Analysis of High Turnover Rate

Analysis of High Turnover Rate

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Analysis of High Turnover Rate

High turnover rate of minorities and female employees has become a serious issue in the United States. Even though many ethnic races form this country, male Anglo-Saxons dominate the majority of the workforce. It is not uncommon for minority and female employees to leave their company after only working for a few years. Why has this behavior become a trend? In order to stop this trend, companies must ask themselves several questions. For example, what are the issues causing the high turnover rate? What legal and ethical issues are the companies facing? After these questions have been asked and processed, solutions must be implemented to change the flow of the trend.

While implementing solutions to the high turnover rate, companies must know and understand the law. The law is created and enforced by the government to prevent any discrimination or biases between the company and employees. It also prevents the strong, corporations, from taking advantage of the weak, employees.

Keeping a high turnover rate, companies will continue to lose money until they decide to deal with the issue. Through some adjustments and implementations of the programs to lower turnover rates, the company can see a significant change in their costs and what they might actually save.

Companies must understand the potential hazard that high turnover rate may cause company. By analyzing banks, one can understand what and where the problem lies.

Statement of Problem
Employee turnover costs are very costly to a company. Turnover not only affects the bottom line but also affects the company’s morale. We are analyzing the problems within our company that are causing our employees to become unsatisfied with their job. Then we are going to find solutions. And then do the cost estimates of the turnover costs and the turnover savings after our solutions are implemented.

Without understand the negative impacts of turnover, a company may be placing itself in a position that will ultimately lead to their demise. We are going to solve our problems and set our company on the path to success, a success that is not only reflected in our bottom line but also our employees’ morale.


Currently, the Bank of Tomenak employees 20,000 people, which only 35% are female or minority. The average biannual turnover rate for our females and minority employees is 65%. The average turnover cost for one employee is estimated to be 18% of their annual salary.

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Our annual salary is $36,000. Each year an average of 2,275 females and minorities are leaving our company. Our yearly turnover cost is an estimated $14,529,356.00

Originally our turnover cost was estimated to be $35.2 million per year. This was derived from a calculation created by Cornell University and Saratoga Institute. However, the calculations were not precise. Therefore, we looked for alternative calculations.

The Chally Group , based out of Dayton, Ohio, adapted a study by the University of Wisconsin Extension- Center for Community Economic Development to produce a turnover calculator. In this cost calculator, each subtotal cost was itemized. Therefore, we could identify the costs that were not relevant to our company. We then were able to subtract the irrelevant costs from our final total turnover cost.

The total cost of turnover is broken down into three main sections: Separation Costs, Replacement Costs, and Training Costs.. The Separation Costs consist of:
•     Cost of exit interviewer,
•     Cost of Exit Interview Employee Time
•     Admin. Cost Related to Termination, and
•     Increase in Unemployment Tax.

The Replacement Costs consist of:
•     Pre-employment Administration Costs
•     Costs of Attracting Applicants
•     Cost of Interview Process
•     Assessment Cost
•     Background Check Cost
•     Staff Cost to Meet & Confer, and
•     Post-employment Administration Costs.

The Training Costs consist of
•     Cost of Informational Literature and Manuals
•     Duration of Formal Training
•     Costs of Trainer’s Time, and
•     Learning Curve of New Employee.

The Training Costs represent the greatest losses for the organization. In looking at the current year cost, the training costs are $10 million. This large sum results from the loss of productivity, since it results in lower productivity of the departing employee, unproductive time for both colleagues and managers, and a general disruption of the team. Potentially even more damaging to a company are lost sales and even lost customers resulting from the departure of an employee. Employee retention is not only critical for cost-efficiency but an important factor in revenue growth as well, because of its direct link to customer acquisition, satisfaction, and retention.

