DETERMINANTS OF EMPLOYEE TURNOVER AND ITS EFFECT ON THE

ORGANIZATIONAL PERFORMANCE

(IN THE CASE OF ARBA MINCH TEXTILE FACTORY)

A THESIS PROPOSAL SUBMITTED TO DEPARTMENT OF MANAGEMENT OF

ALLIANCE COLLEGE IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

AWARD OF BA DEGREE

THESIS PROPOSAL

BY

ADVISOR: MEBRATU.M

April, 2025

ARBA MINCH , ETHIOPIA

 Tables of content

Contents………………………………………………………………Page
Abstract................................................................................................................................................ vii

CHAPTER ONE.................................................................................................................................... 1

Introduction............................................................................................................................................ 1

1.1Background of the study.............................................................................................................. 1

1.2 Background of the organization................................................................................................. 2

1.3 Statement of the problem............................................................................................................ 3

1.4 Research Question....................................................................................................................... 4

1.5 Objective of the study................................................................................................................. 5

1.5.1 General objective................................................................................................................. 5

1.5.2 Specific objectives............................................................................................................... 5

1.6 Significance of the study............................................................................................................ 5

1.7 Scope of the study....................................................................................................................... 5

1.8 Limitation of the study............................................................................................................... 6

1.9 Organization of the study........................................................................................................... 6

CHAPTER TWO................................................................................................................................... 7

Review of Related Literature............................................................................................................ 7

2.1 Introduction................................................................................................................................. 7

2.2 EmployeeTurnover; an overview............................................................................................... 8

2.3 Types of Turnover..................................................................................................................... 10

2.4 Causes of Employee Turn over................................................................................................ 11

2.5 Costs of employee turn over..................................................................................................... 13

2.6 Employee Retention Techniques.............................................................................................. 14

 2.7 Consequences and effects of employee turnover.................................................................... 16

2.8 Sources of employee turnover.................................................................................................. 17

2.9 Method of minimizing employee turnover.............................................................................. 20

CHAPTER THREE............................................................................................................................. 22

3 Research Methodology.................................................................................................................... 22

3.1 Study Area................................................................................................................................. 22

3.2Research Design......................................................................................................................... 22

3.3Type and Sources of data........................................................................................................... 22

3.4Method of data collection.......................................................................................................... 22

3.5 Sample size and sampling techniques...................................................................................... 23

3.6 Data processing and analysis/presentation.............................................................................. 23

Bibliography........................................................................................................................................ 41

Appendix I........................................................................................................................................... 43

Appendix II.......................................................................................................................................... 46
 Declaration
We declare that this proposal titled “determinants of employee turnover on the
organizational performance; the case study of Arba minch textile factory ” Here
submitted to the Department of Management for the partial fulfillment of the
requirements for the bachelors of art in Management is our original work and
not submitted earlier for a degree either at this college or any other University
and all sources of material the researcher used have been properly
acknowledged.
Name Date Sign

Abstract
This research proposal is entitled “the determinants of employee turnover on the organizational
performance; the case study of Arba minch textile factory. Specifically this study will attempt to address
identifying the causes or determinants of employee turnover; see the cost and consequences of employee
turnover, and forward recommendations and feasible solutions to minimize the frequent turnover based
on the result of the study. To conduct this study both primary and secondary data will be used to identify
different determinants of employee turnover. Questionnaire is a dominant tool used to collect the needed
data. The questionnaire will be prepared based on close ended and open ended questions by using
English versions according to the language proficiency of the respondents. For this study will stratified
sampling follow by simple random sampling technique will be used for the selection of the samples from
entire population. Then the data will be collected through questionnaire analyzed using descriptive
research technique like frequency and percentage and presented through tables and interpreted
accordingly.

CHAPTER ONE
Introduction
1.1Background of the study

Employee turnover is the process of replacing one worker with another for any reason. Having
an employee leave a company either because of his or her choice or after being fired, might
require various administrative tasks to be performed and severance pay or other payments made
to the employee. Replacing the employee might require such things as advertising the open
position, bringing candidates for interview and eventually training the new employee
(http;//www.wisegeek.org).

There are several determinants that make an employee to leave their respective organization and
join other organizations. These are salary scale, advancement and promotion policies, fringe
benefits, working environment and working procedures and etc (http;//www.buzzle.com).

Most of the existing researchers focus on the impact of employee turnover, but little has been
done on the causes and determinants, examining the sources of employee turnover, effects and
advising various strategies which can be used by managers in various organizations to insure that
there is employee continuity in their organization to enhance organizational performance

(http;//www.academicjournals.org).
There are many companies that will confront with high rate of employee turnover in our country.
These companies do not know what things determine or cause this high turnover rate.

