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Employee Turnover Final PDF
Employee Turnover Final PDF
Aug. 2015
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ABSTRACT
This paper investigates the factors that cause employees turn over in the oil
sector in Sudan, its magnitude and impacts. The oil and gas industry,
considered as the backbone of Sudan’s economy, has been facing
dysfunctional turnover rate in the recent years. Convenience sampling
techniques were adopted in selecting 40 Sudanese respondents from
different oil organizations in Sudan and abroad. Data was elicited from
respondents using a five point Likert scale questionnaire plus secondary
data from an oil company. The empirical evidence shows that the major
factors that are causing employees turn over are: no career development,
supervisory behavior and low salary. This study also examines the impact of
employees turn over on the oil companies’ performance. The evidence shows
that the performance of the companies affects when experienced employees
leave the company.
The study recommended that management practices to be reviewed and
retention policies should be put in place to reduce employees’ in the oil
industry to stop drain the talent.
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INTRODUCTION
The crucial issue in analyzing turnover...is not how many employees leave
but rather the performance and replace-ability of those who leave versus
those who stay. – Wayne F. Cascio
People always look for better job opportunities and career advancement. The
effect of globalization made job switching much easier.
Employee turnover (sometimes known as ‘labour turnover, ‘wastage’ or
‘attrition’) is the rate at which people leave an organization. It can be
disruptive and costly. The CIPD (2008a) survey of recruitment, retention
and turnover found that the average rate of turnover (the number leaving as a
percentage of the number employed) in the UK was 17.3 per cent. It is
necessary to measure employee turnover and calculates its costs in order to
forecast future losses for planning purposes and to identify the reasons that
people leave the organization. Plans can then be made to attack the problems
causing unnecessary turnover and to reduce costs.
Mobley (1982) conducted early work on understanding why employees
voluntarily elect to leave their organizations. Employee turnover can be
categorized into voluntary and involuntary turnover. Involuntary turnover
refers to the dismissal of employees, whereas voluntary turnover occurs
when employees resign or when employees leave an organization at their
own discretion ( Noe,Hollenbeck,Gerhart& Wright 2006).
This study is aiming to examine voluntary turnover, its impact and
magnitude in the oil sector in Sudan
LITERATURE REVIEW
Employee turnover has been and will continue to be a salient management
issue for organisations of all sizes (Lee & Mitchell, 1994).
Turnover as defined by Armstrong: (sometimes known as ‘labour turnover,
‘wastage’ or ‘attrition’) is the rate at which people leave an organization
(Armstrong ,2009).
Or is the rotation of workers around the labour market; between firms, jobs,
and occupations; and between the states of employment and unemployment
(Abassi & Hollman,2000). This workforce activity segments into two
categories, voluntary and involuntary. Involuntary turnover refers to the
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dismissal of employees, whereas voluntary turnover occurs when employees
resign (Bontis & Stovel,2003).
This study is aiming to examine voluntary turnover specifically.
Since management cannot control voluntary turnover, these are fertile
grounds for research.Voluntary turnover often results in departing
employees migrating to competing firms, creating an even more critical
situation since this knowledge can now be used against the organization.
(Kransdorff, 1996). Managers must recognize that employees are major
contributors to the efficient achievement of the organization’s success
(Abassi & Hollman,2000). There is a need for senior management to
measure the impact and manage the value of each employee within the
firm(Bontis & Stovel, 2003).
Voluntary turnover has in fact been accelerating since 2010 in the oil sector
in Sudan . This situation demands senior management to consider the
consequences of voluntary turnover, and immediately create contingent
plans. Otherwise, senior management may be caught unprepared if (or
when) their best performers leave.
Turnover intention
Turnover intention generally refers to an individual’s perceived probability
of leaving an employing organization, or the willingness of an individual to
voluntarily permanently withdraw from the organization .Empirical studies
have shown that turnover intentions are the best immediate predictor of
actual turnover behavior. There is a strong and significant positive
relationship between turnover intentions and the actual turnover
(Elanain,2014).
Functional turnover
(i.e. bad performers leave, good performers stay) can help reduce sub-
optimal organizational performance (Johnson et al., 2000).However,
excessive turnover can be detrimental to the firm’s productivity. This can
result in the loss of business and relationships, and can even jeopardize the
realization of the firm’s objectives(Bontis & Stovel,2003).
