The Theoretical-Conceptual Model of Churning in Human Resources: The Importance of Its Operationalization

Abstract

Given the current socio-economic context in which the labor market is set in, if we were to consider both employment opportunities in specific economic periods and the individual expectations workers have regarding one’s working conditions, it should be a matter of one’s individual right of choice to decide whether or not to stay or leave and change companies. The paper we present before you took into account the phenomenon of churning as a cyclical process. Our main goal was to understand the main causes leading to it in the context of human resources and, ultimately, what were the consequences emerging from it. In order to carry out this analysis, we put forward a conceptual-theoretical model of the phenomenon of churning, made possible through the analysis of both the currently available literature and the empirical studies and conclusions stemming from the latter. The aforementioned analysis allowed us to trace all main causes responsible for the origin of churning and also, to understand how it could be implemented further on, in order to minimize the costs associated with hiring new personnel and retaining qualified employees by resorting beforehand to the implementation of strategic measures of human resources retention. By applying the methodology based on grounded theory, this study allowed us to further contribute to the already available, yet limited, literature and definition of this multifaceted and greatly complex subject that is the phenomenon of churning.

1. Introduction

Despite being highly relevant for the field of human resources, the phenomenon of churning is still a little-explored topic in terms of both theoretical and empirical studies in Portugal. Although very difficult to define, whether due to its complexity, whether from the multiplicity of related concepts usually associated with it, the aim of this study was to contribute to a real broadening of the literature available and to the demystification of such a concept in the field of human resources.

Taking into consideration the two types of churning there are, being the first one of voluntary-nature: when it is the employee’s decision to deliberately leave one’s former contracting-entity and secondly, and by contrast, one of involuntary nature, i.e., when the decision to rescind all contractual ties celebrated between the two parties is made by the actual hiring-company [1]; we decided to explore in a more in-depth way the voluntary churning given its problematic nature, the current reality managers are facing when having to come up with new strategies seeking to minimize costs the latter encompassed, the need to hire new personnel, the capital invested and spent on vocational training for new hires, and the actual impact the aforementioned has on the overall productivity of the company [2].

Based on the following literary analysis, we decided to choose the following as our research question:

How useful could the elaboration of a churning operational model become for the management of human resources?

On bearing in mind the abovementioned, our main goal was aimed at better understanding all main causes leading to churning in human resources and which would be the best-adopted strategies enabling the company to keep its best, most experienced employees when faced with such a scenario.

To make it possible to accomplish the latter, we chose to bisect it into:

(a)

The analysis between variables leading up to churning,

(b)

the analysis of applied retention measures adopted by companies so to keep their best workers.

As for our adopted methodology, this research was comprised by a theoretical-conceptual study of qualitative nature that, through its theoretical analysis, aimed to devise an effective theoretical-conceptual model that would enable a thorough understanding of the relationship between variables leading up to churning in human resources and by putting forward possible strategies companies could adopt to minimize its impact and contribute to effective retention of their best workers. Notwithstanding the above, this also allowed us to elaborate and present before you our own definition for the concept of churning, taking into consideration the already available literature.

Considering this phenomenon to be a novelty in the field of human resources nationwide and taking into consideration the fact that its conceptualization is yet in its earlier stages, we saw huge unexplored potential there. Ultimately, we hoped that, by focusing on the above, we would be able to provide a substantial contribution to its development both theoretically speaking and by showing how effective it could be in an actual real-life corporate setting.

2. Literary Review

2.1. The Origin of Churning in Human Resources

On account of all the recurrent socio-demographic, cultural, and technological changes companies were faced with, there was a need to invest into the development and implementation of new structural strategies that would make it possible for them to keep-up and thrive in such an exceedingly competitive marketplace [3].

For a company to cement its competitive edge in such a market it becomes crucial for it to partake in the ongoing, extensive efforts to keep up with major changes happening in the latter; hence, the need to hire new personnel on a continuous basis. In this process, organizations must focus on hiring the right people for the right place, considering specific adjustments in tasks to be performed according to the person’s skills so that they contribute to the maximization of productivity, increase in efficiency, and the minimization of associated costs for the company [4]. Stemming from the above arises yet another vital, highly complex process, i.e., the retention of given workers within the organization [5]. In order for an organization to successfully retain their key employees, i.e., workers considered as valuable assets to a company, given the unique set of skills and experiences these bring to the said company, in turn contributing to its overall development [6], a great amount of continuous, strenuous work and effort tends to fall upon the array of responsibilities given to said-company’s human resource team since they are the ones assuring these workers feel motivated, valued, and are being provided with the utmost welcoming working environment possible to work in [3]. In the absence of concern towards the employees’ well-being, along with efficient strategic measures for the retention of said key workers, the phenomenon of churning arises, i.e., the manifold of key employees deciding to depart from their current organization for others, offering a set of better working conditions which best suit their expectations [7].