1.2 Background of the organization

Arba minch textile factory is an organization which is located in the southern part of Ethiopia
about 505 kilometers from the capital city Addis Ababa. Arbaminch textile factory was
established by the government in 1999 in Arbaminch town, Gamo zone south-Ethiopia national
regional state. Arbaminch Textile Company is a leading textile manufacturer based in Ethiopia.
With a focus on producing high-quality, sustainable fabrics, the company has earned a reputation
for its innovative products and commitment to ethical production practices. From its state-of-the-
art facilities, the company produces a wide range of textiles, including natural and synthetic
fabrics, for a variety of industries.

With a strong commitment to environmental sustainability, Arbaminch Textile Company is dedicated to

reducing its impact on the planet and improving the lives of its employees and the communities it serves.

In the current service and knowledge economy it seems that the balance of power shifted from
employers’ who increasingly shift from job to job. When a business losses employees, it loss
skills, experience and “corporate memory”. The magnitude and nature of these losses is a critical
management issues, affecting productivity, profitability, and product and service quality
(Lockheed and Stephens, 2004).

Turnover can be voluntarily and involuntary. It can be decision of the employee or at the hand of
the employer. Employee may involuntarily leave the organization, through layoff or discharge,
or voluntarily leave the organization, through resignation or retirement (French, 1994).
Regardless of the type of organization, voluntary turnover is disruptive and harmful to the
organization. It is also costly, both directly and indirectly (Cascio, 1991).Employers continually
works to reduce voluntary turnover costs through various human resource function including
training, performance management, composition strategies, and selection methods. Today the
demands of workers have been increased very much as ever before (Earle, 2003).

No business can enjoy and sustain the success until it deals with this turnover problem efficiently
and successfully. Most critical thing is to lay the ground work for long term commitment.
Turnover also disputes organizational continuity and is very costly in terms of rehiring and
training new employees (Kreitner&Kinicki, 2001).
 A managerial prospective, the determinant of employee turnover and its effects of high-quality
employees is more important today than ever before. A number of trends (e.g., globalization,
increase in knowledge work, accelerating rate of technological advancement) make it vital that
firms acquire and retain human capital. It is in terms every aspect, not only salaries and perks but
also work experience and cultural context in which it occurs. Providing a prolific, flexible and
dynamic work environment can be a critical asset in attracting and retaining valuable employees
(Earle, 2003).

Employees are assets of the organization. Since the organization spent much of its investment to
build their capacity through training, and education. However, losing of employees’ in which it
invests much is a big loss. From a managerial aspect Fayal’s fourteen principles of management
“stable of tenure of personnel” is one and main principles. Consistent planning, implementation
and workflow can be realized only by stable employees. So, organizations should try their best
performance of their professional and qualified employees.

1.3 Statement of the problem

It is obvious that the quality of work is affected by the frequent turnover of experienced
employees. It takes time to the new employee to adapt to the task effectively. And also it needs
time to make cooperative working environment with the staff members of the organization.
Many researchers hold the position that employees leave their jobs when their needs are not
being satisfied by their present jobs and alternative job becomes available. Employees leave one
organization and join other organization which best satisfy or fulfill their need (Huselids, 1995).

Excessive movement of employees from the organization has its consequence on organization
success. This consequence may hiring cost which includes time and facilities for recruitment,
interviewing, examine, replacement, loss of production in the interval between separation of old
employees and the replacement by new.

When we come to Arba minch textile factory management bodies of the factory tries best to
achieve their predetermined objective of the organization by creating health and conducive
working condition. However, there is employees turnover in the organization which against
human power development of the organization. This employee movement is unbearable,
expensive and which enable the problem of employee turnover in the university to be a hot issue.
The reason is that increase in turnover of employee result in high cost which that organization
incur cost especially when ever trained and qualified staff leave the organization and its impact
on the current organization performance.

There are several reasons why people quit, or leave the organization. Basically sources of
turnover are individual factors (sense of powerlessness, locus of control and personal control) job
related factors (job stress, luck of commitment in the organization, job dissatisfaction, role
ambiguity, and extensive job pressure), and organizational factors (organizational instability,
communication system, poor personal policies and grievance handling, procedures) Ongori(2007).
Also another cause of employee turnover is salary scale, benefits, advancement and promotional
policies, working environment.

Researchers might be conducted at Arba minch textile factory related with employee’s turnover.
But there isn’t any research conducted in determinant of employee turnover and effects on
organizational performance. So, this study will examine the reason for employees’ turnover, its
consequences and finally about the mechanisms used by the factory to overcome this problem.

1.4 Research Question

Based on the above problem this research tries to answer the following questions.

