Because learning changes everything.

Chapter 6
Employee Separation and
Retention

Human Resource Management

Gaining A Competitive Advantage
THIRTEENTH EDITION
Raymond Noe, John Hollenbeck, Barry
Gerhart, Patrick Wright

© 2023 McGraw Hill, LLC. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted w ithout the prior w ritten consent of McGraw Hill, LLC.

Learning Objectives
10-1 Distinguish between involuntary and voluntary turnover,
and discuss how each of these forms of turnover can be
leveraged for competitive advantage.
10-2 List the major elements that contribute to perceptions of
justice and how to apply these in organizational
contexts involving discipline and dismissal.
10-3 Specify the relationship between job satisfaction and
various forms of job withdrawal, and identify the major
sources of job satisfaction in work contexts.
10-4 Design a survey feedback intervention program, and
use this to promote retention of key organizational
personnel.

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 Introduction
Employee Retention:
• Must hold on to key personnel:
• Make them motivated to stay.
• Voluntary turnover.
• Must let go of low performers:
• Terminate if necessary (involuntary turnover)
• Every executive recognizes the need for satisfied, loyal customers. If the firm is publicly held, it is
also safe to assume that every executive appreciates the need to have satisfied, loyal investors.
Customers and investors provide the financial resources that allow the organization to survive.
There is a strong link between employee satisfaction and retention, on the one hand, and critical
organizational outcomes, on the other hand.
• In addition to holding onto key personnel, another hallmark of successful firms is their ability and
willingness to dismiss employees who are engaging in counterproductive behavior or behavior that
threatens other employees.
• Involuntary turnover: Turnover initiated by the organization (often among people who would
prefer to stay).
• Voluntary turnover: Turnover initiated by employees (whom the company often would prefer to
keep).

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Managing Involuntary Turnover 1

Employment-at-Will Doctrine:
• Either employer or employee can sever the employment
relationship at any time.
• Wrongful discharge suit:
• Violation of an implied contract or covenant, or a public policy.
• Can be a civil rights infringement if person discharged is member of
a protected group.

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 Managing Involuntary Turnover 1

• Terminating someone’s employment can be a difficult task that needs to be handled with the utmost
care and attention to detail. The increased willingness of people to sue their employers, combined with
an unprecedented level of violence in the workplace, has made discharging employees personally
dangerous and legally complicated.
• In the absence of a specified contract, either the employer or the employee could sever the
employment relationship at any time. The severing of this relationship could be for “good cause,” “no
cause,” or even “bad cause.” Over time, this policy has been referred to as the employment-at-will
doctrine. This employment-at-will doctrine has eroded significantly over time, however. Today
employees who are fired sometimes sue their employers for wrongful discharge.
• A wrongful discharge suit typically attempts to establish that the discharge either (1) violated an implied
contract or covenant (i.e., the employer acted unfairly) or (2) violated public policy (i.e., the employee
was terminated because he or she refused to do something illegal, unethical, or unsafe).
• The number of such protected groups is large and includes members of underrepresented racial
groups, women, older workers (over 40 years of age), members of the LGBTQ community, workers
with disabilities (including the obese), whistle-blowers, people who have filed workers compensation
claims, and Caucasians (reverse discrimination).

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Managing Involuntary Turnover 2

Ways to Combat a Wrongful Discharge Suit:

• Create a paper trail.
• Initiate punitive actions short of termination to get employee to quit.
• Pay off employee in excess severance pay in return for waiving right to sue for
wrongful dismissal.
• Drastic overhaul of the workforce:
• Zero tolerance of poor performers.
• The high cost of litigating the case makes some employers reluctant to fire
employees, even when they are low performers. When this happens, the
employer’s short-term emphasis on staying out of court has come into
conflict with the long-term need to develop a competitive workforce and
grow.
• Given the critical financial and personal risks associated with employee
dismissal, it is easy to see why the development of a standardized,
systematic approach to discipline and discharge is critical to all
organizations.
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 Managing Involuntary Turnover 3

Principles of Justice:
• Outcome fairness:
• Outcomes relative to other person are proportionate.
• Noncompete clauses.
• Procedural justice:
• Lack of bias and informational accuracy are most critical
determinants.
• Interactional justice:
• Diffuse resentment.