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Dysfunctional turnover
(i.e. good performers leave, bad performers stay) damages the organization
through decreased innovation, delays services, lethargic implementation of
new programs, and degenerated productivity (Abassi & Hollman,2000).
Such activity can radically affect the firm’s ability to prosper in today’s
competitive economy; leaving even the most ambitious firms unable to
succeed due to the inability to retain the right employees (Bontis &
Stovel,2003).
This is typically the case in the turnover in oil sector in Sudan where talent
employees left their organizations.
Employee loyalty is the underpinning of customer satisfaction in the
organization (Abassi & Hollman,2000).Eroding employee loyalty is
highlighting the importance of attracting and maintaining good people as the
key to strategic staffing in the modern workplace (Abassi & Hollman, 2000).
Finally, economics research has proven that investing in pay and benefits
reduces voluntary turnover (Shaw et al, 1998). The effect of pay systems on
employee retention depends greatly on the intrinsic needs of the specific
employee, sometimes making the development of effective HR practices
initially ambiguous and/or difficult.
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3) lack of recognition, 4) lack of competitive compensation systems, and 5)
toxic workplace environments.
While all of these reasons have attracted some attention in academic
research, the correlation between compensation systems and turnover has
been the cause for much study in the past. Johnston and Futrell’s (1989)
study concluded that higher salary and role expectations were the best
predictors of turnover.
Furthermore, skill-based pay systems have found to improve employee
retention, whereas group incentive plans have been associated with high
turnover (Guthrie, 2000).
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career enrichment as well as desired performance in the
organization(Foong,2008).
Turnover Magnitude
Employee turnover index
The employee turnover index as set out below (sometimes referred to as the
employee or labour wastage index) is the traditional formula for measuring
turnover(Armstrong ,2009):
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The cost of employee turnover can be considerable.
The following factors should be considered when calculating costs :
• Direct cost of recruiting replacements (advertising, interviewing, etc).
• Direct cost of introducing replacements (induction cost).
• Direct cost of training replacements in necessary skills.
• Leaving costs – payroll and HR administration.
• Opportunity cost of time spent by HR and line managers in recruitment.
• Loss of output from those leaving before they are replaced.
• Loss of output because of delays in obtaining replacements.
• Loss of output while new starters are on their learning curves acquiring the
necessary knowledge and skills. (Armstrong, 2009)
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The Greater Nile Petroleum Operating Company (GNPOC)
Arakis retained a 25% share based on its previous investments. The other
share holders are China National Petroleum Company (CNPC) with 40%,
Petronas (30%) and Sudapet (5%).Despite this arrangement, by 1998 Arakis
was absorbed by Talisman Energy, another Canadian company.
In March 1997, work began on a 1540 km oil pipeline to a terminal (Marsa
Bashaeir ) at Port Sudan on the Red Sea.. In 1999, the pipeline began
delivery, and the first 600,000 barrels were loaded onto a Shell tanker
(Ziada, 2007).
GNPOC is the main oil producer and exporter in Sudan and is also
considered the biggest multinational company in Sudan (+1100 employee).
Later as a result of American pressure on Talisman to leave Sudan,
Talisman sold its share to ONGC Videsh in 2003.
METHODOLOGY
Quantitative method employed to understand as to why employee turnover
occurs within the oil sector. Primary data collected through structured
questionnaire from the Sudanese who voluntary resigned from the oil
sector in Sudan.Convenience sampling techniques were adopted.
Convenience sampling includes participants who are readily available and
agree to participate in a study (Fink,1995). Rating scale method (Likert
scale) was used to analyze data and draw results. Each question had five
options; strongly disagree,disagree, neutral, agree and strongly agree.
The study targeted a sample size of 48 Sudanese respondents,from which
40 filled in and returned the questionnaire (% 83 )
Secondary data was collected from reports, reviews of exit interviews;
magnitude of turnover, recruitments was taken from (GNPOC) and Bank of
Sudan Annual reports.
A general objective of this research study is to identify the reasons of
employees’ turnover, magnitude and its impact in oil industry and preventive
action to reduce the effects of turnover. Research study answers the
following specific questions.
1. What are the main reasons that cause of employees turnover in oil
industry in Sudan?
