Plug the Leak: Employee Turnover- A Consequence of Discriminatory Behavior?

by Amanda Pintaro September 20 2009, 18:06

      I.        Introduction

 

What does employee turnover look like these days?  Well, much like pouring liquid into a sieve- analogous to employees passing through a company much too rapidly. According to the Bureau of Labor Statistics, which collects and compiles monthly data on a sampling of business establishments, the total number of employees who left their jobs exceeded those being hired from July 2008 through June 2009. [1] “Over the 12 months ending in June, hires totaled 51.8 million and separations totaled 57.1 million, yielding a net employment loss of 5.3 million.” [2] The increasing problem of employee turnover seems to revolve around two vital issues.  Companies do not fully understand what causes employee turnover, and they do not know how to go about correcting the problem. This article will discuss:  1) the costs and causes of employee turnover; 2) the methods by which different companies have approached the problem; and 3) how excessive employee turnover can be a direct result of conscious or unconscious discriminatory behavior by employers.

 

   II.    Financial Impact of Employee Turnover

     John McConnell, author of Hunting Heads, How to Find and Keep the Best People, describes employee turnover as the number of employees a company loses each year, whether they are asked  to leave or not. [3] Despite popular belief, employee turnover is not always negative. [4] It tends to purge an organization of the inadequately skilled, less productive, and objectionable employees. [5] In contrast, a company exhausts valuable time and resources in recruiting, interviewing, hiring, processing, orienting, and training new employees. [6] A major study of the employee turnover dilemma within the supermarket industry estimated that the total cost of replacing a supermarket cashier earning $6.50 per hour was a minimum of $3,637. [7] Consider the negative impact on the overall business profit for a supermarket having to replace several cashiers in any given fiscal period. In an attempt to address these concerns, many theories have been developed to analyze why employees leave.  

    III.      Causes of Employee Turnover

According to Aubrey C. Daniels, Ph.D., an internationally recognized author, speaker and expert on management and human performance issues, “surveys consistently show that more than 40% of people who quit do so because they feel that they weren’t appreciated for their contributions.” [8] More specifically, there are five important factors that can contribute to employees leaving their jobs.  These factors consist of 1) incompetent managers, 2) lack of employee recognition, 3) scarcity of employee advancement and growth opportunities, 4) problems with employees balancing work and life issues, and the 5) erosion of trust between company, management, and employees. [9] In response to these rationales, companies have employed a variety of methods to retain a greater percentage of employees.

 

  IV.     How Companies Have Managed Employee Turnover  

      Applebee’s International Incorporated has recently endeavored to deal with its employee turnover problem by instating a system in which managers play a significant role in reducing employee turnover. [10] Applebee’s managers have an opportunity to earn merit raises and bonuses based upon their successful contributions to employee retention. [11] This has inspired the restaurant managers to devise creative motivational techniques including point systems, prizes, and even ice cream desserts to encourage employee attendance. [12] Applebee's credits their system with successfully reducing employee turnover by nearly fifty percent within four years. [13] This approach has alleviated the turnover crisis with monetary solutions and short term incentives. However, at some point, the novelty of receiving prizes and ice cream will eventually subside for those employees who have more important concerns.           

      In another unique approach, McDonald’s Corporation is attempting to reduce their employee turnover by offering employees health care incentives and other employee benefits. [14] After calculating that experienced employees and proficient managers could accrete as much as $100,000 in additional annual sales and could potentially save $10,000 in annual overhead costs, McDonald’s restaurants began training their managers to tactically interview employees to determine what they value most about their jobs and suggestions they might have to improve them. [15] Since health insurance coverage is considered so essential by job applicants, McDonald's restaurants across America are now offering employees’ health insurance benefits at group rates, along with “computerized English-language classes and other life-enhancing skills that can be learned during breaks or after shifts,” says Rich Floersch, the company's chief human-resources officer. [16]        

      Amongst all employment sectors, the government appears to manage employee turnover most efficiently.  According to the Bureau of Labor Statistics, federal, state and local governments were the only sectors besides health care services that have seen more employee hires than employee separations from July 2008 to July 2009. [17] This could be an ancillary consequence of the recent high unemployment rate and overall depressed economy or it may be attributed to the way in which governments treat their employees.  Governments acting as a role model have a foremost objective to respect their employees through compliance with the law. For example, the "Federal Retirement Thrift Investment Board” has established statutes to provide stock bonuses, pensions, and profit-sharing plans exclusively for those employed in government positions. [18] Perhaps the government recognizes the importance employees place on such laws.     

V.      Role of Discriminatory Behavior by Employers      

     Whether companies realize it or not, a significant portion of their employee turnover is, in all probability, a direct result of the conscious or unconscious discriminatory behavior by employers. [19] In evidence of this, “every fiscal year since 2001, the Equal Employment Opportunity Commission (EEOC) has received more than 22,000 retaliation charges” says Donald Names, director of special staff services in the EEOC’s Office of Federal Operations. [20] To make matters worse, this statistic is not comprehensive and does not incorporate all forms of discriminatory charges that the EEOC receives annually.       