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Managing Involuntary Turnover 3

The key to an effective discipline system is that all employees, including

the individual who is being punished, view the system as “fair.” There are
three specific types of justice or fairness perceptions that need to be
managed in this context.
• Outcome fairness refers to the judgment that people make with respect
to the outcomes received relative to the outcomes received by other
people with whom they identify (referent others).
• Procedural justice focuses specifically on the methods used to
determine the outcomes received.
• Interactional justice refers to the interpersonal nature of how the
outcomes were implemented.

LO 10-2
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 Table 10.1 Six Determinants of Procedural
Justice
Determinants
1. Consistency. The procedures are applied consistently across time
and other persons.
2. Bias suppression. The procedures are applied by a person who has
no vested interest in the outcome and no prior prejudices regarding
the individual.
3. Information accuracy. The procedure is based on information that is
perceived to be true.
4. Correctability. The procedure has built-in safeguards that allow one
to appeal mistakes or bad decisions.
5. Representativeness. The procedure is informed by the concerns of
all groups or stakeholders (co-workers, customers, owners) affected
by the decision, including the individual being dismissed.
6. Ethicality. The procedure is consistent with prevailing moral
standards as they pertain to issues like invasion of privacy or
deception.
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Table 10.2 Four Determinants of

Interactional Justice
Determinants
1. Explanation. Emphasize aspects of procedural fairness
that justify the decision.
2. Social sensitivity. Treat the person with dignity and
respect.
3. Consideration. Listen to the person's concerns.
4. Empathy. Identify with the person's feelings.

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 Managing Involuntary Turnover 4

Progressive Discipline and Alternative Dispute Resolution:

• Termination should come at end of a systematic discipline
program.
• Documentation.
• Progressive punitive measures.
• Alternative dispute resolution (ADR).
• Except in the most extreme cases, employees should generally not be terminated
for a first offense. Rather, termination should come about at the end of a systematic
discipline program. Effective discipline programs have two central components:
documentation (which includes specific publication of work rules and job
descriptions that should be in place prior to administering discipline) and
progressive punitive measures.
• Alternative dispute resolution (ADR): A method of resolving disputes that does
not rely on the legal system, often proceeding through the four stages of open-door
policy, peer review, mediation, and arbitration.
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Table 10.3 An Example of a Progressive

Discipline Program
OFFENSE ORGANIZATIONAL DOCUMENTATION
FREQUENCY RESPONSE
First offense Unofficial verbal warning Witness present
Second offense Official written warning Document filed
Third offense Second official warning, with Document filed
threat of temporary
suspension
Fourth offense Temporary suspension and Document filed
“last chance notification”
Fifth offense Termination (with right to go Document filed
to arbitration)

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 Table 10.4 Stages in Alternative Dispute
Resolution
STAGES
Stage 1: Open-door policy
The two people in conflict (for example, supervisor and subordinate) attempt to
arrive at a settlement together. If none can be reached, they proceed to . . .
Stage 2: Peer review
A panel composed of representatives from the organization that are at the same
level of those people in the dispute hears the case and attempts to help the
parties arrive at a settlement. If none can be reached, they proceed to . . .
Stage 3: Mediation
A neutral third party from outside the organization hears the case and, via a
nonbinding process, tries to help the disputants arrive at a settlement. If none can
be reached, the parties proceed to . . .
Stage 4: Arbitration
A professional arbitrator from outside the organization hears the case and
resolves it unilaterally by rendering a specific decision or award. Most arbitrators
are experienced employment attorneys or retired judges.

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Managing Involuntary Turnover 5

Employee Assistance and Wellness Programs:

• Employee assistance program (EAP):
• Usually identified in official documents published by employer
(employee handbooks).
• Supervisors (and union representatives) trained to use the referral
service for employees whom they suspect of having health-related
problems.
• Employees trained to use the system to make self-referrals.
• Deals with alcoholism, illegal drugs, prescription drugs, and
nonprescription drugs.

