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When does turnover become functional?

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If you are like most managers, you probably view voluntary employee turnover as a costly and undesirable occurrence.  In many instances, this is the case.  However, some types of voluntary turnover can actually be good for your company.  When the employees that leave an organization are poor performers, this may be better for the company than if the employees had stayed.  This is known as functional turnover, and is desirable. 

Influences on Employee Turnover

There are numerous factors that influence voluntary employee turnover including performance level and performance ratings.
  • Performance Level. As touched on above, performance level is one factor that can influence employee turnover.  The lowest performing employees are the most likely employees to turnover.  They are the highest risk, which as mentioned, is not necessarily a bad thing for an organization and a manager should not be as concerned about this type.  The second most common type of employee turnover is among the highest performers in an organization.  The best performing employees are also the most hurtful for the organization to lose. Managers should work to retain these employees.
  • Performance Ratings. These are dynamic in that they are constantly changing for better or worse as an employee’s performance changes.  When these ratings go down for employees, they are more likely to turnover and leave an organization.  Poor performers are even more likely than high performers to turnover after a downward change in performance.  In addition, negative performance ratings will have a greater impact on turnover than positive performance ratings.  In other words, positive performance ratings from a manager will not stop turnover in low performers.  High performers are less likely to be affected by short-term changes in performance whether the ratings have decreased or increased from previous ratings.

What Can be done to Help?

Merit-based, or performance-based, pay may lessen the effects of voluntary turnover in relation to performance level and performance ratings.  High performers are less likely to turnover when they are paid based on performance.  As a manager, you should make sure that an employee is rightfully rewarded for their efforts.  This effect is not found among low performers; the method used to pay a low performer does not influence the turnover rate.

Practical Implications

Managers should provide a fair but rigorous performance rating system that holds employees to high standards.  This will help to get rid of any low performers naturally.  High performers should be adequately rewarded for their work as well because this will reduce turnover in high performers.  Without the right compensation for these employees, an organization will risk losing its move valuable assests.

Ashley Niemczyk

DeGarmo

This was a summary of the research and practice implications from: Becker, W.J., & Cropanzano, R. (2011). Dynamic aspects of voluntary turnover: An integrated approach to curvilinearity in the performance-turnover relationship. Journal of Applied Psychology, 96(2), 233-246.
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