1. What are the major causes of employee turnover in Arba minch textile factory?

2. What are the consequences of employee turnover in the factory?

3. What strategies are applied by the factory to reduce employee turnover?

1.5 Objective of the study

1.5.1 General objective

The general objective of the study is to identify the determinants of employee turnover and its
effect on the organizational performance.
1.5.2 Specific objectives

The specific objectives of the study are as follows;

 To identify the causes or determinants of employee’ turnover.

 To see the costs and consequences of employee turnover.
 To forward recommendations and feasible solutions to minimize the frequent
turnover based on the result of the study.

1.6 Significance of the study

The researcher hopes that the study will benefit policy makers, academics, managers of
institutions, research students and the researcher. To the policy makers, the findings of the study
will be of help as they regulate performance activities..
For managers, the researcher hopes that the study recommendations will help them address
issues identified in the findings so as to improve the effectiveness and efficiency of the
organization. The researchers hope came true that this study enabled him get to the frontier of
knowledge and attain a BA degree in Management at Alliance College in Ethiopia.
1.7 Scope of the study

The study would be delimited geographical, conceptual, methodological and time horizon.

Geographically this study will focus on identifying the determinants of employee turnover on the
organizational performance. Due to time and money constraints it is difficult to conduct the
study all over the country. There for this study focused only on Arba minch textile factory this is
located in south-Ethiopia Arbaminch town.

Conceptually, the study focused on determinants of employee turnover in administrative and

other department staff employees.

Methodologically, the study used simple random sampling techniques questionnaire for data
collection.

1.8 Organization of the study

This study has five chapters. The first chapter contains introduction such as background of the
study, background of the organization, statement of the problem, research question, and objective
of the study, specific objectives, and significance of the study scope of the study. Chapter two
deals with related literature review. Chapter three deals with research methodology. Chapter four
deal with data analysis and presentation and Chapter five deal with conclusion and
recommendation.

CHAPTER TWO

Review of Related Literature

2.1 Introduction

Before looking in detail about employee turn over it is better to have general overview on human
resource management. Human Resource management is the process of acquiring, training,
appraising, and compensating employees and attaining to their labor relations, health and safety,
and fairness concerns(Dessler, 1994).

Human Resource Management deals with the design of formal systems in an organization to
ensure the effective and efficient use of human talent to accomplish organizational goals. (Mathis
& Jackson, 2002) The central focus for human resource management (HRM) must be on
contributing to organizational success. Human resource management (HRM) usually is
composed of several group of interlinked activities. However, the performance of these human
resource(HR) activities is done in the context of organization.Allmanagers with human resource
(HR) responsibilities must consider external environmental forces such as legal, political,
economic, social, cultural, and technological ones when addressing human resource (HR)
activities(Mathis and Jackson, 2002).

All efforts involved in human resource(HR) planning will be futile unless management takes
action to implement the plans. Managerial actions vary depending on whether a surplus or a
shortage of workers has been forecast. But regardless of the means, the actions are difficult
becuse they require that some employee’s be removed from the organization and work force
reductions are necessary(ibid).

Why it is tried to discuss about human resource management above is, employee turn over is
closely related with effective human resource management of an organization.

According to Malvern W. chiboiwa et al the most important drivers of productivity and

sustainable economic growth in developed economies is the quality and stability causes of
employee turnover. As they state the objective of the study are to identify the cause of employee
turnover in organization, examine the current retention practices that could reduce the high rate
of employee turnover in organizations. The study found that labor turnover is very high amongst
non managerial employees. This was manifested in tenure analysis which put s the average
turnover of managerial employees at five years. This study concluded that the labor turnover in
organization is influenced when managers perfectly understand why employee wants to leave, it
is then that workable retention strategies can be devised to arrest such intention.

2.2 EmployeeTurnover; an overview

Employee turnover can be defined as the net result of the exit of employees and the entrance of
others, or it’s the ration comparison of the number of employees accompany can not replace in a
given time period to the average number of total employees(http:/www.wise/geek.. Com).

The impact of turnover has received considerable attention by senior management, human
resource professionals and industrial psychologists.

It has proven to be one of the most costly and seemingly intractable human resource challenges
confronting the organizations (ibid).

The challenge and cost of employee turnover is of the most discussed, most trust rating and most
misunderstood problems.

If you do not know what your employee turnover cost is, many experts agree that your can come
surprisingly close to the cost of single turnover incident by simply multiplying the annual salary
for the position times 2 – 5 that will cover productivity loss, recruiting and high ring cost,
training cost liability, unemployment and the other 1.1 hidden costs that we usually try to not to
think of when we lose an employee(ibid).

An organization is as good as its people, and no body can deny the fact that manpower is the
great asset of a company. More over high attrition rate incur major costs of the company
including recruiting expense, training expenses, unemployment insurance and guest service of a
quality less than one has been striving for (ibid).

