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The Effect of Labour Turnover in Brewery Industries in Nigeria (A Study of Guinness Brewery Industries Plc and Bendel Brewery Ltd in Benin City

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Asia Joural of Busiess Maagemet 4(2): , 2012 ISSN: Maxwell Scietific Orgaizatio, 2012 Submitted: November 25, 2011 Accepted: Jauary 26, 2012 Published: April 15, 2012 The Effect of Labour
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Asia Joural of Busiess Maagemet 4(2): , 2012 ISSN: Maxwell Scietific Orgaizatio, 2012 Submitted: November 25, 2011 Accepted: Jauary 26, 2012 Published: April 15, 2012 The Effect of Labour Turover i Brewery Idustries i Nigeria (A Study of Guiess Brewery Idustries Plc ad Bedel Brewery Ltd i Bei ity 1 A.. Beedict, 2 M. Josiah, 2 S.K. Ogugbele ad 1 E. Akpeti 1 Departmet of Busiess Admiistratio, 2 Departmet of Accoutig, ollege of Busiess ad Maagemet Sciece, Igbiedio Uiversity, Okada Edo State, Nigeria Abstract: This research study ivestigated the effect of labour turover i Brewery idustries i Nigeria. Labour turover is a costly problem ad a ecoomic drai to Brewig Idustries. Labour turover costs Brewig idustries i Nigeria huge sum of moey i recruitig ad traiig replacemets. Additioal costs are icured through ew employees that are more subject to accidets, causes more breakages ad make more errors tha experieced worker. Brewig idustries icur losses through reduced productio, work disruptio ad icreases scrap ad over-time as a result of departed workers. A cross-sectioal survey was utilized to collect data for aswerig research questioaires ad testig hypothesis i this research work. The data collected from questioaire istrumet were also aalyzed usig percetage. The research fidig showed that the effect of labour turover were reduced productio, icrease cost of recruitmet, work disruptio, icreased scrap ad overtime ad additioal labour turover. Reduced productio was foud to have the foremost effect o labour turover ad this affects output ad profit. A compariso of the effect of labour turover betwee Bedel Brewery ad Guiess Brewery showed that Bedel Brewery rated icrease cost of recruitmet ad traiig replacemets as the major effect of labour turover while Guieas Brewery rated reduced productio. The variables that were hypothetically tested as the causes of turover had sigificat effect o brewery idustries i Nigeria. Key words: Labour retetio, labour turover, respose rate, turover cost, turover effect, turover solutio INTRODUTION Backgroud of study: Labour turover is the rate at which a employer gais ad loses employee. Simple ways to describe it are how log employees ted to stay. Turover is measured for idividual compaies ad for their idustries as a whole. High turover may be harmful to a compay s productivity, if skilled workers are ofte leavig ad the worker populatio cotais a high percetage of ovice workers (Hutchuso ad Jad Beruvides, 1997). Turover ca be volutary ad ivolutary. The istace of volutary turover is iitiated at the choice of the employee while employee has o choice at the istace of ivolutary turover. The employee has o choice i their termiatio, such as log term sickess, death, movig overseas or employer iitiated termiatio (Marti, 2003). Typically, the characteristics of employees who egage i ivolutary turover are o differet from job stragers (Joseph, 1972; Testa, 2008). However, volutary turover ca be predicted, ad i tur cotrolled by the costruct of turover itet. Ruby (2002) classified labour turover ito iteral or exteral. Iteral turover ivolves employees leavig their curret positios ad takig ew positio withi the same orgaisatio. Both positive (such as icreased moral from the chage of task ad supervisor) ad egative (such as project/ratioal disruptio exists, ad therefore, it may be equally importat to moitor this form of turover as it is to moitor its exteral couterpart. Iteral turover might be moderated ad cotrolled by typical huma resource mechaics, such as a iteral recruitmet policy or formal successio plaig. I the U.S., for the period of December 2000 to November 2008, the average total o seasoally adjusted mothly turover rate was 3.3%. However rates vary widely whe compared over differet periods of time or differet job sectors. For istace, durig the period , the aual turover rate for all idustry sectors averaged 39.6% before seasoal adjustmets, durig the same period the leisure ad hospitality sector experieced a average aual rate of 74.6% (Bureau of Labour statistics, 2008). This corroborates the fidigs of Joseph (1972) which stated that Labour turover cost America orrespodig Author: A.. Beedict, Departmet of Busiess Admiistratio, ollege of Busiess ad Maagemet Sciece, Igbiedio Uiversity, Okada Edo State, Nigeria 114 Asia J. Bus. Maage., 4(2): , 2012 idustry 11 billio dollar a year. This figure icludes items as recruitmet, hirig ad traiig of replacemets. I additio, ew employees are more subject to accidets, causes more breakages ad makes more errors tha experieced workers, so that the cost of replacig a ma greatly exceed the hirig estimate (Stessi, 1961). Nigeria idustries are experiecig similar effect of labour turover, ad most employers recogizes that it is a serious ad o goig problem of great cocer, hece it is appropriate to udertake this study. Whe accoutig for the costs (both real costs,) such