     There are many forms of discriminatory behavior in the workplace that federal statutes are designed to curtail. [21] Employees are protected in regards to the following characteristics: race or color, national origin, ancestry, sex and gender, sexual orientation, marital status, pregnancy, age, physical or mental disability, medical condition, and religion or military status. [22] Some statutes protecting these aspects from discrimination include Title VII of the Civil Rights Act of 1964, Age Discriminating in Employment Act (ADEA) of 1967, Americans with Disabilities Act (ADA) of 1990, the Rehabilitation Act of 1973, and the Equal Pay Act (EPA) of 1963. [23] The EPA which bans wage discrimination between males and females performing the same job became the subject of one of the largest discrimination lawsuits in United State’s history, Dukes v. Wal-Mart Stores. [24] 

       In the class action case filed in mid-2004 against Wal-Mart, 1.5 million current and former female Wal-Mart employees claimed that they suffered discrimination under the Equal Pay Act of 1963.[25] This employee class was sending a clear message that they felt less appreciated by their employer, one of the main reasons why employees leave a company, as previously suggested. [26]

 

With massive amounts of EEOC claims flooding the courts, employers have to be particularly careful that they are not overlooking the rights of their employees. [27] Arkady Itkin, a California attorney specializing in employment law suggests there are five common, subtle and "circumstantial" ways in which employers engage in discrimination against employees. [28] They include: 1) applying the rules of discipline unequally,  2) stating untrue reasons for termination, 3) asking or reminding older employees about retirement plans, 4) not investigating complaints or allegations prior to terminating the accused employee, and 5) terminating an employee shortly after he has exercised his legal rights. [29] Whether intentional or not, these discriminatory behaviors could be contributing to employee turnover by causing employees to leave a company at or against their will.                      

 

Employment policies and practices are the foundation to creating an efficient company with “a productive and satisfied workforce.” [30] There are an abundance of laws at federal, state and local levels that employers can utilize to their advantage not only to boost employee morale, but also to maintain legal compliance. [31] For example, employers should actively review employee backgrounds to assess whether workers are eligible for insurance premiums and other benefits from programs such as ERISA, HIPAA, or COBRA. [32] Companies can also educate their staff about discrimination and develop systematic policies to address discipline and termination procedures. [33] The legal solutions are endless.

 

   VI.        Conclusion

     The government provides the prototype to legal compliance and employee satisfaction within the workplace. Companies will continue to struggle with high employee turnover and other negative repercussions if they do not approach their employee needs from all perspectives, including the law. If companies fully understand the underpinnings of discrimination in the workplace and how they can alleviate this misdeed, perhaps, one day, companies will eventually plug the leak that drains from their organization their most valuable asset, their valued employees.  

End Notes:  

[1] Press Release, Bureau Lab. Stat., Job Openings and Labor Turnover Survey (Sept. 9, 2009) (on file with the U.S. Dep’t. Lab.) available at http://www.bls.gov/news.release/jolts.htm. 

[2] Id. 

[3] John H. McConnell, Hunting Heads, How To Find And Keep The Best People 20-23 (Kiplinger Washington Editors) (2000).  

[4] Not All Employee Turnover Is Bad- Celebrate “Losing the Losers,” http://www.ere.net/2009/04/06/not-all-employee-turnover-is-bad-celebrate-losing-the-losers/ (last visited Sept. 18, 2009).  

[5] Id.  

[6] Rod Hawkes, Retaining Good Employees is Smart Marketing, Vegetable Production & Marketing News, Jan. 2001, available at http://aggie-horticulture.tamu.edu/extension/newsletters/vpmnews/apr01/art3apr.html. 

[7] Id.  

[8] Aubrey C. Daniels, How to Prevent Employee Turnover, Entrepreneur, Apr. 7, 2003, http://www.entrepreneur.com/humanresources/employeemanagementcolumnistdavidjavitch/article60740.html 

[9] Employee Retention: 5 Reasons That People Quit Their Jobs, http://www.examiner.com/x-13521-SF-Workplace-Communication-Examiner~y2009m9d2-Employee-retention-5-reasons-people-quit-their-jobs (last visited Sept. 18, 2009).

[10] Erin White, Editorial, Theory & Practice: How to Reduce Turnover - Restaurant Chain Retains Workers Using Rankings and Rewards, Wall St. J., Nov. 21, 2005 at B5. 

[11] Id.  

[12] Id.  

[13] Id.  

[14] Richard Gibson, Editorial, Building Pride Into a “McJob,” Wall St. J., May 7, 2008, at B3C.  

[15] Id.  

[16] Id.  

[17] Press Release, Bureau Lab. Stat., supra note 1.  

[18] See 26 U.S.C.A. § 401 (West 1986). 

[19] Hr411.com, Unconscious Discrimination: Could you be Guilty?, https://www.hr411.com/hr-tip/Unconscious-Discrimination-Could-you-be-Guilty%3F_68800 (last visited Sept. 15, 2009). 

[20] David L. Hudson Jr. & Lawrence D. Rosenthal, Editorial, Targeted at Work, 31 Legal Times 7, Feb. 18, 2008. 

[21] Diskinlawfirm.com, Grounds by Which an Employer Discriminates, http://deskinlawfirm.com/grounds_by_which_an_employer_discriminates (last visited Sept. 18, 2009). 

[22] Id.  

[23] Hr411.com, How to Ensure Compliance EEO Laws, https://www.hr411.com/hr-tip/How-to-Ensure-Compliance-with-EEO-Laws_26953,(last visited Sept. 15, 2009), supra note 19. 

[24] Mike Scarcella, Editorial, Size Matters in Wal-Mart Discrimination Case, 32 Legal Times 13, Mar. 30, 2009. 

[25] Id.  

[26] Employee Retention: 5 Reasons That People Quit Their Jobs, supra note 9. 

[27] Unconscious Discrimination: Could you be Guilty?, supra note 19. 

[28] Posting of Arkady Itkin to Employment Law Firm Blog, http://www.sanfranciscoemploymentlawfirm.com/2009/07/how_employers_discriminate_and.html (July 15, 2009).  

[29] Id. 

[30] Hr411.com, When was the last time your company reviewed its Human Resources policies and practices?, https://www.hr411.com/hr-tip/How-to-Ensure-Compliance-with-HR-Laws_26922(last visited Sept. 15, 2009), supra note 19. 

[31] Id.  

[32] Id.  

[33] Id.

 

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