Staff turnover and organizational performance: The case of a microfinance organization

• Authors: Romina Giuliano , Cécile Godfroid , Laure Radermecker

Abstracts

EN

Aim/purpose – This study examines the relationship between staff turnover and performance in the microfinance industry in a dynamic perspective and investigates some contingency factors that moderate this relationship. Design/methodology/approach – We ran random-effects and GMM models based on a database of 2,814 branch-month observations from a specific microfinance organization. Findings – It takes three months to see a significant negative impact of turnover on the volume of a branch’s loan portfolio. Moreover, it takes four months after the turnover event for this negative impact to be counterbalanced. After four months, turnover stops having negative consequences and even becomes advantageous in terms of loan portfolio growth, but this positive effect lasts only one month. The effect of turnover thus appears to be particularly limited in time. Finally, we find that the negative relationship between turnover rate and performance is weakened by the seniority level of departing loan officers and by the recruitment rate. Originality/value/contribution – First, this paper examines the duration of the consequences of turnover event, which is poorly studied in the literature. Second, it focuses on microfinance, an industry where relational capital is of high importance. Third, it extends the theory on turnover by highlighting that the seniority level of departing employees is a moderator in the relationship between turnover and organizational performance.

Keywords

EN

staff turnover; performance; context-emergent theory; microfinance; GMM

• Publisher: Uniwersytet Ekonomiczny w Katowicach
• Journal: Journal of Economics and Management
• Year: 2023
• Volume: 45
• Pages: 413-440

