To replace an employee costs on average $4,000 according to a study from the University of California. Replacing a manual worker costs $2,000 on average while replacing a professional employee costs $7,000. A survey of CEOs found that typical mid-level managers require 6.2 months to reach their break-even point of productivity in their new role. The costs of replacing an employee include both money spent on recruiting and training as well as lost productivity time while the new hire ramps up. Organizations should focus on retention strategies to reduce replacement costs and maintain productivity levels.

1. How does it cost to
replace an employee?
Average cost = $4,000
According to IRLE of the University of California, to replace:

2. How does it cost to
replace an employee?
According to IRLE of the University of California, to replace:
= $2,000
A manual worker
A professional
employee
= $7,000

3. How long does it take to
replace an employee?
A survey of 610 CEOs by Harvard Business School
estimates that typical mid-level managers require
6.2 months to reach their break-even point.

4. How long does it take to
replace an employee?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Week
Productivity
THE PRODUCTIVITY SCALE OF
A NEW EMPLOYEE
25%
50%
75%

5. Cost of replacing an employee:
 Money
HOW TO SAVE THIS COST?
 Time

6. Organizational
Commitment
Presented by Tuan LE

7. 1) What is Organizational Commitment?
Questions of the presentation
2) Why is Organizational Commitment
important?
3) How can company create/improve
Organizational Commitment?

8. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
Agenda of the presentation
B. THE IMPORTANCE OF ORGANIZATIONAL
COMMITMENT
C. HOW TO IMPROVE ORGANIZATIONAL
COMMITMENT?

9. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
The concept of “Organizational Commitment” has attracted
considerable attention over recent years
 “Organisational commitment is a state in which individual
continue remaining in the organization because of weighing
cost-benefits of leaving” - Hrebiniak & Alutto (1972)
 “Organizational commitment is an individual's psychological
bond to the organisation, including a sense of job involvement,
loyalty and belief in the values of the organisation” - Porter et al
(1974)

10. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
“Organizational Commitment is a psychological state
that characterises the employee’s relationship with the
organisation, and has implications for the decision to
continue membership in the organisation”.
Meyer and Allen (1990)

11. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
Organizational
Commitment
A tri-dimensional concept of Meyer and Allen (1990)
Affective
Continuance
Normative
Different ways of organisational commitment
development and the implications for employees’
behaviour.

12. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
1. Affective commitment dimension:
“Affective commitment is the employee’s emotional
attachment to, identification with, and involvement
in the organisation.”
Meyer and Allen (1990)
• Employee continue working in organization because
they desire to do.
• Personal objectives are congruent to the goals and
values of the organisation.

13. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
1. Affective commitment dimension:

14. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
1. Affective commitment dimension:
Affective commitment is influenced by factors:
 Job challenge
 Role clarity
 Goal difficulty
 Receptiveness by management
 Peer cohesion
 Feedback
 Dependability

15. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
2. Continuance commitment dimension:

16. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
2. Continuance commitment dimension:
“Continuance commitment is employee’s awareness of
the costs associated with leaving the organisation.”
Meyer and Allen (1990)
• Employees remains in the organisation because they
need to do so.

17. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
2. Continuance commitment dimension:
Continuance commitment is influenced by factors:
 Availability of alternatives
 Level of investments

18. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
3. Normative commitment dimension:
“Normative commitment is feeling of obligation
to continue employment”.
Meyer and Allen (1990)
• Employee remains with the organization because
they think they should do so.
• Relationship between employee and organization
is moral obligation.

19. A. DEFINTION OF ORGANIZATIONAL COMMITMENT
3. Normative commitment dimension:

20. B. THE IMPORTANCE OF ORGANIZATIONAL COMMITMENT
Organizational commitment has either negative or
positive effects on the organization
Low level of Organizational
Commitment
High level of Organizational
Commitment
• Reduce the operation cost
• Working actively, neurotic compulsion
to succeed
• Work mechanically, unproductive and
tend to become loafer at work
• Low level of energy • High level of energy
• High level of creativeness
• Tend not to be creative at work
• Tend to leave the organization when
facing difficulties
• Tend to protect the organization against
the threat inside as well as outside
• Absenteeism • Willing to work overtime
• Increase the operation cost:
recruitment, waste working facilities...

21. C. HOW TO IMPROVE ORGANIZATIONAL COMMITMENT?
1. Determine which commitment dimension which
employee has to choose the appropriate method.
2. Create a working environment that allows employee do
renovation.
3. Communicate openly and often.
4. Create company loyalty programs.
5. Use the organization's history to create a desirable
corporate culture.
6. Create a desirable working environment: picnic and
holiday parties...

22. CONCLUSION
A. Definition of Organizational Commitment
1. Affective commitment dimension
2. Continuance commitment dimension
3. Normative commitment dimension
B. The importance of Organizational Commitment
Organizational commitment has either negative and positive
effects on organization
C. How to improve Organizational Commitment?

23. THANK YOU!
Presented by Tuan LE