In Human resource (HR) research and practice, employee retention or turn over, involves the
question of organization employee movement. Research in this area by the mainstream
organizational behavior school has evolved to the research of factors affecting employee turn
over. The positive or negative influences from these factors may either result in employee
retention or turn over (Zhang, 2005).

In the research on employee retention, voluntary turn over attracts attention, because employee
movement such as recruitment (exterior inflow), personnel allocation, and “misemployment
(involuntary turnover) are all controlled by the organization. How ever the loss of employees
who have relatively high human capital value who choose to leave an organization can cause
serious loss and difficulty, especially when the turnover numbers are on the rise Zhanyetal,
(2006) studies on the voluntary turnover model have attracted much attention amongst academic
and practitioners for a long time making voluntary turn over of knowledge and management
talents two major research dimensions Erikson, (2001) Employees often comprise the
organization’s core human capital, making it significant to highlight their turnover behavior
influence on an organization’s competitive advantage (Lee and Steven, 1997).

The obvious loss of an organizations talent has inspired researchers and practitioners alike to
identify the factors that enable organization to promote effective talent retention and organization
performance (Daltonetal, 1982).

Turnover has an immediate effect, particularly in customer’s service dependent area of the
business. A vacant position means more work for the remaining employees, with out making a
compromise on the customers service front little wonder them, that hospitality companies with
low turnover rates report higher customer satisfaction and higher profit. A huge concern to most
companies, employee turnover is easily expense especially in lower paying roles, for which the
employee turn over rate is highest. Many factors play a role in the employee turnover rate of any
company, and these can stem from both the employer and the employees. Wages company
benefits, employee attendance, and job performance are factors that play a significant role in
employeeturnover.

Employee turnover is not always disadvantageous; it is advantageous for the organization, when
poor performers leave the organization either voluntarily or retirement(ibid).

2.3 Types of Turnover

Employee turn over can be classified as:

Job related:- usually relates with factors of employer direct control

Non job related: - mostly associated with personal life. Example: - suppose relocation,family
problems,school retuning (http;//www.missouribiusneous.net).

Turnover can also be classified as poor fit (under qualification) and resignation (voluntary
separation). The later one should be analyzed for their implication for the particular organization.
Although some resignation may permit an organization to correct the mistakes in staffing, the
organization losses investment it has made in recruiting, selecting the departed employee(ibid).

According to Mathis and Jackson, (1984) turnover can be further classified in a number of
different ways, which are not mutually exclusive.

Voluntary and involuntary turnover;Voluntary turnover is a turnover that is initiated by

employees. On the other hand involuntary turnover is a turnover which is initiated by the
organization.

Functional and dysfunctional turnover In functional turn over the organization is beneficial as
many workers can be less reliable and poor performing on the contrary dysfunctional turn over
is highly influencer to organization.This situation occurs when the key individual of high
performance leave at critical time.

Uncontrollable and controllable turnover Uncontrollable turnover:- reasons for such kind of
turnover can not be simply controlled by the employer

Controllable turn over:- the employers are able to retain the employees if they deal with the
issues of turn over in their institution.

2.4 Causes of Employee Turn over

According to Reith Kumar, 2011 the study focuses on the gender, age, experience and
department analysis to find out the factors that induces employees for turnover. It also shows
that the turnover of employees is mainly due to low salary. There is also lack of good
relationship between superior and subordinate, training, recognition of job and evaluation of job
performance. The study aims to identify the cause of employee turnover in one Textile
Company. The study found out that 51% of employees leave the organization due to low salary.
At the same time 41% of employees leave when they get better job offers and 7% of employees
leave due to job dissatisfaction. And he concludes that this study examined the labor turnover in
one Textile Company due to low salary and better opportunity for the employees. The overall
analysis provides a strong relation between gender and reason for turnovers. Age and turnover,
high performers and turnover as well as experience.

Generally there are several reasons due to which employee’s leave their respective companies,
and join other companies (http://www.buzzle.com).

Salary scale This is the most common cause of the employee turnover rate being so high.
Employee’s are in search of jobs which pay well. If the companies which they are working in
don’t offer good salaries, they tend to hunt for jobs that pay them considerably well. In order to
resolve this problem, the employers should make it a point to offer salaries that would be retain
and attract well qualified and talented personnel (ibid).
Benefits Employees always flock to companies who offer more benefits. There are many
employees who are not a ware of the benefits that are provided to them in their compensation
package. The employers need to reduce their bureaucratic procedures in order for the employees
to receive the best available benefits with out any difficulty. They should make a note of what all
benefits other organizations are providing(ibid).