Dates

published

2023

Contributors

author

Romina Giuliano

• University of Mons, Mons, Belgium

author

Cécile Godfroid

• University of Mons, Mons, Belgium

author

Laure Radermecker

• University of Mons, Mons, Belgium

References

• Allen, D. G., & Griffeth, R. W. (1999). Job performance and turnover: A review and integrative multi-route model. Human Resource Management Review, 9(4), 525-548. https://doi.org/10.1016/S1053-4822(99)00032-7
• An, S. H. (2019). Employee voluntary and involuntary turnover and organizational performance: Revisiting the hypothesis from classical public administration. International Public Management Journal, 22(3), 444-469. https://doi.org/10.1080/10967494.2018.1549629
• Batt, R. (2002). Managing customer services: Human resource practices, quit rates, and sales growth. Academy of Management Journal, 45(3), 587-597. https://www.jstor.org/stable/3069383
• Batt, R., & Colvin, A. J. S. (2011). An employment systems approach to turnover: Human resources practices, quits, dismissals, and performance. Academy of Management Journal, 54(4), 695-717. https://doi.org/10.5465/amj.2011.64869448
• Berger, A. N., & Udell, G. F. (2002). Small business credit availability and relationship lending: The importance of bank organisational structure. The Economic Jounal, 112(477), F32-F53. https://doi.org/10.1111/1468-0297.00682
• Call, M. L., Nyberg, A. J., Ployhart, R. E., & Weekley, J. (2015). The dynamic nature of collective turnover and unit performance: The impact of time, quality, and replacements. Academy of Management Journal, 58(4), 1208-1232. https://doi.org/10.5465/amj.2013.0669
• Cascio, F. (1991). Managing human resource: Productivity, quality of work life and profits (3rd ed.). McGraw Hill.
• Dalton, D. R., & Todor, W. D. (1979). Turnover turned over: An expanded and positive perspective. Academy of Management Review, 4(2), 225-235. https://doi.org/10.5465/amr.1979.4289021
• De Winne, S., Marescaux, E., Sels, L., Van Beveren, I., & Vanormelingen, S. (2019). The impact of employee turnover and turnover volatility on labor productivity: A flexible non-linear approach. The International Journal of Human Resource Management, 30(21), 3049-3079. https://doi.org/10.1080/09585192.2018.1449129
• Dixon, R., Ritchie, J., & Siwale, J. (2007). Loan officers and loan “deliquency” in microfinance: A Zambian case. Accounting Forum, 31(1), 47-71. https://doi.org/10.1016/j.accfor.2006.11.005
• Doering, L., & Wry, T. (2022). The challenges of supporting necessity entrepreneurs: Understanding loan officer exit in microfinance. Journal of Business Venturing, 37(2), 106189. https://doi.org/10.1016/j.jbusvent.2022.106189
• Drexler, A., & Schoar, A. (2014). Do relationships matter? Evidence from loan officer turnover. Management Science, 60(11), 2722-2736. https://doi.org/10.1287/mnsc.2014.1957
• Gerhart, B. (2005). Human resources and business performance: Findings, unanswered questions, and an alternative approach. Management Revue, 16(2), 174-185. https://doi.org/10.5771/0935-9915-2005-2-174
• Glebbeek, A., & Bax, E. (2004). Is high employee turnover really harmful? An empirical test using company records. Academy of Management Journal, 47(2), 277-286.
• Grant, R. M. (1996). Toward a knowledge-based theory of the firm. Strategic Management Journal, 17(S2), 109-122. https://doi.org/10.1002/smj.4250171110
• Hale, D., Jr, Ployhart, R. E., & Shepherd, W. (2016). A two-phase longitudinal model of a turnover event: Disruption, recovery rates, and moderators of collective performance. Academy of Management Journal, 59(3), 906-929. https://doi.org/10.5465/amj.2013.0546
• Hancock, J. I., Allen, D. G., Bosco, F. A., McDaniel, K. R., & Pierce, C. A. (2013). Metaanalytic review of employee turnover as a predictor of firm performance. Journal of Management, 39(3), 573-603. https://doi.org/10.1177/0149206311424943
• Hansen, M. T. (1999). The search-transfer problem: The role of weak ties in sharing knowledge across organization subunits. Administrative Science Quarterly, 44(1), 82-111. https://doi.org/10.2307/2667032
• Hausknecht, J. P., & Trevor, C. O. (2011). Collective turnover at the group, unit, and organizational levels: Evidence, issues, and implications. Journal of Management, 37(1), 352-388. https://doi.org/10.1177/0149206310383910