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 Managing Involuntary Turnover 5

• Many of the problems that lead an organization to consider terminating an

individual’s employment relate to drug or alcohol abuse. In these cases, the
organization’s discipline and dismissal program should also incorporate an
employee assistance program. An employee assistance program (EAP) is a
referral service that supervisors or employees can use to seek professional
treatment for various problems.
• Although originally targeted at the use of illegal drugs, many EAPs increasingly
have had to deal with employees who have problems attributable to prescription
drugs, especially painkillers. In addition to considering both illegal drugs and
prescription drugs, in some states, employee assistance programs also have to
address legal, nonprescription drugs (recreational use of marijuana in states
where it is legal).
• The key to the effectiveness of an EAP is striking the right balance between
collecting information that can be used to promote employee health, on the one
hand, and the employee’s right to privacy, on the other.

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Managing Involuntary Turnover 6

Employee Assistance and Wellness Programs continued:

• Employee wellness programs:
• Focus on preventing health-related problems.
• People react more strongly to threats of losses (punishment)
than promises of gains (reward programs).
• Consider the importance of employee’s health to job performance.

• Employee wellness programs take a proactive and preemptive focus on trying to prevent health-related
problems in the first place.
• Employee wellness programs come in many different sizes and varieties, so it is difficult to make general
statements about their cost and effectiveness. Many employers find that people react more strongly to
threats of losses than promises of gains, and reward programs at companies that offer incentives to get
healthier simply do not seem to work. Reward programs at these companies that offered incentives to get
healthier simply did not seem to work. By contrast, punishment-based programs definitely get people’s
attention.
• One of the major determinants of how far employee wellness programs can push their employees is how
central health is to effectively performing the work.

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 Managing Involuntary Turnover 7

Outplacement Counseling:
• Helps dismissed employees manage transition from one
job to another.
• Includes career counseling, job search support, resume
critiques, job interviewing training, and provision of
networking opportunities.
• Reduces likelihood of litigation by former employees.

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Managing Involuntary Turnover 7

• The permanent nature of an employee termination not only leaves the person
angry, but it also leads to confusion as to how to react and in a quandary
regarding what happens next. If the person feels there is nothing to lose and
nowhere else to turn, the potential for violence or litigation is higher than most
organizations are willing to tolerate. Therefore, many organizations provide
outplacement counseling, which tries to help dismissed employees manage
the transition from one job to another. There is a great deal of variability in the
services offered via outplacement programs.
• Many observers have criticized the effectiveness of outplacement programs,
when it comes to helping former employees actually find new jobs. Many
programs take a “one-size-fits-all” approach with standardized training
programs not tailored to the specific needs of clients and industries, as well as
boilerplate resume services that send out almost identical documents for
different workers.
• Outplacement counseling can help people realize that losing a job is not the
end of the world and that other opportunities exist.

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 Managing Voluntary Turnover 1

Voluntary Turnover
• Prevent employees who are highly valued from leaving.
• Successful companies attract others looking to steal talent.
• Drivers of retention:
• Pay and job security.
• Benefits.
• Fun and collaborative work environment.
• Immediate feedback.
• Opportunities for development.

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Managing Voluntary Turnover 1

• The cost of turnover is extremely high and it estimated that losing an employee
can cost roughly two times the employee’s salary.
• Turnover is also costly when it comes to time, in that an employer is forced to
dedicate time and resources to recruiting, onboarding, and training a new hire –,
all while taking a business hit internally when the role remains unfilled. Turnover
rates also affect one’s reputation and is seen as an indicator to shareholders
how well managed a business is.
• Employees may be attached to their jobs for any of a number of reasons, and
employers need to recognize this in their efforts to retain workers. For example,
pay and job security used to be the primary drivers of retention for older
generations of workers, but this is not always the case today. Evidence seems
to suggest that younger employees prefer benefits to cash, and they generally
want to work in an environment that is fun and collaborative and that provides a
great deal of immediate feedback and opportunities for development. This
generation of employees has a lot to offer employers, including the fact that they
are technically skilled, racially diverse, socially interconnected, and willing to
collaborate.

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 Managing Voluntary Turnover 2

Progression of withdrawal:
• Behavior change.
• Can lead to supervisor–subordinate confrontation.
• Whistle-blowing.
• Physical job withdrawal:
• Transferring, quitting, or being absent.
• Psychological withdrawal:
• Low level of job involvement.
• Low level of organizational commitment.