Compliant with [8], churning is a notorious concern for organizations, given its frequent occurrence. When a worker presents their resignation, a set of complications arises: the need to find appropriate substitutes; the amount of time, effort, and associated costs implied by the latter; the delay in meeting deadlines, which oftentimes leads to unsatisfied clients, ultimately translates to huge losses for the said company [9].

Several authors have described churning as a multi-faceted concept with a multitude of associated definitions. Nonetheless, and taking into consideration the already available definitions presented in said literary contributions, we came to see the concept of churning as the combination of all costs linked to a manifold of voluntary resignations submitted by key workers in each company. This decision was made to provide a coherent line of reasoning for our research. The phenomenon of churning was linked to specific economic cycles occurring at a given time. During severe economic downturns, a decrease in the incidence rate of churning cases was oftentimes verified, most likely due to the decrease in job offers within the labor market. Conversely, in periods of economic recovery and increased availability in job offers, the incidence rate of churning cases arose [6,8,10]. Churning is thus considered to be a process of creative destruction associated with new economic processes [11]. The economy does not necessarily grow, but it undoubtedly changes. Along that same line of reasoning, [8] mentioned that churning could present favorable outcomes for the economy due to an increase in employment rates enabling employees to find better working conditions.

2.2. Causes of Churning in Human Resources

Studies showed an established relation between churning, the spatial, temporal, and specific activity sector a company is set in, along with its dimension and relevance within the labor market [10]. However, based on the available literature, labor conditions were considered the main driver for the incidence of higher or lower churning occurrences in each company, linking them with an organization’s positive working environment, attractive wages, favorable co-working relationships, chances for further training opportunities, and career progression within each organization [12].

Considering human resources, the main driving force for increased productivity results within a given organization fell upon them to develop better, more effective methods that, when put in place, would contribute to the retention of said company’s most highly skilled employees reassuring the company’s competitive edge within the marketplace, and consequently helped avoid incidences of the churning phenomenon [3].

During the 1960s and 1970s, significant changes were felt regarding organizational results stemming from the existing workforce [13]. Said changes were related to improved working conditions, namely: working environment, job satisfaction, salaries and working related benefits, recognition, training opportunities, career advancement opportunities, and professional stability [8].

An individual’s freedom of choice to remain or depart from an organization in the pursuit of better working conditions [11] urged organizations to draft, improve, and implement their retention measures, to forecast future resignations, and ultimately act preventively to avoid the phenomenon of churning from occurring internally [14].

Factors leading to churning could vary greatly from organization to organization and even in between individuals. Taking the voluntary strain of churning as an example, when an individual decided it was time to leave and resign from their current job position, this might be due to a set of positive reasons. An individual was, for example, able to find their desired working environment, was offered a better salary and/or better working conditions in relation to the previous ones, a chance for career advancement, and continuous training opportunities. Conversely, there were times when an individual’s decision to resign was due to difficult co-working relationships, lack of recognition from their peers and/or superiors, demotivating assigned tasks, among others [8,15].

The following rendered all main factors that, according to the reviewed literature, were considered the most relevant and those to have the greatest influence on the rise of the churning phenomenon. Please see

Table 1. Definitions of organizational concepts responsible for the occurrence of churning.