Advancement & promotion policies This is the prime reason why many mid – level executives
leave the company. Due to no potential opportunity for advancements or promotions, they proper
other companies which may provide them with higher posts and in creased compensation
packages. The companies need to evaluate and modify their promotion policies in a fair way
which would enable promotions for candidates only on the basis of employee performance(ibid).

Working environment This is also one of the main causes for employee turn over. Employees
prefer to work in an environment which is suitable for them. This is the most common reason
why they jump from company to company in just a few months. If they find an appropriate work
environment in a specific company, they may work in the same organization for several years
(ibid).

Working procedures The company should analyze and alter their work procedure and policies
in a way which would enable employees to use their full potential and even gain significant work
experience. There are many causes where employees have left the company due to no projects or
assignments which do not require their full potential(ibid).

These are some of the principal causes of employee turnover which can surly be avoided by the
organization after taking some necessary steps to better their in house services towards
employees. How ever, there is many more cause which contributes to employee turnover Such as
lack of employee motivation, work pressure, job stress, partiality and favoritism, employee effort
and attitudes, poor employee management etc(www.buzzle .com).

2.5 Costs of employee turn over

Analysis of the cost of associated with turn over yield surprisingly high estimates. The high cost
of losing key employees has long been recognized.
How ever it’s important for organization to understand that general turnover rate in the work
force can also have a serious impact on an organization profitability, and even survival. There
are a number of costs incurred as a result of employee turn over this cost are divided from a
number of different sources, a few of which are listed below.

Recruitment of replacements, including administrative expenses, advertising, screening and

interviewing, and service associated with selection, such as security checks, processing of
reference and possibly psychological testing.

Administrative hiring costs.

Lost productivities associated with the in trim period before a replacement can be placed on the
job.

Lost productivities due to the time required for a new worker to get up to speed on the job.

Lost productivity associated with the coworkers must spend away from their work to help a new
worker.

Cost of training, including supervisor and coworker time spent in format training, as well as the
time that the worker in training must spent off the job.

Costs associated with the period prior to voluntary termination when workers tend to be less
productive. In some causes costs associated with the communication of proprietary trade secrets,
procedures, and skills to competitive organizations.

Public relation costs associated with having a large number of voluntary or involuntary
terminations in the community spreading gossip about the organization.

Increased unemployment insurance costs. (http;//www.sigmaassessment system.com)

2.6 Employee Retention Techniques

Employees are a valuable asset to any organization. It is essential to protect this vital resource as
talented and motivated employees play a crucial role in over all growth and success of the
organization. Focusing on employee retention techniques can positively impact the organization
as it increases employee productivity, performance, quality of work, profits, and reduces turn
over and absenteeism. Effectively creating an engaging environment, recognizing good
performance, giving benefits and rewards, promoting mutual respect are some of the way for
effective employee retention (N.C.jain.saakshi ,2005).

Increase employee engagement Effectively implementing employee retention program by

increasing employee engagement ensure that the employees are satisfied with their work, take
period in their work, report to duty on time, feel responsible for their job, feel valued for their
contributions, and have high job satisfaction. As employees actively focus on their work, it
increases the productivity levels in the organization and leads to improvement in several
associated areas. Employee engagement ensures that the employees have a clear understanding
of their roles and responsibilities. The organization increasing employee engagement helps to
develop emotional connection enthusiasm among the employees that promotes team work and
healthy environment at the work place(ibid).

Motivate employee’s Motivating employee’s by offering them better opportunities for career
development can help in employee retention. Giving rewards, recognitions, promotions, and
appreciation to employees can motivate them to increase their productivity, commitment to
work, and loyalty to the organization. They feel that their contributions are valued in the given
organization. Giving incentives, pay hikes, bonuses can also help to motivate employees.
Recognizing employee’s contribution and aspirations motivates employee to work productively
and increases his confidence that helps in employee retention(ibid).

Focus on team building Promoting team culture helps to actively involve all employees in
achieving the goals an in overall success of the organization. Promoting team building imbibes a
sense of belongingness among the employee’s that they are a part of larger goals or objectives of
the organization. Team building promotes team word and team effort that help employee’s to
tackle work pressure and thus provide a competitive advantage to organization. Focusing on
team building activities can help to reduce work place conflict between team members as they
work in a team organization team building games, seminars, and outdoor events help to promote
team spirit, unity, and reduce stress (ibid).

Recognition of performance Recognition of performance of employee’s is an effective method

of employee retention. Although monetary compensation can act as motivating factors, openly
recognizing the performance, imitative, and good work increases the moral and motivates the
employee to work more productively.Appreciating the performance motivates the employee and
they feel valuable with in the organization.