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Managing Voluntary Turnover 2

• Job withdrawal is a set of behaviors that dissatisfied individuals enact to avoid the work
situation. The overall set of behaviors are grouped into three categories: behavior change,
physical job withdrawal, and psychological job withdrawal. We present the various forms
of withdrawal in a progression, as if individuals try the next category only if the preceding
is either unsuccessful or impossible to implement. This theory is called progression of
withdrawal.
• An employee’s first response to dissatisfaction would be to try to change the conditions
that generate the dissatisfaction. Less constructively, employees can initiate change
through whistle-blowing (making grievances public by going to the media).
• If the job conditions cannot be changed, a dissatisfied worker may be able to solve the
problem by leaving the job. This could take the form of an internal transfer if the
dissatisfaction is job specific or if the source of the dissatisfaction relates to
organizationwide policies, then organizational turnover is likely.
• When dissatisfied employees are unable to change their situation or remove themselves
physically from their jobs, they may psychologically disengage themselves from their jobs.
• Job involvement is the degree to which people identify themselves with their jobs.
• Organizational commitment is the degree to which an employee identifies with the
organization and is willing to put forth effort on its behalf.

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 Figure 10.1 An Overall Model of the Job
Dissatisfaction–Job Withdrawal Process

Access the text alternative for slide images.

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Managing Voluntary Turnover 3

Job Satisfaction and Job Withdrawal:

• Job satisfaction:
• Function of values.
• Differing views of which values are important.
• Perception:
• Influenced by frame of reference, such as pay levels.
• The key driving force behind all the different forms of job
withdrawal is job satisfaction, which we define as a
pleasurable feeling that results from the perception that one’s
job fulfills or allows for the fulfillment of one’s important job
values.
• A frame of reference is a standard point that serves as a
comparison for other points and thus provides meaning.
LO 10-3
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 Managing Voluntary Turnover 4

Sources of Job Dissatisfaction:

• Unsafe working conditions:
• Occupational Safety and Health Act of 1970 (OSHA).
• Nature of work makes managing safety-related perceptions critical.
• Some jobs create health risks due to long hours and high stress.
• Protecting workers and ensuring their safety challenging with
overseas operations.

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Managing Voluntary Turnover 4

• Many aspects of people and organizations can cause dissatisfaction

among employees. Managers and HR professionals need to be aware
of these because they are the levers that can raise job satisfaction and
reduce employee withdrawal.
• Of course, each employee has a right to safe working conditions. The
Occupational Safety and Health Act of 1970 (OSHA) authorizes the
federal government to establish and enforce occupational safety and
health standards for all places of employment engaging in interstate
commerce.
• The perception and reaction of the organization’s own employees to
working conditions has implications for satisfaction, retention, and
competitive advantage that go well beyond merely meeting the legal
requirements. That is, if applicants or job incumbents conclude that their
health or lives are at risk because of the job, then attracting and
retaining workers will be impossible.

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 Managing Voluntary Turnover 5

Sources of Job Dissatisfaction continued:

• Personal dispositions:
• Negative affectivity.
• Positive people work harder, more committed, paid more, and
promoted more often.
• Importance of personnel selection to raise overall levels of
employee satisfaction.

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Managing Voluntary Turnover 5

• Negative affectivity describes a dispositional dimension that reflects

pervasive individual differences in satisfaction with any and all aspects
of life. Individuals who are high in negative affectivity report higher
levels of aversive mood states, including anger, contempt, disgust, guilt,
fear, and nervousness across all contexts (work and nonwork). People
who are high in negative affectivity tend to focus extensively on the
negative aspects of themselves and others and persist in their negative
attitudes even in the face of organizational interventions, such as
increased pay levels, that generally increase the levels of satisfaction of
other people.
• By contrast, research suggests that people who are positive tend to
work harder, are more likely to be committed to the organization, are
paid more, and are promoted more often.

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 Managing Voluntary Turnover 6

Sources of Job Dissatisfaction continued:

• Tasks and roles:
• Complexity of the task:
• Strong positive relationship.
• Job enrichment.
• Job rotation.
• Amount of flexibility in where and when work is done:
• Working from home, family-friendly policies.
• Value employee puts on task:
• Prosocial motivation.

