satisfaction
According to Lawler (1971), pay satisfaction or dissatisfaction is a function
of the discrepancy between employee's expectation of his/her pay and the pay s/he
receives. Several studies have considered pay satisfaction one major component of
job satisfaction (Frisina, Murray andAird, 1988). Lum, Kervin, Clark, & Reid
(1988) argues that pay satisfaction can be understood in terms of equity theory.
According to this view, pay satisfaction is caused by sentiments regarding the equity
of a person's pay. If an employee perceives high pay equity, s/he show greater
satisfaction with his or her job. However, when someone perceives his/her pay to be
less than another's, it increases the dissatisfaction and results in several unwanted
employee behaviours such as absenteeism, grievances, strikes, and turnover.
Pay satisfaction and turnover intention
Prashant Das, Virendra Byadwal and Tushar Singh
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Lum, Kervin, Clark, & Reid (1988) has shown that pay satisfaction is
positively correlated with job satisfaction and negatively correlated with turnover
intent. Motowidlo (1983) has reported that pay satisfaction is more powerful
determinant of withdrawal cognition than general satisfaction, and that pay
satisfaction and withdrawal cognition significantly mediated the relationship
between pay and turnover intention. Similarly, in a meta-analytic study, Williams,
McDaniel, and Nguyen (2006) found that turnover and turnover intention were the
consequences of pay level dissatisfaction. More recently Singh and Loncar (2010)
explored the relationship among pay satisfaction, job satisfaction, and turnover
intention and found that all dimensions of pay satisfaction were correlated
negatively with turnover intention. Similarly, Carraher (2011) study about the
attitudes toward benefits and pay and found that benefits, pay, and satisfaction were
important in affecting turnover and were useful to retain employees.
Conclusion
Turnover within the Indian organization has recently turned out to be a
culture and employees are considering it as a regular practice to gain access to an
organization which gives them better pay as compared to previous one. Employees
focus on what they get from the employers in return for their loyalty and work for
their organization. Compensation fairness, satisfaction in pay and prospects of
career growth are greater among other benefits. Changing to a new job to get a better
package is common and particularly acts as a pull factor for turnover intention.
Iverson and Deery (1997) have concluded that lack of job security and lack of career
potential are leading causes of the turnover culture. They argued that when
employees enter into an industry with the perception of a short tenure and limited
promotional opportunities they perceive that turnover is acceptable. This culture is
more prevalent among the younger generation as they strive to get a better pay even
if they have to shift job at a rapid pace. With a caliber to work for long hours, the
youngsters are always in search of position which has an excellent package.
Given the cost implications and destructive tendencies of turnover to
organizations, it is important that more research is carried out in the area of intention
to quit. When managers perfectly understand why employees have a tendency to
leave, it is then that a workable retention strategy can be devised to arrest such
intention. In order to respond to the problem of turnover, it is necessary to
understand its most basic process. There is also the need for organizations to
properly align retention practices with the needs and values of employees. For
example, while the management of the organization studied and crafted its retention
strategy around nonmonetary benefits, employees may prefer pay rise that will
Employee Engagement, Cognitive Flexibility and Pay Satisfaction as Potential Determinants of Employees' Turnover Intentions: An Overview
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commensurate with the inflationary trend in the country. Money may not necessarily
be a good retention variable (as variously argued), however, the unstable economic
environment, it is important to understand that money may significantly influence
retention and therefore, may explain why the retention practices take place. The
costs of high turnover can be considerable thus it has turned out to be a necessity for
the organization to appropriately redirect its retention intervention strategy in
consonance with the valence of employees. Only then can the organization retain a
sizeable number of its high performing employees in the face of unabated economic
woes. It would be too late and indeed counterproductive if the managers try to
respond after employees have left. Finally, it is envisaged that this review will lead
to increased awareness of retention process among managers and the need for
further research in the subject area.
Recommendations for managers
On the basis of this overview of literature related to the causes and
consequences of turnover intentions among employees, the following
recommendations can be suggested. First, the organizations should have a clear
plan for the career growth and promotion of each employee so that the committed
and talented employees know the prospects for their personal and professional
growth. In addition, the company should also provide adequate training so that its
employees are equipped with latest and appropriate skills. When employees start to
take the training courses as a means to improve their career opportunities, they gain
better skills and get closer to becoming the next 'best candidate'. Moreover, they also
perceive the time they are putting into their training or self-development as an
investment, and thus they are more likely to stay in the same organization to 'harvest'
their investment. This, in turn, would help to reduce their negative perception of
limited opportunity for advancement and self-growth. Second, organizations
should introduce flexible work arrangements for employees so that they have time
offs for personal work and time for rejuvenating themselves. Management should
optimize their internal culture to help the employees in building interpersonal
relationships which is very important for the survival of employees in the
organization and, thus, reduce the chances of employee's turnover (Das, Byadwal
and Singh, 2015. Third, compensation of employees is one of the most critical
issues of all turnover causes. Finally, organizations must provide a platform for
participation of employees in decision making. When the employees are given
opportunities for ownership, they value themselves more and are motivated to
indulge them in creative ideas.
To conclude, it is suggested that that retention strategies must be wide and varied to
Prashant Das, Virendra Byadwal and Tushar Singh
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address the variety of reasons for which employees leave their organizations. These
strategies must be manifested in terms of increased employee satisfaction and an
increased sense of belonging to the organization.
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Employee Engagement, Cognitive Flexibility and Pay Satisfaction as Potential Determinants of Employees' Turnover Intentions: An Overview