ABSTRACT
This study investigated the impact of labour turnover on the performance of selected deposit banks in Enugu Metropolis. There has been the problem of high rates of resignation and dismissal in deposit banks. The objectives of this study are: to identify the cause (s) of labour turnover in Enugu Metropolis, to assess the extent to which labour turnover affect the workload and effectiveness of the remaining bank employees in Enugu deposit banks, to examine the impact of labour turnover on the profitability of deposit banks in Enugu Metropolis and to ascertain the effectiveness of policy used by deposit banks to reduce labour turnover. Survey research design was adopted for the study because questionnaire and oral interview were used as the research instrument for data collection. Out of the 19 deposit banks in Enugu, 4 was purposively selected with a total population of 787 employees and a sample size of 265 drawn from Yamane’s formula at 5% error of tolerance and 95% level of confidence. Hypotheses 1 and 2 were tested using Chi-square while hypotheses 3 and 4 were tested using Z-test statistical tools. The findings show that: poor remuneration is the main cause of labour turnover in deposit banks (X2c = 30.629 > X2t = 21.03), labour turnover has a positive and significant effect on employees’ workload and effectiveness (X2c = 40.750 > X2t = 21.03), labour turnover has a negative impact on profitability of deposit banks (Zc = 2.299 > Zt =1.96) and policy of collective bargaining has a negative and significant impact on labour turnover reduction (Zc = 2.671 > Zt 1.96). The study concluded that dealing with labour turnover calls for collective and continuous efforts of all employers, employees and stakeholders of selected deposit banks in Enugu Metropolis. The study recommended that: Nigerian banks should enhance remuneration of staff in order to reduce labour turnover and cost, they should make sure that most of their staff are exposed to different job descriptions so that staff can work in another department when there is labour turnover, there is need to select the right and capable candidates that can render quality services to customers in order to reduce loss of personal account and good communication should be improve by allowing staff to freely air their mind without threat from their superior.
TABLE OF CONTENTS
Title Page i
Declaration Page ii
Approval Page iii
Dedication iv
Acknowledgements v
Abstract vi
List of Tables x
CHAPTER ONE: INTRODUCTION
1.1 Background of Study 1
1.2 Statement of the Problem 6
1.3 Objectives of the Study 6
1.4 Research Questions 7
1.5 Research Hypotheses 7
1.6 Significance of the Study 7
1.7 Scope of the Study 8
1.8 Operational Definitions of Terms
References 9
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Introduction 11
2.2.1 Labour Turnover 11
2.2 Conceptual Review (Concepts) 11
2.3 Theoretical Review (Theories) 14
2.3.1 Theories of Labour Turnover and Productivity 16
2.4 Empirical Review 17
2.5 Theoretical Framework/Conceptual Framework 18
2.5.1 Classification of Labour Turnover 20
2.5.2 Factors Impacting on Labour Turnover 22
2.5.3 Desirable and Undesirable Labour Turnover 23
2.5.4 High Labour Turnover 24
2.5.5 Turnover Cost 24
2.5.6 How to Calculate Labour Turnover Cost 25
2.5.7 Some of the Difficulties Encountered during the Replacement of New Employees 26
2.5.8 Causes of Labour Turnover 27
2.5.9 Reasons for Labour Turnover 29
2.5.10 Consequences of Labour Turnover 31
2.5.11 How to Solve Labour Turnover Rate 33
2.5.12 Tips for Reducing Labour Turnover 34
2.5.13 Useful Tips to Improve Employee Morale and Retention in an Organisation 35
2.6 Summary of the Reviewed Related Literature 37
2.7 Knowledge Gap in the Reviewed Related Literature 38
References 40
CHAPTER THREE: METHODOLOGY
3.1 Introduction 46
3.2 Research Design 46
3.3 Sources of Data Collection 46
3.4 Population of the Study 46
3.5 Sample Size Determination 48
3.5.1 Sampling Technique 49
3.6 Description of research instrument 49
3.7 Validity of Research Instrument 50
3.8 Reliability of Research Instrument 50
3.6 Method of Data Analysis 51
References 52
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Introduction 53
4.2 Presentation of collected Biographical Information of Respondents’ (Section A) 53
4.2 Presentation of Questionnaire Analyses (Section B) 55
4.3 Test of Hypotheses 62
4.4 Discussion of Result 68
References 70
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary of Findings 71
5.2 Conclusion 72
5.3 Recommendations 72
5.4 Suggested Areas for further Research 73
5.5 Contribution to Knowledge 74
5.6 Limitations of the Study 74
Bibliography 75
Appendix I: Questionnaire
Appendix II: Oral Interview Guide
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
For an organization to perform effectively does not depend only on the available technical resources, but also on the quality and competence of its employees. Meaghan (2002) states that employees are extremely crucial to the organization since their value to the organization are essentially intangible and not easily replicated.