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Managing Voluntary Turnover 6

• The three primary aspects of tasks that affect job satisfaction are: the
complexity of the task, the amount of flexibility in where and when the work is
done, and, finally, the value the employee puts on the task.
• With a few exceptions, there is a strong positive relationship between task
complexity and job satisfaction. That is, the boredom generated by simple,
repetitive jobs that do not mentally challenge the worker leads to frustration and
dissatisfaction.
• One of the major interventions aimed at reducing job dissatisfaction by
increasing job complexity is job enrichment. As the term suggests, this
intervention is directed at jobs that are “impoverished” or boring because of their
repetitive nature or low scope.
• Another task-based intervention is job rotation. This is a process of
systematically moving a single individual from one job to another over the
course of time.
• The term prosocial motivation is often used explicitly to capture the degree to
which people are motivated to help other people.

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 Managing Voluntary Turnover 7

Sources of Job Dissatisfaction continued:

• Supervisors and co-workers:
• Satisfied when supervisors have “warmth” and provide support to
help employees achieve their goals.
• Must be competent.
• Abuse by co-workers can have more profound negative influence
on job satisfaction.
• Workplace bullying.
• Organizations foster team building.

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Managing Voluntary Turnover 7

• Workers may be satisfied with their supervisors for one of two reasons. First, job incumbents may see
their supervisors as having “warmth,” that is, genuinely caring about the workers and respecting them
as people. Thus, being in a culture where people are generally civil and polite makes people feel their
own dignity and worth above and beyond their contributions to the work itself.
• Second, people may be satisfied with their supervisors because the supervisors provide support that
helps them achieve their own goals. That is, although it is nice to have a supervisor and co -workers
who are warm, it is also critical that these people be “competent” in terms of helping workers and their
teams get the mission accomplished.
• Abuse by co-workers can have an even more profound negative influence on one’s job satisfaction.
Workplace bullying is defined as repeated health-harming mistreatment by one or more perpetrators at
work that takes the form of verbal abuse and offensive conduct that is threatening, humiliating, or
intimidating to the point where it prevents work from getting done.
• Because a supportive environment reduces dissatisfaction, many organizations foster team building
both on and off the job (such as via softball or bowling leagues). The idea is that group cohesiveness
and support for individual group members will be increased through exposure and joint efforts.

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 Managing Voluntary Turnover 8

Sources of Job Dissatisfaction continued:

• Pay and benefits:
• Work is primary source of income and financial security.
• Pay may be seen as an indicator of status.
• Consideration of pay levels is relative to market wages.
• Make benefits highly salient to employees and link them to
organization’s strategic direction.

• For most people, work is their primary source of income and financial security. Pay is also seen as an indicator
of status within the organization as well as in society at large. Thus, for many individuals, the standing of their
pay relative to those within their organization, or the standing of their pay relative to others doing similar work for
other employers, becomes even more important than the level of pay itself.
• Satisfaction with benefits is another important dimension of overall pay satisfaction. To derive competitive
advantage from benefits’ expenditures, it is critical not only to make them highly salient to employees but also to
link them to the organization’s strategic direction.

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Managing Voluntary Turnover 9

Measuring and Monitoring Job Satisfaction:

• Workers’ self-reports:
• Established scales.
• Job Descriptive Index (JDI).
• Pay Satisfaction Questionnaire (PSQ).
• Pulse surveys.

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 Managing Voluntary Turnover 9

• Most attempts to measure job satisfaction rely on workers’ self-reports.

There is a vast amount of data on the reliability and validity of many existing
scales as well as a wealth of data from companies that have used these
scales, allowing for comparisons across firms. Established scales are
excellent places to begin if employers wish to assess the satisfaction levels
of their employees.
• One standardized, widely used measure of job satisfaction is the Job
Descriptive Index (JDI). The JDI emphasizes various facets of satisfaction:
pay, the work itself, supervision, co-workers, and promotions.
• The Pay Satisfaction Questionnaire (PSQ) focuses on these more specific
dimensions (pay levels, benefits, pay structure, and pay raises).
• Pulse surveys are very short questionnaires that go out every day or once a
week that focus on a small set of specific questions—perhaps even just one
question—which the company wants to keep track of over time.

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Managing Voluntary Turnover 10

Survey Feedback Interventions:

• Employee survey research:
• Allow company to monitor trends over time.
• Provide a means of empirically assessing impact of changes in
policy or personnel.
• Allow company to compare itself with others in same industry along
these dimensions.
• Allow company to check for differences between units and
benchmark “best practices” that might be generalized across units.
• Uncover systematic concerns that are driving retention problems.

LO 10-4
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