• Hausknecht, J. P., Rodda, J., & Howard, M. J. (2009). Targeted employee retention: Performance-based and job-related differences in reported reasons for staying. Human Resource Management, 48(2), 269-288. https://doi.org/10.1002/hrm.20279
• Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251-1271. https://doi.org/10.2307/1913827
• Heavey, A. L., Holwerda, J. A., & Hausknecht, J. P. (2013). Causes and consequences of collective turnover: A meta-analytic review. Journal of Applied Psychology, 98(3), 412-453. https://doi.org/10.1037/a0032380
• Hom, P., & Griffeth, R. (1995). Employee turnover. South-Western Press.
• Hossain, M. I., Mia, M. A., & Hooy, C.-W. (2023). Employee turnover and the credit risk of microfinance institutions (MFIs): International evidence. Borsa Istanbul Review, 23(4), 936-952. https://doi.org/10.1016/j.bir.2023.04.001
• Huckman, R. S., & Pisano, G. P. (2006). The firm specificity of individual performance: Evidence from cardiac surgery. Management Science, 52(4), 473-488. https://doi.org/10.1037/a0032380
• Hudon, M., & Sandberg, J. (2013). The ethical crisis in microfinance: Issues, findings, and implications. Business Ethics Quarterly, 23(4), 561-589. https://www.jstor.org/stable/43695076
• Hurley, R., & Estelami, H. (2007). An exploratory study of employee turnover indicators as predictors of customer satisfaction. Journal of Services Marketing, 21(3), 186-199. https://doi.org/10.5840/beq201323440
• Kacmar, K. M, Andrews, M. C., Van Rooy, D. L., Steilberg, R. C., & Cerrone, S. (2006). Sure everyone can be replaced... but at what cost? Turnover as a predictor of unitevel performance. Academy of Management Journal, 49(1), 133-144. https://doi.org/10.5465/amj.2006.20785670
• Kogut, B., & Zander, U. (1992). Knowledge of the firm, combinative capabilities, and the replication of technology. Organization Science, 3(3), 383-397. https://doi.org/10.1287/orsc.3.3.383
• Lang, J. W. B., & Bliese, P. D. (2009). General mental ability and two types of adaptation to unforeseen change: Applying discontinuous growth models to the taskchange paradigm. Journal of Applied Psychology, 94(2), 411-428. https://doi.org/10.1037/a0013803
• Lee, S. (2018). Employee turnover and organizational performance in US federal agencies. The American Review of Public Administration, 48(6), 522-534. https://doi.org/10.1177/0275074017715322
• Lin, T.-C., Chang, C. L.-H., & Tsai, W.-C. (2016). The influences of knowledge loss and knowledge retention mechanisms on the absorptive capacity and performance of a MIS department. Management Decision, 54(7), 1757-1787. https://doi.org/10.1108/MD-02-2016-0117
• Ledgerwood, J. (2013). The new microfinance handbook: An institutional financial perspective. The World Bank. https://openknowledge.worldbank.org/server/api/core/bitstreams/88ac48b3-2d51-5f65-9f29-af0fdaa936db/content
• McElroy, J. C., Morrow, P. C., & Rude, S. N. (2001). Turnover and organizational performance: A comparative analysis of the effects of voluntary, involuntary, and reduction-in-force turnover. Journal of Applied Psychology, 86(6), 1294-1299. https://doi.org/10.1037/0021-9010.86.6.1294
• Marquis, C., & Tilcsik, A. (2013). Imprinting: Toward a multilevel theory. Academy of Management Annals, 7(1), 195-245. https://doi.org/10.5465/19416520.2013.766076
• Meier, K. J., & Hicklin, A. (2008). Employee turnover and organizational performance: Testing a hypothesis from classical public administration. Journal of Public Administration Research and Theory, 18(4), 573-590. https://doi.org/10.1093/jopart/mum028
• Messersmith, J. G., Lee, J.-Y., Guthrie, J. P., & Ji, Y-Y. (2014). Turnover at the top: Executive team departures and firm performance. Organization Science, 25(3), 776-793. https://doi.org/10.1287/orsc.2013.0864
• Mia, M. A. (2023). Employee turnover and the depth of outreach of microfinance institutions: A non-linear approach. Applied Economics Letters, forthcoming. https://doi.org/10.1080/13504851.2023.2208834
• Mia, M. A., Ahmad, N. H., & Halim, H. A. (2022). The impact of employee turnover on the financial performance of microfinance institutions: A global evidence. Business and Society Review, 127(4), 863-889. https://doi.org/10.1111/basr.12291
• Microfinance Insights. (2008). Human resource challenges and solutions in microfinance (Survey report). https://www.findevgateway.org/sites/default/files/publications/files/mfg-en-paper-human-resource-challenges-and-solutions-in-microfinance-apr-2008_0.pdf
