This study adds to scientific understanding of how employee turnover affects organizational performance in a multi-unit commercial bank setting operating in the United States. Theoretically, expected relationships among turnover, efficiency and performance are outlined. Empirically, two indicators of organizational efficiency are examined and one, cost-per-loan efficiency, is found to fully mediate relations between voluntary employee turnover and two organizational performance outcomes, profitability and customer satisfaction, in both synchronous and longitudinal analyses These results replicate recent findings in disparate industries, suggesting that efficiency may explain why higher levels of turnover are typically associated with lower levels of organizational performance. The need to distinguish among conceptualizations of efficiency is discussed, along with the need to consider temporal effects associated with turnover and efficiency.
Abelson, M.A.Examination of avoidable and unavoidable turnover. Journal of Applied Psychology, 1987, 72, 382—6.
2.
Abelson, M.A. & Baysinger, B.D. Optimal and dysfunctional turnover: Toward an organizational level model. Academy of Management Review, 1984, 9, 331—41.
3.
Anderson, P.M. & Meyer, B.D.The extent and consequences of turnover. In Brookings papers on economic activity: Microeconomics. Washington, DC: Brookings Institution, 1993 , pp. 177—248.
4.
Baron, R.M. & Kenny, D.A.The moderator-mediator distinction in social psychological research: Conceptual, strategic and statistical considerations. Journal of Personality and Social Psychology, 1986, 51, 1173—82.
5.
Baron, J.N., Hannan, M.T. & Burton, M.D.Labor pains: Change in organizational models and employee turnover in young, high-tech firms. American Journal of Sociology, 2001, 106, 960—1012.
6.
Baysinger, B.D. & Mobley, W.H.Employee turnover: Individual and organizational analysis. In K.M. Rowland and G.R. Ferris (Eds) Research in personnel and human resource management , vol. 1. Greenwich, CT: JAI Press, 1983, pp. 269—319.
7.
Berger, A.N. & Humphrey, D.B.Efficiency of financial institutions: International survey and directions for future research. EuropeanJournal of Operational Research, 1997, 98, 175—212.
8.
Berman, S., Wicks, A.C., Kotha, S. & Jones, T.Does stakeholder orientation matter? An empirical examination of the relationship between stakeholder management models and firm financial performance . Academy of Management Journal, 1999, 42(5), 507—25.
9.
Buxey, G.Strategy not tactics drives aggregate planning. International Journal of Production Economics, 2003, 85, 331—46.
10.
Carsten, J.M. & Spector, P.E. Unemployment , job satisfaction, and employee turnover: A meta-analytic test of the Muchinsky model. Journal of Applied Psychology , 1987, 72, 374—81.
11.
Cascio, W.F.Managing human resources: Productivity, quality of work life, profits , 4th edn. New York: McGraw-Hill, 1995.
12.
Clarkson, M. A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 1995, 20, 92—117.
13.
Cotton, J. & Tuttle, J.Employee turnover: A meta-analysis and review with implications for research . Academy of Management Review, 1986 , 11, 55—70.
14.
Dalton, D.R. & Tudor, W.D.Turnover turned over: An expanded and positive perspective. Academy of Management Review, 1979, 4, 225—35.
15.
Fernandez, C., Koop, G. & Steel, M.F.J.Alternate efficiency measures for multiple-output production. Journal ofEconometrics, 2005, 126, 411—44.
16.
Freeman, R.E.The development of stakeholder theory: An idiosyncratic approach. In K.G. Smith & M.A. Hitt (Eds) Great minds in management: The process of theory development. Oxford: Oxford University Press, 2005, pp. 417—35.
17.
Glebbeek, A.C. & Bax, E.H.Is high employee turnover really harmful? An empirical test using company records. Academy of Management Journal, 2004 , 47, 266—86.
18.
Grant, R.M.Toward a knowledge-based theory of the firm. Strategic Management Journal, 1996, 17, 109—22.
Griffeth, R.W., Hom, P.W. & Gaertner, S. A meta-analysis of antecedents and correlates of employee turnover: Update, moderator tests, and research implications for the next millennium. Journal of Management, 2000, 26, 463—88.