2. What is the magnitude of employees’ turnover in oil industry in Sudan?
3. What is the impact of employees’ turnover on employer?
4. What preventive actions management can take place to reduce the effects
of turnover?
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RESULTS
Respondents’ job types were 75% Technical / Engineering and 25%
Administrative .More analysis revealed that most of turnover happened in
the technical disciplines and particularly in the Geophysicist ,production
engineering, drilling rig Supervisors, and reservoir engineering disciplines.
Since most of the technical staff joined new oil concessions, these
disciplines are essential for the new explorations. In the administration side,
turnover rate increases in the contract specialist positions which is also
required for new companies.
Gender type showed 87% male and 13% female .The nature of oil sector
environment is tough, so the majority of the staff is male. In GNPOC for
example the female percentage is not more than % 6.
Age distribution is 25% (26-35 years) 70% (36-45 years), 5% (46 -55 years)
The majority of turnover falls in 36 -45 years because the degree of new
recruitment competition depends mainly on the experience.
85% of respondents are married. 90% of respondents have less than 5 years
in their current organization. This because the Sudanese experience in oil
began in late 1990s and also the new concessions started in 2010.
63% have more than 10 years experience in other companies. This means
the more experienced are likely to find better opportunities.
77.5% have been working for 1-3 companies which means they don’t
change their employers frequently.
We can conclude that the high rate of turnover fall within a 36-45 years old
employees who have gained more than 10 years experience mainly in 1-3
companies and who recently resigned to join another company less than 5
years ago.
I. Magnitude of Turnover:
From secondary data , people who left GNPOC were 188 during the period
from 2010 -2014.Knowing that the employees are + 1100.the number is not
high but the main problem is that, those people are highly skilled and work
in the essential areas for productivity.
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II.Main reasons for turnover:
Fig.1
On the basis of the questionnaire it was concluded that the main reasons for
turnover are listed in Fig.1.Career development scored 59%.Is the highest
reason for turnover because competent staff are highly required in oil sector
and can get high offers. Supervision scored 10.3% .Many employees
complained about their supervisors and some of them resigned because of
his supervisor. Compensation scored 10.3% oil sector in Sudan pays far less
from the international rates. Job security scored 5.1% because some
organizations intend to restructure its workforce. Immigration 5.1% , Other
5.1% and explained by heavy work load .Marriage 2.6 % linked mainly to
females , difficult co-workers 2.6%.
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new organizations. This means the highly trained and skilled staff are likely
to score high rates of turnover.
4. Supervision
Regarding the relationship with supervision, 60% agreed that their
supervisors follow the policies and procedures , %63 treated them fairly and
consistently %73 Listen to their ideas. However, when it comes to answer
the question: would you like to work for or report to the same person again?
50 % answered yes.
6. Rewards
50% agreed that their base salary was adequate. Salary structure for oil
sector in Sudan is good compared with other sectors in Sudan but far below
the international oil salaries
Most of employees were not in the favor of motivation and encouragement.
There is no proper policy that motivates and encourages employees to take
interest in job. If any employee do good job; he/she will not motivated or
encouraged.The next question support the idea that the benefits are the
lowest:
What did you like most about working at your past company?
42.5 % Environment, %42.5 job and 15% Compensations & Benefits
7. Retention
In an answer to the question: If your past company has taken some initiatives
on employees’ retention, what ONE item do you recommend to focus on?
%55 selected Management.The answer is consistent with the supervision
In an answer to the question: What ONE item if improved would have the
greatest impact on increasing your satisfaction about current company?
The answers 35 % salary 25% management 10 % training 7.5% job security
7.5% annual performance review 5% Working hours 2.5% Working
Conditions
8. Loyality
72% rated their past company from good to excellent, % 82 recommend
their past company as a potential employer to others, %57 consider re-
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employment at your past company. It is worth mentioning that some
employees have been reemployed in their mother companies.
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Relationship between GNPOC production and
Sudan Production
150 y = 2.1254x - 1.8884
Total Oil Production of Sudan
R² = 0.8662
100
50 Sudan Prod.Mbbl
Linear (Sudan Prod.Mbbl)
0
0 20 40 60
GNPOC Oil Production
Fig.2
The below data shows the relationship the oil production of GNPOC, total
Sudan oil production and the oil revenue as a national income of Sudan.
