What assets are most important to an organization? When reviewing the balance sheet, great time is spent weighing assets, liabilities, and equity, but what is often forgotten is the value of human capital. An organization's employees and their knowledge and ability to perform are one of the most important components of any organization.
Dr. Jessica J. Hoppner, assistant professor of marketing at George Mason University School of Management, has conducted research on human capital examining an important organizational issue that has significant implications for marketing managers: reducing employee turnover.
What is the cost of an employee leaving an organization? In for-profit organizations, the cost of employee turnover has been estimated to be up to 150% of the employees' pay (including direct and indirect costs).
According to an AARP research study, these costs can include: lost productivity during the time while looking for a replacement; cost of formal and informal training to bring the new employee up to speed; severance pay or litigation costs from involuntary turnovers; and costs for advertising and promotional materials, referral bonuses, relocation expenses and background checks for the new employee.
Hoppner and her colleague, David A. Griffith from Lehigh University, examined how implementing a team structure can influence the turnover process of salespeople. They examined three types of employees: team players, lone wolves, and the lonely. Team players are the salespeople that work on a team and prefer to work on a team, while lone wolves are the salespeople that work alone and prefer to work alone. The lonely are salespeople that work alone but would prefer to work on a team
"We hypothesized that the fit between the salesperson's desired working environment and their actual working environment would have implications for turnover via their satisfaction with and commitment to their organization," says Hoppner.
Their study found that the extent to which turnover exists as well as the motivators to reduce turnover differ depending upon which group was examined.
"While there will always be some turnover, the lowest level exists where there is a fit between desired and actual working environment—such as the fit achieved by lone wolves and team players," says Hoppner. "Moreover, the method to reduce turnover intentions of these two groups varies even further. For example, increasing job satisfaction was critical for lone wolves, whereas increasing organizational commitment was critical for team players."
The lonely were found to have the highest level of turnover and neither job satisfaction nor organizational commitment strongly reduced their turnover intentions.
"It's almost as if the lonely don't know where their place in the organization is," says Hoppner. "The lone wolves love their job and the work. Team players love their team and the company. But, the lonely? Their situation isn't as clear since they have yet to achieve their ideal work-environment fit."
In order to retain talent and reduce turnover, managers can focus first on creating an ideal work-environment fit. This may involve introducing specific interview questions to better select employees that will fit within the team system or restructuring how employees are placed in teams within the organization. Second, managers can enhance elements of the job that influence job satisfaction and organizational commitment in order to reduce turnover amongst these specific groups. This may include providing challenging work to lone wolves to increase their job satisfaction or having more opportunities for team building for team players to increase their organizational commitment.
This research provides a clear implication for sales managers implementing new policies regarding the formation of sales teams;the preference for a certain work environment, via their sales team situation, has significant influence on the turnover process and the level of actual turnover among salespeople.
No matter how you account for human capital on a balance sheet, employee turnover has associated costs for an organization. The benefits of reducing employee turnover and retaining talent is more than the dollars and cents that add up, it's also the time to train new employees and the intellectual capital that leaves with employees. Appealing to employee preferences, may be one answer to avoid these costs.
Jessica Hoppner is an assistant professor of marketing in the School of Management. She joined George Mason University in 2010. Hoppner's research focuses on examining issues in marketing strategy that have significant implications for marketing managers. In particular, her research examines the governance of inter- and intra- marketing relationships, international marketing, and marketing strategy decision making. She currently teaches courses on principles of marketing and marketing research. Click here for complete bio.