Definitions	References
Working conditions: It is imperative to identify and understand which factors pose an influence on the worker’s performance in a corporate setting which, in turn, provides companies with the assurance that they can keep on fostering their competitive edge within the labor market. The attractiveness of said companies contributes to the worker’s feeling involved in the company and helps predict that working conditions positively influence the retention of human resources.	[16]
Working environment: A work setting, where employees are incorporated, where they perform their assigned tasks. The said environment is oftentimes regarded to have a tremendous influence on the worker’s ability to successfully perform said tasks. The latter is also considered to play a great deal in the worker’s decision to leave or stay in a company. A desirable working environment is conducive to retaining employees.	[17]
Salary: A fixed compensation paid regularly for services provided by an employee, considered an essential factor for the ability to keep an employee in the organization.	[18]
Co-working relationships: Bilateral relationships established between colleagues, superiors, and subordinates. A positive relationship in the workplace is proven to greatly impact the capacity of an organization to retain its desired workforce.	[19]
Employee’s satisfaction in the workplace: When assured, such satisfaction directly influences the worker’s performance, motivation, productivity, and/or, conversely, absenteeism, ultimately leading to one’s desire to leave the organization.	[20]
Probity: A factor directly responsible for influencing someone’s own behavior, character, and desire for personal and professional development.	[21]
Engagement: Defined as an individual’s heartfelt desire to feel and be considered as a constituent part of the company they currently work in. The aforementioned is characterized by that same individual’s ability to accept and share a given company’s core values and objectives, to show true dedication, effort, and the will and want to contribute to said company’s future success, and a true desire to continue working there.	[20]
Loyalty: Resulting in a worker’s desire to keep working in an organization so that such a company can later provide positive references of the said worker to other companies. In such settings, loyalty is described as the behavior adopted by employees towards their hiring entity when the latter is going through challenging times, and the worker makes the decision to remain and help the company out.	[22]

:

Notwithstanding the abovementioned leading causes for the occurrence of churning, [23] also emphasized that factors such as age group, academic background, genre, sector of activity, among others, also tend to weigh in on an individual’s decision to leave their current job title. Interestingly, [24] stressed that the decision to remain or leave an organization could also be linked to several other reasons: work environment, (dis)regard for gender equality, and salary equity, for personal reasons (such as the case of reallocation due to family circumstances, maternal/parental leave, medical reasons), and even due to conflictual relations with managers and/or other colleagues.

2.3. Strategic Measures for the Retention of Human Resources

Considering churning an economy-based process with fluctuations in its incidence rate depending on specific economic scenarios, the latter tended to influence overall workflows [10]. Thus, the greater the economic situation in a given setting, the greater was the tendency of organizations to want to expand their workforce, oftentimes through stealing from their rival companies’ highly qualified workers. Unfortunately for those, such causalities resulted in a chain of continuous losses: the time spent in hiring and training new employees in addition and not to mention the discomfort and distress felt by employees and clients given the resulting internal structural changes the said casualties brought to the company [8].

Studies showed annual rates of churning of about 12–15% [8], with added costs of replacing the said casualties rounding between 70 to 200% of the salary of each key employee leaving the organization [25].

As a result of this issue, organizations must develop action plans for the sake of enabling them to predict possible exits of key employees and act accordingly in ways to ensure that, by implementing strategic retention measures, these ensure said employees want to remain in the organization [5].

That is why analyzing the causes of such exits is of utmost importance. Through interviews, by scanning previous assessments of performance, or even through the analysis of possible behavioral changes occurring during the time those employees worked there, companies were able to apply corrective or precautionary measures of retention [8,14]. By considering churning being a cyclical process directly linked to economic flows [10], the decision to not resort and/or take advantage of available strategic measures towards the retention of their most valuable employees can, in time, be detrimental for said companies [6].

3. Methodology

This research followed a theoretical approach of qualitative nature contributing towards the attainment of our overall goal: an in-depth analysis of the impact of churning on a company’s human resources, in addition to the identification of strategies that companies should adopt to successfully hold back their most experienced employees from wanting them to quit. With that in mind, in order to accomplish it, we outlined two specific objectives: (a) to analyze the relationship set between all variables that lead to churning and (b) to analyze all retention measures implemented by companies intended at retaining their most qualified employees.

We put forward a theoretical-conceptual model aiming at identifying the main causes leading to churning, as well as which measures contributed to the retention of key employees within organizations.

As for our chosen method for data collection, we resorted to literary review and analysis of empirical studies’ inferences on the topic of churning in the context of human resources.

The model in Figure 1 was subdivided into three tiers of analysis: the causes of churning, churning, and, finally, the retention of human resources, thus, enabling a theoretical evaluation of its multidimensionality that, in part with the results obtained through the application of the methodology, was based on grounded theory and allowed us to elaborate and contribute with a new theoretical definition of the concept of churning in the context of human resources.

4. Results and Discussion

Considering that working conditions were in this given context the most appointed cause for the rise of churning [27], as mentioned in the table above, we saw fitting to render such a phenomenon a more operational character helping to provide companies with a set of effective measures that would enable them to successfully keep their most valuable employees, and avoid all major costs associated with hiring new personnel, consequently ensuring the companies’ sustainable growth in the future.

