Impact of  Employee Turnover on Firm Profitability

Employee turnover, or the rate at which employees leave an organization and are replaced by new hires, can have a significant impact on a firm's profitability. High employee turnover can lead to a number of negative consequences, including increased costs associated with recruiting and training new employees (Mobley, 1982), decreased productivity and morale among remaining staff (Price & Mueller, 1986), and a loss of institutional knowledge and expertise (Price, 1977). These factors can ultimately lead to decreased profitability for the firm.

On the other hand, low employee turnover can have a positive impact on a firm's profitability. Companies with low turnover tend to have lower recruitment and training costs (Price & Mueller, 1986), as well as higher productivity and morale among their employees (Price, 1977). These factors can contribute to increased profitability for the firm.

There are several factors that can contribute to high employee turnover, including a poor work environment (Mobley, 1982), a lack of opportunities for growth and advancement (Price & Mueller, 1986), and low pay and benefits (Price, 1977). Companies can take steps to reduce employee turnover by improving working conditions (Price, 1977), offering training and development opportunities (Price & Mueller, 1986), and providing competitive pay and benefits packages (Mobley, 1982).

Overall, the impact of employee turnover on firm profitability is significant, and companies should strive to minimize turnover in order to maximize profitability and maintain a stable and productive workforce.

References:

Mobley, W. H. (1982). Employee turnover: Causes, consequences, and control. Reading, MA: Addison-Wesley.

Price, J. L. (1977). The study of turnover. Ames: Iowa State University Press.

Price, J. L., & Mueller, C. W. (1986). Turnover: Causes, consequences, and control. San Francisco, CA: Jossey-Bass.

Ahsan Tariq
Preston university
Department of management science