This helps in employee engagement and to increase the productivity levels following effective
employee retention techniques help to leverage the most valuable asset, the employees, to a chive
growth of the company and increase the bottom line profits. Various employee retention
techniques increases the employee productivity levels in the organization leading to reduction in
cost per item or service produced (ibid).

According to research studied by Michael o Samuel et al, (2010) this research looked at the
extent to which identified intrinsic and extrinsic motivational variables influenced the retention
and reduce employee turnover in both public and private sector organization. According to their
study the main objective of this study are to identify and establish the key intrinsic and extrinsic
motivational variables being used by selected public and private sector organization in retaining
their employees.

To determine the extent to which the identified intrinsic and extrinsic variables are influencing
employees’ retention and turnover in the selected sector and make recommendation to
management of the selected on how to effectively retain employees and reduce turnover and it
find out that the study focused on the following intrinsic motivational variable to have
significantly influence retention against employees in both public and private sector
organization; training and development, sense of belongingness to organization, job security,
challenging/interesting work and freedom for innovative thinking.

The study concluded that the following motivational variables were found to have significance
influence on employee retention in one sector without a corresponding significance on the other
sector. These variables include; goal setting technique, promotional system based performance
and employee monitoring.

2.7 Consequences and effects of employee turnover

Employee turnover is expensive from the view of organization. Voluntary quits which represents
on exodus of human capital investment from organization and subsequent replacement process
entails manifold costs to the organizations. The replacement cost include for example search for
external labor market for a possible substitute, selection between competing substitutes,
induction of the chosen substitutes, formal and informal training of the substitutes until he or she
attains performance level equivalent to the individual who quit. In addition to these replacement
costs, output would be maintained at the cost of over time payment. The reason so much
attention has been paid to the issue of turnover is because turnover has some significant on
organizations, many researcher argue that high turnover rate might have negative effects on the
profitability of organization if not managed properly. (Demicco, 1990).

According to Catherine et al (2002) turnover include other costs such as lost productivity, lost
sales and managements time. This demonstrates that turnover affects the profitability of the
organization and if it is not managed properly it would have the negative effect on the profit.
Research estimates indicate that hiring and training a replacement worker for a lost employee
costs approximately 50% of the workers annual salary. But the costs do not stop there. Each time
an employee leaves the firm, we presume that productivity drops due to the learning curve
involved in understanding the job and the organization. Therefore if employee turnover is not
managed properly it would affect the organization adversely in terms of personnel costs and in
the long run it would affect its liquidity position. However voluntary turnover incurs significance
cost both in terms of direct costs (replacement, recruitment, and selection, temporary staff,
management time) and also in terms of indirect costs (morale pressure on remaining staff, cost of
learning product/service quality, organizational memory) and the loss of social capital.

2.8 Sources of employee turnover

According to Kevin et al (2004) organizations invest a lot on their employees in terms of

induction and training, developing, maintaining and retaining them in their organization.
Therefore managers at all costs must minimize employee turnover. Although there is nostandard
frame work for understanding the employees turnover process as whole. A wide range of factors
have been found useful in interpreting employee turnover. Therefore there is need to develop a
fuller understanding of the employee turnover more especially the sources what determines
employee turnover effects and strategies that managers can put in place to minimize turnover.
Job related factors Most researchers attempted to answer the question of what determines
people’s intention to quit by investigating possible antecedents of employees intention to quit. To
date there has been little consistency in findings which is partly due to the diversity of employees
included by the researchers and the lack of consistency in their findings. Therefore, there are
several reasons why people quit from one organization to another or why people leave
organization. The experience of job related stress (job stress), the range factors that lead to job
related stress (stressors), lack of commitment in the organization and job dissatisfaction make
employees to quit. This clearly indicates that there are individual decisions which one to quit.
There are other factors like personal agency refers to concepts such as a sense of powerlessness,
locus of control and personal control. Locus of control refers to the extent to which people
believe that the external factors such as chance and powerful others are in control of the events
which influence their lives (Firth et al, 2004).

Manu et al (2004) argue that employees quit from the organization due to economic reasons.
Using economic model he show that people quit from organization due to economic reasons and
these can be used to predict the labor turnover in the market. Good local labor market conditions
improve organizational stability. Large organizations can provide employees with better chance
for advancement and higher wages and hence insure organizational attachment.

Trevor, (2001) argues that local unemployment rates interact with job satisfaction to predict
turnover in the market. Role stress also leads to employee turnover. Role ambiguity refers the
difference between what people expects of us on the job and what we feel we should do. This
causes uncertainty about what our role should be. It can be a result of misunderstanding what is
expected, how to meet the expectation or the employees thinking the job should be different.