Through the mentioned model, it was intended to give relevance to the importance of the operationalization of human resource churning in organizations so that they can act through strategic measures of human resource retention in order to minimize the negative factors in working conditions with the aim of mitigating the problem of human resource churning.

We put forward a detailed description of the abovementioned model in order to explain in the clearest possible way what this model encompassed and how the said model might be conducive in meeting the previously appointed aims of the present work.

The arrows with a straight line represent all variables having a bigger certainty of impactfulness in this given context (i.e., in causes of churning, churning, and in the retention of qualified staff), whereas the arrows with a dashed line are indicative of having less of an impact due to the fact that they are dependent on the strategies adopted aiming at holding back key workers from leaving the organizations, and the ability these will eventually have for contributing to diminishing in-house occurrence rates of churning, consequently fomenting these companies’ competitive edge in the market-place.

As previously mentioned, the adopted model was comprised of 3 levels of analysis. With regards to the causes of churning, we considered the following as the main causes directly linked to the worker’s decision to leave and change organizations, once given the opportunity to do so when offered better working conditions from other competitive institutions: working environment, wage, relationships established in the workplace, overall satisfaction, worker’s engagement, and their allegiance to the company. Ultimately, this negatively impacted the organizations’ own ability to successfully retain their most qualified employees by choosing not to adopt effective retention measures. Given there still was a shortage in attempts to put forward the operationalization of churning, significant amounts of employees resigning from companies resulted in major losses for companies, given their overall investment in the time spent training these employees and huge financial burdens for the former [3].

Companies showing legitimate concern for their workers’ overall well-being came as a result of their broad understanding that by assuring the latter (through the implementation of preventative-strategic measures), they were, in fact, reassuring their ability to keep their most valued, most qualified employees, as well as solidifying their competitive edge within the labor market. As a result, companies that implemented strategic measures for the retention of their most skilled workers certainly did lower their odds of facing high incidence rates of in-house churning [8]. However, that could only be accomplished when actual measures were put into place. Studies showed that companies should reassess their adopted working conditions and salary policies, which were some of the main reasons for employees deciding to look for jobs somewhere else. Increasing overall satisfaction rates in the workplace was shown to directly influence productivity outcomes [20], thus, fostering feelings of motivation, engagement, and commitment to the organization and the work performed, consequently reduced absenteeism rates and a desire to leave and change organizations in the pursuit of better living conditions [22].

For these reasons, considering previously mentioned variables as the main causes for churning along with the proposed theoretical-conceptual model and through the revision of both the available literature and empirical studies made on such matters, we concluded that the work environment component, i.e., the place where workers carry out their duties, greatly influenced their overall performance, hence, was considered as one of the most influential factors for wanting to stay or leave organizations. A desirable working environment was conducive to the retention of employees. We could predict that a bad working environment negatively influenced the incidence rates of churning.

Salary: a fixed compensation paid regularly for services provided by an employee, considered as an essential factor for the ability to keep an employee in the organization. In this sense, we could argue that low wages negatively influence churning.

Considering positively established work-related relationships was a good way to boost a good working environment in between the workforce, these also had a great impact in successfully retaining workers within the organization [19]. Hence, poorly established working relationships between employees and/or employees and managers did negatively influence the companies’ rates of churning.

Overall job satisfaction (due to a good working environment and/or due to satisfaction towards tasks given and performed) made employees want to work harder, be more productive, and be more involved, eliminating any desire to even consider leaving the company [28]. That said, we could assume that low satisfactory levels in regard to the job and tasks performed by employees negatively influenced churning.

Probity: A factor directly responsible for influencing someone’s own behavior, character, and desire for personal and professional development. In the absence of the said factor, one was able to clearly see the opposite taking place: employees lacking such feelings usually ended up wanting to leave organizations [21]. One could argue that the lack of commitment felt and shown by employees towards a company negatively influenced churning.

Since an employee’s direct engagement is rooted in the theory of advocating for the existence of a linkage between one’s feelings of fulfillment towards the role assigned and tasks performed and their productivity levels, this was concomitant for a company’s overall productivity outcomes. So, when employees showed a lack of engagement that usually led to their desire to leave [29,30]. We could also argue that the lack of thereof negatively influenced churning.