What are the issues causing the high turnover rate for females and minority employees? Many employees, if not all, consider what the company has to offer them in return for their skills. Companies need to implement incentives to motivate the employees to perform their everyday tasks. One of the most critical incentives is the benefits. Benefits are a compensation that an organization gives to their employees such as health insurance, vacations, and such things as on-site day care of fitness centers. The problem with many companies is the attractiveness and variety of their incentives and the equality in the allocation of the benefits.
In order for the benefits to be attractive, it must provide variety so that employees can make choices. The employees do not feel a sense of satisfaction when their company does not offer a wide range of benefits. If an employee knows they can receive more and different benefits with the same salary at a different job, there is no reason for the employee not to leave the company for the other one. Even with the benefits the company provides, most employees feel that the benefits are too simple and flat. There is no real attraction in the benefits because every other company may provide these benefits as a standard, plus other benefits. In most companies, the differences in benefit plans differ quite largely between female and minority employees with the rest of the workers. (insert figures) There is a reason why the turnover rate is so high among the female and minority employees. If the company cannot keep an equal distribution of their benefit plan, employees will be motivated to leave rather than motivated to work harder.

Moreover, Female employees’ salaries are much lower than an average of female employees’ of other banks. In The Bank of Tomanek, the wages of female employees are $718. In comparison to female employees at other banks, which is $917, it is considered relatively low. The reason people work is not because they just want to but because they need to make money. Everybody knows that money is essential to everyday living. Low wages creates high turnover rate because every single person wants to make more money. If a company cannot substitute the difference in their salary with, for example, benefits, they do not leave the employees with much option.

Work Environment (Not enough information)

With high turnover rates, companies may be liable to legal action. Every country has a certain amount of laws that govern their land. The purpose of these laws is to protect its citizens and to provide a guideline to what can and cannot be done. Without laws, there would be complete chaos because nothing would be regulated, people can do whatever they want, and the world would operate on complete Darwinism, survival the fittest. Well, the government has laws applicable to the business world also. The business laws are created so that companies do not take advantage of their employees and vice versa. Title VII of the Civil Rights Act of 1964, The Equal Pay Act of 1963, The Age Discrimination in Employment Act of 1967, The Civil Rights Act of 1991 are laws set by the Federal Equal Employment Opportunity (EEO) to list a few.
All these Acts serve the same purpose of prohibiting job discrimination, however, they differ slightly by the targeted group the Acts applies to.

Title VII of the Civil Rights Act of 1964 (Title VII)
-     States that employment discrimination based on race, color, religion, sex, or national origin are prohibited.
The Equal Pay Act of 1963 (EPA)
-     Protects men and women who perform substantially equal work in the same establishment from sex-based wage discrimination.
The Age Discrimination in Employment Act of 1967 (ADEA)
-     Protects individuals who are 40 years of age or older.
The Civil Rights Act of 1991
-     Provides monetary damages in cases of intentional employment discrimination, among other things.

Statistics from the past show the dramatic change of how companies in our society have made a solid effort in order to conform with the laws and come to terms with these issues, especially for upper-management who do not face the daily challenges in the workplace. Even though it may seem like there are many regulations set by the government and more companies are putting efforts into complying with the law, job discrimination still exist in the work place. As most people know, the wage discrimination between male and female employees is quite wide. The same applies to minority employees. It is a wonder many companies are not under litigation for wage discrimination. Looking at this statistic, male employees with the same position as female employees, earn an average of $200 more than a female employee. Is this not a direct violation of The Equal Pay Act of 1963?
With laws comes along the question of ethics.

Industry Average for Turnover, Promotion, Management positions filled by female and minorities.
To fight the increase in high turnover rates, companies must find the right kind of solution for their particular company. As for The Bank of Tomanek, it has come up with solutions to maintain a low turnover rate.

Benefits and Incentives:

The company will be adding tuition reimbursements based on G.P.A.s. Each employee will receive 100% reimbursement for every grade letter “A” and 80% reimbursement for every grade letter “B”. The only condition is that reimbursement can only apply to courses that are industry-related. Therefore the courses must be related to business, finance, accounting or management.

The Cafeteria Plan will be offered to those who have worked at the bank for at least a year.

Based upon our finding, it is highly recommended that our company incorporate the changes immediately. If our calculations are correct, our company will be more financially stable, but most importantly our employees will know they are valued assets to us.
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