*GNPOC Production & Sudan Oil Production
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DISCUSSION
The magnitude of turnover in the oil sector in Sudan isn’t high when
compared to the total number of employees. But the number is high when
compared to rare technical skills like geophysicist, production engineer,
drilling rig supervisor, reservoir engineer and contract specialist. So it is
considered dysfunctional. The dysfunctional turnover constitutes the loss of
a valued employee that subsequently results in lowered organisational
effectiveness (Abelson and Baysinger 1984).
As the study analysis showed the main reasons for turnover were: career
development, salary and supervision.
2.Majority of the employees disagreed with the salary package of the oil
sector in Sudan
It is far below the international standards. Even in Sudanese organizations
there is discrimination in terms of salary package between the expatriates
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who are getting higher salaries than the national staff although they are
doing the same job.
Government of Sudan has policies on the public sectors that maintain certain
levels of salary packages. But because of the risky nature and high profit of
oil industry, international companies pay high salaries compared with most
industries.
Employees joined local organizations in higher positions or international
organizations in the same position for this reason.
3. About 50% of the respondents reported that they are not willing to report
to the same supervisor in the future. Some of them agreed that supervisors
use coercive measures to harass their subordinate, while others were
overloaded by work assignments beyond the scope of the formal job
description. So, coercive strategy is also a major factor that cause employees
turn over. This result is in line with previous studies. Elanain (2014)
explored the leadership behavior represented by leader–member exchange
and its impact on
turnover intentions. He concluded that: LMX has a functional impact on
employees’ turnover intentions.
(Krackhardt.et al,1981)suggested that turnover can be controlled through a
supervisory intervention which can result in lower turnover rates.
On the other hand respondents selected management as one of the top three
reasons for retention.
Usually the training of technical staff doesn’t focus on the human resource
management which creates supervisors couldn’t manage their subordinates
perfectly.
Staff who left the oil companies in Sudan created a big gap that couldn’t be
filled because their experience is scare among the Sudanese. Turnover does
not only reduce the performance of the organizations but also lessen the
productivity and profitability of the organizations as well.
If turnover can reduce the productivity of the oil organications,then it can be
one of the factors that affect the national income. Annual reports of the Bank
of Sudan show that crude oil’s contribution to the national income has
declined from 82% in 2010 to 45 % in 2014.
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An important point is that the temporary reduction in turnover rates doesn’t
mean that the workers are satisfied: workers may also stay because they just
cannot find another job. Now Sudanese workforce has built a good
reputation in the oil sector abroad and may leave at any time if no retention
policies have been implemented.
This study is also subject to limitations. First, samples were taken from oil
sector; caution should be exercised when generalizing the results to other
sectors. Second, some unlisted reasons like the work overloaded were added
by respondents under (other reasons). A larger sample may reveal more
reasons. Third, the study was generalized to the whole oil sector in Sudan,
while the exact reasons for each organization may provide a fruitful avenue
for future research.
A fruitful extension of this research would therefore be the impact of the
employee turnover on the national income.
Recommendations are summarized as follows:
1. To apply Monetary and non-monetary incentives in the Sudanese oil
organizations
2. To consider career development programs which is a motivational
incentive that promotes workers retention and productivity. It involves
career paths for the employee and designing in-service training and
experience to prepare the person for more advanced responsibilities
3. To train supervisors to be more supportive of subordinates and to show
them greater respect to increase the quality of relationships between leaders
and followers.
4. Building a team-oriented culture that emphasizes conflict resolution,
friendly relationships, and mutual support would facilitate leader-member
interactions.
Furthermore, the management should pay keen attention towards employee
who is dissatisfied from his/her job and should try to formulate such plans
that could enhance the satisfaction level. Also, management should create an
environment that should develop confidence in employee to share his/her
problems with them.
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REFERENCES
Abbasi, S.M. and Hollman, K.W. (2000), “Turnover: the real bottom line”,
Public Personnel Management, Vol. 29 No. 3, pp. 333-342.
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Johnson, J, Griffeth, R.W., and Griffin M. (2000), “Factors discrimination
functional and dysfunctional sales force turnover”, Journal of Business and
Industrial Marketing, Vol. 15
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