• Mixmarket. (2007, January). https://databank.worldbank.org/source/mix-market
• Mohr, D. C., Young, C. G., & Burgess, J. F., Jr (2012). Employee turnover and operational performance: The moderating effect of grouporiented organisational culture. Human Resource Management Journal, 22, 216-233. https://doi.org/10.1111/J.1748-8583.2010.00159.X
• Morrow, P., & McElroy, J. (2007). Efficiency as a mediator in turnover - organizational performance relations. Human Relations, 60(6), 827-849. https://doi.org/10.1177/0018726707080078
• Nyberg, A. R., & Ployhart, R. E. (2013). Context-emergent turnover (CET) theory: A theory of collective turnover. Academy of Management Review, 38(1), 109-131. https://doi.org/10.5465/amr.2011.0201
• Park, T. Y., & Shaw, J. (2013). Turnover rates and organizational performance: A metaanalysis. Journal of Applied Psychology, 98(2), 268-309. https://doi.org/10.1037/a0030723
• Ployhart, R. E., & Hale, D., Jr (2014). The fascinating psychological microfoundations of strategy and competitive advantage. Annual Review of Organizational Psychology and Organizational Behavior, 1(1), 145-172. https://doi.org/10.1146/annurevorgpsych-031413-091312
• Price, J. L. (1999). Introduction to the special issue on employee turnover. Human Resource Management Review, 9(4), 387-395. https://doi.org/10.1016/S1053-4822(99)00026-1
• Reilly, G., Nyberg, A., Maltarich, M., & Weller, I. (2014). Human capital flows: Using context-emergent turnover (CET) theory to explore the process by which turnover, hiring, and job demands affect patient satisfaction. Academy of Management Journal, 57(3), 766-790. https://doi.org/10.5465/amj.2005.17843940
• Scott, J. A. (2006). Loan officer turnover and credit availability for small firms. Journal of Small Business Management, 44(4), 544-562. https://doi.org/10.1111/j.1540-627X.2006.00186.x
• Shaw, J. D., Duffy, M. K., Johnson, J. L., & Lockhart, D. E. (2005). Turnover, social capital losses, and performance. Academy of Management Journal, 48(4), 594-606. https://doi.org/10.5465/amj.2005.17843940
• Siebert, W. S., & Zubanov, N. (2009). Searching for the optimal level of employee turnover: A study of a large UK retail organization. Academy of Management Journal, 52(2), 294-313. https://doi.org/10.5465/amj.2009.37308149
• Staw, B. (1980). The consequences of turnover. Journal of Occupational Behaviour, 1(4), 253-273.
• Stinchcombe, A. L. (1965). Social structure and organization. In J. P. March (Ed.), Handbook of organizations (pp. 142-193). Rand McNally. https://www.talkinga boutorganizations.com/104-social-structure-organizations-stinchcombe/
• Ton, Z., & Huckman, R. S. (2008). Managing the impact of employee turnover on performance: The role of process conformance. Organization Science, 19(1), 56-68. https://doi.org/10.1287/orsc.1070.0294
• Tziner, A., & Birati, A. (1996). Assessing employee turnover costs: A revised approach. Human Resource Management Review, 6(2), 113-122. https://doi.org/10.1016/S1053-4822(96)90015-7
• Uzzi, B., & Lancaster, R. (2003). Relational embeddedness and learning: The case of bank loan managers and their clients. Management Science, 49(4), 383-399. https://doi.org/10.1287/mnsc.49.4.383.14427
• Waldman, J. D., Kelly, F., Arora, S., & Smith, H. L. (2004). The shocking cost of turnover in health care. Health Care Management Review, 29(1), 2-7. https://doi.org/10.1097/HMR.0b013e3181e3940e
• Williams C. R. (1999). Reward contingency, unemployment, and functional turnover. Human Resource Management Review, 9(4), 549-576. https://doi.org/10.1016/S1053-4822(99)00033-9
• Wooldridge, J. M. (2013). Introductory econometrics: A modern approach (5th ed.). Nelson Education.
• Wright, P. M., & Haggerty, J. J. (2005). Missing variables in theories of strategic human resource management: Time, cause, and individuals. Management Revue, 16(2), 164-173. https://doi.org/10.5771/0935-9915-2005-2-164
• Zhang, M., Fried, D. D., & Griffeth, R. W. (2012). A review of job embeddedness: Conceptual, measurement issues, and directions for future research. Human Resource Management Review, 22(3), 220-231. https://doi.org/10.1016/j.hrmr.2012.02.004

Identifiers

DOI

10.22367/jem.2023.45.16

Biblioteka Nauki

20311773