Compliant with [31], the employees’ loyalty towards a company was oftentimes a matter of an individual’s choice, adopted by those sensing that said company might or is, in fact, be going through a difficult situation, still choosing to stay in the hopes that the declining situation might take a turn for the better, or simply because they see no better employment options at that given time. Having said that, workers who showed loyalty towards a company they worked for were a result of their overall satisfaction with the latter, recommending the said institution to others and showing a desire to maintain their job position there. In this sense, one can say that the lack of an employee’s feelings of loyalty towards the company they work for had a negative influence on churning.

On the basis of the aforementioned and, considering that churning was related to the surplus of turnover cases in such context, given the relation set between workers’ voluntary departures and the costs associated with having to hire new personnel to replace them [32] being related with the flows of entrances and exits of the workers of the organizations and the flows of work [10], and that the retention was the capacity that an organization had in keeping its collaborators in the organization [5], allowed to predict that churning had a negative impact in the retention of collaborators.

These authors’ reasoning for the results presented above stemmed from the correlation established between the functions performed, overall feelings of satisfaction and loyalty, seen as a consequence of the interdependency nature of workers’ salaries, benefits given, their working conditions, promotion opportunities, career progression, autonomy, and responsibilities given for tasks performed. Employees performing administrative functions had less favorable labor conditions and lower levels of loyalty, hence higher odds for wanting to leave organizations. In contrast, employees assigned more technical or management positions had better working conditions and showed more loyalty towards the organization they worked for, thus a lower probability of desiring to leave.

5. Conclusions

The work we chose to present before you allowed us to approach themes on the churning of human resources, making it possible to deepen understandings of this thematic and also put forward a viable analysis on its causes and consequences, as well as an opportunity to personally contribute to the development on this multi-faceted and complex conceptual phenomenon.

This research sought to answer the following research question: How useful could the elaboration of a churning operational model become for the management of human resources? In order to fully and accurately explore the abovementioned, we chose as our main goal the analysis of how impactful the causes associated with the churning of human resources were and how to act accordingly to prevent it. For that reason, we had also chosen to further bisect it into two other objectives: (a) to analyze the relationship between variables within churning and (b) to analyze which implemented measures of retention were chosen to put in place by organizations so to successfully retain their most qualified workers.

Notwithstanding the fact that churning was directly linked to specific economic settings, there were other factors to be considered in regards to its incidence rates, oftentimes as a result of the nature of relationships established in between the workforce and, towards the organization, for example, dissatisfaction in the workplace, tasks performed, for financial reasons (poor salaries), a bad working relationship with management, lack of recognition, etc., could be appointed as some of the factors contributing to the worker’s decision to leave the company. That had major financial losses for the said companies hindering their overall productivity levels [33].

Through the analysis of the available literature, we were also able to conclude that companies that did not apply strategic measures and policies to avoid higher numbers of churning occurrences ended up facing major financial burdens in the long run, mostly due to costs associated with hiring new personnel to replace the ones who left. Given how steadfast the labor markets’ competitiveness is, organizations must develop solid action plans in order to guarantee the retention of their most valued, highly qualified personnel.

As a result of the analysis made on the empirical studies available, it was possible to verify how relevant it would be to operationalize such a concept in order to minimize the costs associated with it. However, for that to happen, it also became clear that organizations must set forward their own investigation processes allowing for a deep understanding of what measures should be improved and adapted so as to prevent the latter from happening, avoiding financial burdens, the loss of qualified workers, and their competitive edge within the labor market [6].

The scarcity in the literature available on the chosen topic was one of our main constraints for the elaboration of the present paper. In addition, the preclusion in analyzing other sets of possible variables related to the said concept by taking into consideration other methods of research and handling of data was considered as a limitation for further developments, hampering possible major findings that could make a solid contribution to the said concept.

Taking into account the aforementioned, we found it fitting to propose for future considerations the possibility to further develop this research by taking into account not only the application of empirical data already available but also taking into consideration a statistical analysis, which would enable us to verify the impact each variable may have for the said phenomenon, for example, by doing a quantitative analysis using parametric or non-parametric tests to confirm or exclude hypotheses [34,35], applying factor analysis to analyze the degree of reliability, the adequacy of the measurement variables and the unidimensionality of each of the variables [36,37], or by applying structural equations to analyze the latent variables and their causal interrelationships [38], as well as the relevancy in operationalizing the phenomenon of churning in human resources.