Unclear expectations of peers and supervisors, ambiguity of performance evaluation methods,

extensive job pressure and lack of consensus on job functions or duties may cause employees to
feel less committed to their organization, less involved and less satisfied with their jobs and
careers and eventually displays a propensity to leave the organization. If roles of employees are
not clearly spelled out by management (supervisors), this will accelerate the degree of employees
quitting their jobs due to lack of role clarity.
According to Simon et al (2007) there are some factors that are imparted beyond the control of
management such as the death or incapacity of a member of a staff. Other factors have been
classed as involuntary turnover in the past such as the need to provide care for children or aged
relatives. Today such factors should not be seen as involuntary turnover as both government
regulation and company policies create the chance for such staff to come back to work or to
continue to work on a more flexible basis.

Organizational factors Organizational instability has been shown to have a high degree of
employee turnover. Indications are that employees are more likely to stay when there is a
predictable work environment work environment and vice versa. In organizations where there
was a high level of inefficiency, there was also a high level of staff turnover. Therefore in
situations where organizations are not stable employees tend to quit and look for stable
organizations because with stable organizations they would be able to predict their career
advancement. The imposition of a quantitative approach to managing the employees leads to
disenchantment of staff and hence it leads to labor turnover. Therefore management should not
use quantitative approach in managing its employees. Adopting accost oriented approach to
employment costs increase labor turnover. All these approaches should be avoided if managers
want to minimize employee turnover and increase organizational competitiveness in this
environment of globalization. Employees have a strong need to be informed. Organizations with
strong communication systems enjoyed lower turnover of staff (Zuber, 2001).

Employee feel comfortable to stay longer in positions where they are involved in some level of
the decision making process. That is employees should fully understand about issues that affect
their working environment. But in the absence of openness in sharing information, employee
empowerment and the chance of continuity of employees are minimal. A high labor turnover
may mean poor personnel policies, poor recruitment policies, poor supervisory practices, poor
grievance procedures or lack of motivation. All these factors contribute to a high employee
turnover in the sense that there is no proper management practices and policies on personnel
matters hence employees are not recruited scientifically, promotions of employee are not based
on spelled out policies, no grievance procedure in place and thus employees decides to quit
(Magner, 1996).
According to Griffiths et al, (2000) noted that pay and pay related variables have a modest effect
on employees turnover. His analysis also included studies that examined the relationship
between pay a person performance and turnover. He concluded that when high performance is
insufficiently rewarded, they quit. If jobs provide adequate financial incentives, the more likely
employees remain with organization and vice versa. There are also other factors which make
employees to quit from organizations and these are poor hiring practices, managerial style, lack
of recognition, lack of competitive compensation system in the organization and toxic work
place environment.

2.9 Method of minimizing employee turnover

The following actions may be taken to reduce employee turnover.

Increasing pay levels to meet competition

Providing better career opportunities and ensuring that employees are aware of them.

Extending opportunities for training

Using conflict resolution and team building techniques of organization development.

Educating and training management in approaches to improve their relationship with

employees.

Improving recruitment and selection procedures to ensure that job requirements are
specified accurately and that the people who are selected fit the specification

Introducing better method of planning and scheduling work to smooth out peak loads

Providing adequate training or adjustment periods when working conditions change

Adopting payment by result system to insure that individuals are not usually penalized
when they are only engaged on short run (N.c.jain.saakshi).
 CHAPTER THREE

3 Research Methodologies

3.1 Study Area

This study is conducted at Arba minch textile factory, which is located in the south-Ethiopia
Arbaminch town. In addition, the study focused on determinant of employee turnover and their
effect on organizational performance with specially focuses on administrative employees and
other department staff.

3.2 Research Design

The researcher used a descriptive type of research design which focuses on describing about the
area/title of the study. So, the study try to describe basic issues related with determinants of
employee turnover and effect on organizational performance applied by the factory.

3.3 Type and Sources of data

This study will be used both qualitative and quantitative data that were collected from the
employees. And the study was based on both primary and secondary sources of data. Primary
data source comprises of data will be collected through questionnaires that distributed to the
respondents through meeting with them on the office. In order to collect reliable data primary
data were give high emphasis by the researcher. In addition to this published material such as
books, magazines, as well as internet and other sources were used as a secondary data.
3.4 Method of data collection

To undertake successful study researchers should use reliable source of data which depends up
on the source of the data. Therefore researcher used both questionnaire and interview to collect
data from a primary source and secondary source.

The primary data will be collected through preplanned questionnaire and interview. Both open
ended and close ended questions will be implemented for this study. The implementations of
open ended questions will to obtain more information and minimize load during data analysis.

