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Effect of employee turn over on national economy

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Working paper discussing the employee turnover problem in Egypt. This paper was presented at the second international conference of business development, innovation & challenges.

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Effect of employee turn over on national economy

  1. 1. EFFECT OF EMPLOYEE TURNOVER ON NATIONAL ECONOMY PresentedBy: Mohamed Moharam FACULTY OF FINANCIAL AND ADMINISTRATIVE SCIENCES PHAROS UNIVERSITY IN ALEXANDRIA
  2. 2. Agenda  Introduction  Research Focus  Research Questions  Research Importance  Research Design  Research Findings  Recommendations
  3. 3. Introduction  What is employee turnover phenomenon?  How to control this phenomenon?
  4. 4. Research Focus  This research explores the problem of employee turnover and the relation between this phenomenon and the unemployment rate in Egypt.
  5. 5. Research Questions 1- What is the effect of unemployment rates on the Egyptian economy?
  6. 6. Research Importance  This research discusses one of the most important problems that must be discussed deeply.  A lot of researches discussed the Egyptian unemployment rate only without illustrating the turnover rate neglecting the direct relationship between them.  Illustrating the two sectors with the highest turnover rate in Egypt.
  7. 7. Research Design  A survey was conducted using personal interviews and questionnaires focusing on random sample of employees in two sectors: Fast food and medical sectors
  8. 8. INTRODUCTION  Employee turnover is one of the main problems that must be discussed deeply nowadays; this condition widely appeared since 2011 (after the revolution) .  it’s not surprising to say that this phenomenon is increasing till now.  Employee turnover has a direct effect on the unemployment rate which is a very important problem in Egypt especially for fresh graduates.  Employee turnover has four types:  voluntary  involuntary  Desirable and Undesirable turnover
  9. 9. Voluntary turnover  When an employee leaves the company of his / her own volition, it's called voluntary termination. [Ruth Mayhew]  They may be accepting employment with another company, relocating to a new area or dealing with a personal matter that makes it impossible to work.[Ruth Mayhew]  When an employee voluntarily terminates the employment relationship, he / she generally gives the employer verbal or written notice of intent to resign from his / her job.[Ruth Mayhew]
  10. 10. Voluntary turnover (cont’d)
  11. 11. Involuntary turnover  Employee termination for poor job performance, absenteeism or violation of workplace policies is called involuntary turnover (also referred to as termination, firing or discharge). [Ruth Mayhew]  It's involuntary because it wasn't the employee's decision to leave the company. [Ruth Mayhew]  layoff procedures usually are handled different from termination.[Ruth Mayhew]  Some layoffs is due to laws and regulations forced by the government on the company because of performance or policy violations.[Ruth Mayhew]  EX: Auditors must have CPA
  12. 12. Desirable and Undesirable turnover  Turnover often has a negative connotation, yet turnover isn't always a negative event.[Ruth Mayhew]  It's desirable because poor job performance, absenteeism and tardiness are costly.[Ruth Mayhew]  replacing a poor performer with an employee who does his job can improve the company's profitability.[Ruth Mayhew]  Desirable turnover also occurs when replacing employees infuses new talent and skills, which can give an organization a competitive advantage. [Ruth Mayhew]  undesirable turnover means the company is losing employees whose performance, skills and qualifications are valuable resources.[Ruth Mayhew]
  13. 13. Employee turnover statistics
  14. 14. EFFECTS OF EMPLOYEE TURNOVER  High turnover can be a serious obstacle to productivity, quality, and profitability at firms of all sizes. [ Clint Johnson ]  For the smallest of companies, a high turnover rate can mean that simply having enough staff to fulfill daily functions is a challenge, even beyond the issue of how well the work is done when staff is available.[ Clint Johnson ]  Turnover is no less a problem for major companies, which often spend millions of dollars a year on turnover-related costs.[ Clint Johnson ]  For service-oriented professions, such as management consulting or account management, high employee turnover can also lead to customer dissatisfaction and turnover, as clients feel little attachment to a revolving contact.[ Clint Johnson ]
