Turnover and Unit-Level Financial Performance: An Analysis of the Costs and Benefits of Voluntary and Involuntary Turnover in Unskilled Jobs

Abstract

Purpose

We investigate outcomes associated with the turnover of unskilled workers, isolating its effects on revenue, cost, and profit. Little attention from researchers has been given to unskilled workers, a significant portion of the workforce.

Methodology/approach

This study investigates the relation between turnover among unskilled workers and financial performance using data from 527 hotels owned by the same lodging chain. The workers in our sample are full-time housekeepers and front desk attendants.

Findings

We find that the relation between turnover and performance differs by turnover type (voluntary vs. involuntary) and category of unskilled worker, reiterating the need to differentiate between turnover type and the importance of context in studying turnover. We challenge the assumption that voluntary turnover is categorically harmful and our results for front desk attendants support the view that organizations choose turnover levels that maximize performance. We also provide new evidence on the effects of involuntary turnover. Contrary to the established notion that dismissing less able employees should improve performance, we find that involuntary turnover has negative consequences.

Research limitations/implications

Our results demonstrate the importance of distinguishing voluntary turnover from involuntary turnover and the need to include both in models predicting turnover’s performance effects.

Citation

Hesford, J.W., Malina, M.A. and Pizzini, M. (2016), "Turnover and Unit-Level Financial Performance: An Analysis of the Costs and Benefits of Voluntary and Involuntary Turnover in Unskilled Jobs", Advances in Management Accounting (Advances in Management Accounting, Vol. 26), Emerald Group Publishing Limited, Leeds, pp. 35-65. https://doi.org/10.1108/S1474-787120150000026002