3.5 Target Population

According to Rubin and Babbie, (2001), as cited by (Kenneth, 2012), the study population is the
aggregation of element from which the sample is actually selected. It is the aggregation or the
totality of members from which sample will be obtained. The total population or target for this
study will be 91 employees of in the case of arba minch textile factory.

3.6 Sample size

In this study, the researcher will be used Yemane (1967) set and massive population sample
measurement components with 99% self confidence level. The method used to achieve this
sample measurement is introduced below:

=
Where, n= the sample size

N = Total population

e = the acceptable sampling error

A 95% confidence level and e = 0.05 are assumed

 n= , n= , n = 74

3.7 Sampling techniques

The sample of the study will take employees from the total permanent employees of all in the
organization. Having the number of samples, the researcher will be use stratified sampling
follow by simple random sampling technique which more will appropriate according to the
nature and number of population. And this technique allows giving equal chance for all members
of the population to be included as sample which is very much important for sample to be
representative of a population.

3.8 Data processing and analysis

After all the required data will be collected, it is processed by the basic data processing methods
editing, coding, and classifying to make ready for analysis. Data is analyzed with the help of
descriptive statistical tools like frequency and percentage. The major questions will identified
and most responses to the questions will be organized in a well prepared format manner by using
different tools like tables, graphs. Quantitative data related to the organization will be evaluated
and described qualitatively.
 Appendix I

Alliance

ALLIANCE COLLEGE

Department Of Management

Questionnaire will be filled by employees of Arba minch textile factory

Dear respondent

This questionnaire prepar for the purpose of studying determinants of employee turnover and its
effect on the organizational performance in the case of Arba minch textile factory. The outcome
the study will be used in order to suggest possible solutions for problems identified while
conducting the study. Therefore I kindly request you co-operation. I inform you that the
information you provide will be consumed only for academic purpose.

General instructions
 There is no need of mentioning your name.

Choose, and put (x) mark for your answer in multiple choice questions.

For the questions that need explanation use the space provided.

For subjective questions you can give additional idea or information.

A personal detail of respondents

Age

Below 24 25-34 35-44

45-54 55-64 Above 65

Sex

Male female

Marital status

Married single other

Educational back ground

Certificate Diploma

First degree Master degree PhD and above

Year of service in Arba minch textile factory

Below 2 years 2 to 4 years 5 to 7 years

8 to 10 years More than 10 years

Monthly salary
Below 2500 C. 5001 – 7500

2501-5000 D. Above 7500

Is there any benefit beyond your salary? If you say yes what type of benefit?
A. House allowance B. dessert allowance C. field allowance

D. health allowance E. there is no other benefit

Is there any training program that helps to improve your performance?A.Yes B.No

How is your relationship with your boss or supervisor?

A. Low B. Moderate C. High

For question number 9 if you say low what is your reason?

A. nature of the job

B. bosses will not appreciate individual job difference

C. bosses themselves do not respect the rules of the organization

D. bosses do not see all workers as equal if there is any other

reason----------------------------------------------------------------------------------------

What is your reason to prefer to work in this organization? Because

A. it pays me well

B. it has good image

C. to get good position

D. I have no other job opportunity if there is other

reason-------------------------------------------------------------------------------------------------------------
-------------------

Here after for how many years you will stay in this organization?

A. for a long period of time

B. until I get a better job

C. for short period if any other

reason-------------------------------------------------------------------------------------------------------------
----------------------------------

For question number 12 if you say ‘for short period ‘or’ until I get a better job’ what is your
reason?
A. weak management

B. there is no any motivator

C. low salar

D. working conditions are not comfortable if there is other

reason-------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
-

What type of workers leave this organization repeatedly?

A. members of the management

B. professional workers

others----------------------------------------------------------------------------------------------------

In connection with turnover of employees, how is the status of the organization now?

A. very good

B. good

C. medium

D. weak

E. bad

For question number 15 if you say’ weak ‘or ‘bad’ what measures should be taken in the future?

A.create comfortable working condition

B. gives responsibility to employees

C. appreciate good performance of employees

if there is any other

reason-------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------

What is/are the most important reason for your

leaving?-----------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
 when employees leave the organization, what is the impact for other
employees?-------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------

when employees leave the organization, what is the impact or loss that has on the
organization?-----------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

What measures should be taken to reduce the frequent turnover of

employees?-------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
-------------------------------------------------

Appendix II

Alliance

ALLIANCE COLLEGE

Department Of Management

Interview Questions to HRM in Arba minch textile factory

What is the level of employee turnover in your organization?

What do you think about the effect of employee turnover on your organizational
performance?

What mechanisms the organizations use to reduce employee turnover?

Is there any program to discuss about the employee turnover with the employee of the
origination?

What are the main reasons for employee turnover?

What measures has been taken to reduce employee turnover?