21.
Hall, R.H. & Tolbert, P.S. Organizations : Structures, processes, and outcomes, 9th edn. Upper Saddle River, NJ: Pearson, 2005.
22.
Harter, J.K., Schmidt, F.L. & Hayes, T.L.Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis. Journal of Applied Psychology, 2002, 87, 268—79.
23.
Heskett, J.L., Sasser, W.E. & Schlesinger, L.A.The service profit chain. New York: Free Press, 1997.
Huselid, M.A.The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 1995, 38, 635—72.
26.
Kacmar, K.M., Andrews, M.C., Van Rooy, D.L., Steilberg, R.C. & Cerrone, S. Sure everyone can be replaced . . . but at what cost? Turnover as a predictor of unit-level performance. Academy of Management Journal, 2006, 49, 133—44.
27.
Kenny, D.A.Mediation, 2006 (revised 7 February), available online at: [http://davidakenny.net/cm/mediate.htm], accessed 20 July 2006.
Kochan, T. & Rubenstein, S.Towards a stakeholder theory of the firm: The Saturn partnership. Organizational Science, 2000, 11(4), 367—86.
30.
Koys, D.J.The effects of employee satisfaction, organizational citizenship behavior, and turnover on organizational effectiveness: A unit-level longitudinal study . Personnel Psychology, 2001, 54, 101—14.
31.
Marcus, A.A. & Goodman, R.S. Victims and shareholders : The dilemmas of presenting corporate policy during a crisis. Academy of Management Journal, 1991, 34, 281—305.
32.
Marens, R. & Wicks, A.C.Getting real: Stakeholder theory, managerial practice, and the general irrelevance of fiduciary duties owed to shareholders. Business Ethics Quarterly, 1999, 9(2), 273—93.
33.
McKie, D.A.Quality issues in customer satisfaction studies of cable television . Journal of Advertising Research, 1992, 32(2), 6—8.
O'Reilly, C.A. III & Pfeffer, J. Hidden value. Boston, MA: Harvard Business School Press, 2000.
36.
Osterman, P.Turnover, employment security and the performance of the firm. In M.M. Kleiner, R.N. Block, M. Roomkin & S.W. Salsberg (Eds), Human resources and the performance of the firm. Washington, DC: BNA Press, 1987, pp. 275—317.
37.
Peters, T.J. & Waterman, R.H. Jr.In search of excellence: Lessons from America's best-run companies. New York: Harper and Row, 1982.
38.
Pfeffer, J. & Veiga, J.F.Putting people first for organizational success. Academy of Management Executive, 1998, 13, 37—48.
39.
Phillips, J.D.The price tag on turnover. Personnel Journal, 1990, December, pp. 58—61.
40.
Preacher, K.J. & Leonardelli, G.J.Calculation for the Sobel test, 2005, available online at: [http://www.unc.edu/~preacher/sobel/sobel.htm ], accessed 20 July 2006.
41.
Sagie, A., Birati, A. & Tziner, A.Assessing the costs of behavioral and psychological withdrawal: A new model and empirical illustration. Applied Psychology: An International Review, 2002, 51, 67—89.
Schneider, B., Hanges, P.J., Smith, D.B. & Salvaggio, A.N.Which comes first: Employee attitudes or financial and market performance?Journal of Applied Psychology, 2003, 88, 836—51.
44.
Shaw, J.D., Gupta, N. & Delery, J.E.Alternative conceptualizations of the relationship between voluntary turnover and organizational performance. Academy of Management Journal , 2005, 48, 50—68.
45.
Staw, B.M.The consequences of turnover. Journal of Occupational Behavior , 1980, 1, 255—73.
46.
Steel, R.P. & Ovalle, N.K. A review and meta-analysis of research on the relationship between behavioral intentions and employee turnover. Journal of Applied Psychology , 1984, 69, 673—86.
47.
Tsui, A.S. A multiple constituency model of organizational effectiveness: An empirical examination at the human resources subunit level. Administrative Science Quarterly,1990, 35, 458—83.