Every organization has to bear in mind that the difference in the levels of productivity of two or more organizations depends on the contribution of existing employees. For an organization to be successful, employee satisfaction should not be overlooked, because, it is the prerequisite for staff retention. According to Abassi and Hollman (2000), managers must recognize that employees are major contributors of organizational competitive advantage and as such for the competitive advantage to be maintained, labour turnover should be discouraged by management.
Labour turnover is the movement of employees in and out of an organisation. It can also be seen as the rate at which an employer gains or loses employees. Owen (2004) opines that labour turnover measures the movement of workers in and out of employment with a particular firm. The issue and interest in measuring such movement arouse when working for an employer (rather than self-employment in craft or agricultural production) became the norm. Labour turnover is measured typically in terms of the separation rate (quits, layoffs, and discharges per hundred employees on the payroll).
High labour turnover can be seen as a devastating phenomenon to any organisations both public and private, whether big or small. Labour turnover affects both firms and employees. Organisations suffer the loss of job specific skills, disruption in production and incur the costs of hiring and training new workers. Employees, on the other hand, experience unsteady salary, unemployment, as a result of moving from one job to another in search of higher pay jobs, new job-specific skills and different career prospects. Some authors were concerned over the high rates of labour turnover in the early part of the century and conducted many studies to understand the causes and consequences of labour turnover (Douglas 1918; Lescohler 1923 and Slichter 1921). Some of these studies focused on the irregularity in labour demand which resulted in seasonal and cyclical layoffs. Others interpreted the high rate of labour turnover as an indication of worker dissatisfaction and labour relations problems. It was seen that labour turnover was costly for the firm (in terms of increased in hiring and training expenditures) and for the workers (in terms of irregularity of income flows). Many studies sought and identified why workers quitted their jobs less frequently was as a result of altered employment relationships (Owen 1995b; Ozanne 1967; and Ross 1958). In the United States, these changes in employment practices began in a few firms around the turn of the 20th century, intensified during World War 1 and became more widespread in the 1920s. These employment practices were sometimes attempts to appraise workers and to prevent unionization. However, others have suggested that the changes in quit behaviour in the 1920s were the result of immigration declines (due to implemented quotas) and slack labour turnover markets (Goldin 2000; Jacoby 1985). Labour economists have also noted that providing various form of deferred compensation (pensions, wages which increases with seniority, etc.) can increase worker effort and reduce the costs of monitoring workers.
High labour turnover can be harmful to a company’s productivity if skilled workers are often leaving and the worker population contains a high percentage of novice (trainee) workers (Hutchinson and Berunvides, 1997). Experts are needed for recruitment, selection and training of new employees whenever there is reduction in the work force (key employees); lots of money that is involved pose a challenge to any organisation to handle high labour turnover. Apart from the negative parts of labour turnover, there are little benefits attached to it, such as the opportunity of being able to replace poorly performed workers with more educated, experienced and skilled workers and the idea of waste reduction (unnecessary expenses caused by improper utilisation resources).
Newstrom and Davis (1997) define turnover as the proportion of employee leaving a job during a given time period. It is the sum of job turnover, which relates to expansion and contraction of establishments or firms and the movement of workers into and out going of jobs in establishments or firms. Workers leave firms and firms hire other workers to replace them regardless of whether firm itself is growing or declining. Grobler; Warnicks; Carrel; Elbert & Harfierd (2006) define staff turnover as the movement of employees out of the organisation, that results from resignation, transfers out of the organisational units, discharges, retirement and death. These authors distinguished between avoidable and unavoidable turnover, without clearly indicating the different between these two types of turnover. However, they mentioned that staff turnover is linked to job satisfaction, with the inevitable result that organisations mostly concerned with the reasons why employees wants to leave an organisation. Staff turnover can be described as the frequent or amount of voluntary termination (Gordon, 1991).
The historical analyses of labour turnover have relied upon two types of data. The first type consists of firm-level data on turnover within a particular workforce or governmental collections (through firms) of data on the level of turnover within particular industries or geographic locations. If these turnover data are broken down into their components (quit, discharges and layoffs), a quit rate model can be employed to analyse the worker-initiated component of turnover as it relates to job search behaviour (Parsons, 1973). The second type of turnover data is derived using employment records or governmental as the source for information specific to individual workers. Analyses of this type of data typically employs a “hazard” model that estimates the probability of a worker’s leaving a job as a function of individual worker characteristics (Carter and Savoca, 1992; Maloney, 1998; Whatley and Sedo, 1998).
In the United State, for the period of December, 2000 to November, 2008, the average total non-seasonally adjusted monthly turnover rate was 3.3%. However, rates vary widely when compared over different periods of time or different job sectors. For instance, during the period of 2001 to 2006, the annual turnover rate for all the industrial sectors averaged 39.6% before seasonal adjustments, during the same period the leisure and hospitality sector experienced an average annual rate of 74.6% (Bureau of Labour Statistics, 2008). This corroborates the findings of Joseph (1972) which states that labour turnover cost American industries $11 billion a year. This figure includes items like recruitment, hiring, training of replacements.