  15. 15. TURNOVER CALCULATIONS  Basic turnover calculations are relatively simple. If your company employs 100 employees and 15 employees are fired or quit, your turnover is 15 percent.[Ruth Mayhew]  Most organizations use more detailed calculations to determine what underlies turnover.[Ruth Mayhew]  Assume five employees leave in January, one employee leaves in May and four employees leave in November. Your annual turnover rate is 10 percent, and your average monthly turnover is 8.3 percent. [Ruth Mayhew]
  16. 16. LIST OF COMPANY’S with the shortest tenure
  17. 17. LIST OF COMPANY’S WITH THE LOWEST TURNOVER RATE
  18. 18. Research Hypothesis  From previous literature, this research hypothesis is formulated as follow: H1: There is a direct significant effect of turnover rates on the Egyptian economy.
  19. 19. Results
  20. 20. Effect On Egyptian Economy  Egyptian government spent more than 600 million pound annually on employee turnover in all sectors.  This high turnover rate in the governmental sector occur due to the dissatisfaction with salaries.  Till now there is no definite solution for this problem.
  21. 21. CAUSES OF EMPLOYEE TURNOVER
  22. 22. Reasons for employee turnover in the fast foods sector in Egypt  The results of this study revealed that more than 59% of the employees who terminated employment during the period had been employed for 4-6 months. The greatest percentage of respondents left because of dissatisfaction with treatment by the supervisor (51.2%), followed by (12.7%) who left for dissatisfaction with salary. Seventy-seven percent of those who left were male, compared to twenty-three percent female. This imbalance reflects the overall gender imbalance of employees. The findings revealed significant differences in satisfaction with the supervisors of former and current employees at McDonald's. In particular, the group of former employees was less satisfied with their supervisor.
  23. 23. CAUSES OF EMPLOYEE TURNOVER (cont’d)  Reasons for employee turnover in the medical representative sector in Egypt:  Pharmaceutical industry is rapidly growing industry in Egypt. This industry requires huge skilled and efficient manpower. Medical representative are the front line for marketing any product. Medical representative spent most of their business in their territory, talking with pharmacists, hospital personnel, physicians, patient and detailing and promoting their company’s products and increasing the volume of their sales. They represent the company image.
  24. 24. Reasons for employee turnover in medical representative sector in Egypt (cont’d)  As medical representative are the core of the pharmaceutical business, thus increasing their satisfaction will lead to increase in the revenue of the company. But there are observed huge turnover due to lack of proper job satisfaction and lack of proper motivation, turnover intention, and level of experience, manager’s support, compensation and benefits. The problem in medical reps turnover is that it cost the companies a lot. When sales territories are vacant, medical rep/doctor relationships become threaten. This could lead to decrease of market share. Also cost of recruiting new medical reps, cost of training new medical reps, decreased morale and productivity among retained workers and loss of future key talent. The main reason for medical reps turnover was that they are not feeling satisfied neither from the salaries nor from the managers treatment.
  25. 25. Recommendation  At the end of this research I am attempting to recommend some ways to solve the turnover phenomenon especially in Egypt, turnover rate in Egypt increased after the revolution by approximately 55% so the unemployment rate increased also by 50% which cause a real economic crisis.  After a very specific study and questioners I found that most of turnovers was voluntary especially at the age from 23 to 31, I was not surprised because this age is searching for the best salary also to feel safe (contracts, insurance, etc.…).  SOLUTIONS:  HR specialists must be aware when choosing the employee, hiring the right person is the best way to reduce turnover  employee interpersonal skills must be examined carefully to be sure that he will fit well with the company, managers and co-workers.
  26. 26. Recommendation  Managers must be aware to employees personal needs and offers flexibility when they can  Motivation and respect are the two main weapons manager can use to reduce the turnover rate  Business cycles must be used widely and in different ways to satisfy both work and employees needs.  Finally any employee needs to feel that he is helpful and useful to the firm and an appreciation word from the manager is better than any salary he / she can get.

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