There
has always been labour turnover in the Nigerian banking industry but it became
more pronounced after the introduction of bank consolidation by the Central
Bank of Nigeria (CBN) that took place from July 2004 to December 2005 (Okafor,
2009). Under this policy, deposit banks were mandated to raise their equity
capital to N25 billion through
windows like mergers and acquisition, sourcing funds from the capital market or
private placement in order to strengthen them. This process resulted to reduction of deposit banks
from 89 to 25 in the year 2007 and later to 20 in 2011 with the attendant
massive job loss. Some deposit banks that could not meet
up with the requirements of the Central Bank of Nigeria were closed down. The
survived ones laid off their staff and this escalated the number of job seekers
in the country. Furthermore, in developing countries, labour turnover increases
the rate of unemployment due to lack of job, many job seekers roaming around in
search of job in the face of little or no job and in the same vein, countries
that have high unemployment rates are likely not to have high labour turnover.
Workers may find it difficult to leave their present jobs because they know
there are many job seekers waiting for the slightest opportunity to be
employed.
The Nigerian banking industry has witnessed new and different physical change in the recent years as a result of the restructuring programme channeled towards resolving the existing problems of the industry by the Central Bank of Nigeria (CBN). The Central Bank of Nigeria has seen the weakness in banking system characterized by insolvency, persistent illiquidity, poor assets quality, unprofitable operations, weak corporate governance, over dependency on public sector deposits, weak capital base, late or non-publication of annual accounts and among others. These might make it impossible for deposit banks to meet all employees requirements (such as high pay, job security, opportunity for advancement an achievements, job satisfaction, incentives and among others) which can trigger the movement of employees from one organisation to another. Due to the above weaknesses, the former governor of the Central Bank of Nigeria, Soludo (2004) at the special meeting with the Bankers Committee initiated bank consolidation and pointed out why mergers and acquisitions should be taken seriously as an instrument for enhancing banking efficiency, size and development.
The
banking industry specifically has experienced lots of labour turnover in the recent
years, especially, after the 2005 bank reform exercise introduced by the
Central Bank of Nigeria (CBN). This move was prompted by the weak and fragile
capital base of most Nigerian banks which predisposed them to collapse at the
slightest loan default. Consequently, CBN increased the minimum share capital
of banks to N25billion to strengthen
them. This resulted in reduction of deposit banks from 89 to 24 under Soludo in
2007 and later to 20 under Sanusi in 2011 with the attendant massive job loss
and loss of customers’ loyalty.
Before now, Nigeria had 89 banks with many banks having capital base of less than US$10million and about 3,300 branches. Recently, Nigeria banking industry has undergone remarkable changes over the years in terms of the number of institutions, ownership structure as well as depth and breadth of operations. These changes have been influenced largely by challenges posed by deregulation of the finance sector, globalization of operations, technological innovations and adoption of supervisory and prudential requirements that conform to international standards.
According to Nigerian Deposit Insurance Corporation (NDIC) annual report (2007), there was 24 deposit banks in Nigeria at the end of 2007 and out of these 24 banks, 4 were rated sound, 17 were rated satisfactory, 2 marginal and 1 was rated unsound. In the year 2012/13, it was further reduced to 22 deposit banks.
The main aim of initiating bank consolidation by the CBN was to make deposit banks strong and reliable. When deposit banks are strong and reliable, the issue of labour turnover might be reduced with the intention that some factors that contributed to labour turnover have been reduced as low as reasonably possible. In the side of employees, they might be rest assured of their regular salary pay, job security, opportunity for advancement and achievement etc. and the idea of employees moving from one organisation to another may not be there. This in turn can be of a good advantage to deposit banks because as employees are retained there might be no room for the organisations to suffer disruption in production or loss of job specific skills that will make them spend money for hiring and training new workers. High labour turnover boost a threat in the reputation of commercial banks; people might be scared to put in their money in such bank and those that have already have account with them might decide to withdraw all their money due to fear of unknown. This can cause bank runs which might make it difficult for banks to be able to operate effectively.
Kelvin, Joan, and Adrian (2004) state that although there is no standard framework for understanding employee’s turnover process as a whole, a wide range of factors has been found useful in interpreting employee turnover. In line with this, there is need to develop a fuller comprehension of labour turnover, the factors that triggered the push and pull of employees in an organisation, and its effect on performance of workers in Nigeria deposit banks. Due to upsurge in competition in the banking industry, Nigerian banks should note that their competitive advantage can be affected if they experience high rate of labour turnover. This is based on the fact that employees’ skills and knowledge as intangible assets cannot be copied by rivals just like tangible assets or products. The most common way by which rivals can have access to the skills and knowledge of an organisation is where there is labour turnover and as such the employees leave the organisations and join the rivals (Owomoh and Korankye, 2012).
1.2 Statement of the Problem