as time take to select ad recruit a replacemet, ad also opportuity costs; such as lost productivity), the cost of employee turover to for-profit orgaisatios has bee estimated to be up to 150% of employees remueratio package. These are both direct ad idirect costs. Direct costs relate to the leavig costs, replacemet costs ad trasitios costs, ad idirect costs relate to the loss of productio, reduced performace levels, uecessary overtime ad low morale US Departmet of labour, (Bureau of labour statistics, 2008). These are direct ad idirect effects of labour turover which we wat to study i Brewery idustries i Nigeria amely Guiess Brewery plc ad Bedel Brewery Limited. hrude (1980) stated that uskilled positios ofte have high turover, ad employee ca geerally be replaced without the orgaizatio or busiess icurrig ay loss of performace. The ease of replacig these employees provides little icetive to employers to offer geerous employmet cotracts, coversely, cotracts may strogly favour the employer ad lead to icrease turover as employees seek, ad evetually fid more favourable employmet. However, high turover rates of skilled professioals ca pose as a risk to the busiess or orgaizatio, due to huma capital (such a skills, traiig ad kowledge) cost. Notably, give the atural specializatio of skilled professioals, these employees are likely to be reemployed withi the same idustry by a competitor. (hrude, 1980; Testa, 2008). High turover is caused by uhappiess with the work, iadequate compesatio, usafe ad uhealthy coditios, urealistic expectatios, iappropriate processes or tools, ad poor cadidate screeig. Other causes are lack of career opportuities ad challeges, dissatisfactio with the job-scope or coflict with maagemet (Jackso, 1981; Stear, 1991). otiual traiig ad reiforcemet develops a workforce that is competet, cosistet, competitive, effective ad efficiet. Begiig i the first day of work, providig idividual with the ecessary skills to perform their job is importat. Before the first day, it is importat the iterview ad hirig process expose ew hires to a explaatio of the compay, so idividuals kow whether the job is their choice. Not workig ad strategizig with the compay provides ogoig performace maagemet ad helps build relatioships amog co-workers. It is also importat to motivate employees to focus o customer success, profitable growth ad the compay well beig. Employers ca keep their employees iformed ad ivolved by icludig them i future plas, ew purchases, policy chages as well as itroducig ew employees to the employees who have goe above ad beyod i meetigs (Dijkstra, 2008). Early egagemet ad egagemet alog the way, shows employees they are valuable through iformatio or recogitio rewards, makig them feel icluded. Whe compaies hire the best people, ew talets hired ad veteras are eabled to reach compay goals, maximizig the ivestmet of each employee. Takig the time to liste to employees ad makig them feel ivolved will create loyalty, i tur reducig turover, allowig for growth (ostello, 2006). otrolled turover ca be healthy as it clears dead wood ad brigs ew blood ad flesh ideas ad approaches to the orgaizatio. Most orgaisatios do ot usually attach moetary value to the loss caused by labour turover. They usually feel very reluctat to attack the problem. Some orgaizatios are igorat of the problem. osiderable time, effort ad moey are poured ito attractig, selectig ad traiig employee, but also too little of the same are directed towards keepig them. It is worthwhile carryig out this study because of the umerous problems associated with labour turover ad its attedat effect o the productivity ad effectiveess of a orgaisatio. The fidigs from this study caot be geeralized to other brewery idustries or other idustries because the circumstaces are ot the same. It will require much larger study to be able to geeralize. But at least, the result ca form the basis for further study ad a cotributio to ogoig research experimets o the effect of labour turover. Statemet of problem: Much moey is icurred i recruitig, hirig ad traiig replacemets. New employees are more subject to accidets, cause more breakages ad make more errors tha experieced worker. There is work disruptio, icreased scrap ad overtime as a result of departed staff. There is reduced productio, decreased output ad profit as a result of labour turover. There is additioal turover ad difficulty i recruitig good employees. Objectives of study: To research ito the effect of labour turover i brewig idustries i Nigeria. To fid out the most serious effect of labour turover i brewery idustries i Nigeria. 115 Asia J. Bus. Maage., 4(2): , 2012 To compare the effect of labour turover i the two breweries that are uder ivestigatio. Research questios: The study did utilize the followig research questios: Why are employees termiated i the orgaisatio Has exit of employee ay effect i your orgaisatio. What effect has labour turover i the orgaisatio Does turover occur more i some departmets. Statemet of hypotheses: The followig hypotheses were also formulated to guide this study: H 0 : Labour turover does ot icrease cost of recruitmet, hirig ad traiig replacemet i Brewery sector. H A : Labour turover icrease cost of recruitmet, hirig ad traiig replacemet i Brewery sector. H 0 : Labour turover does ot reduce productio, decrease output ad profit i Brewery sector. H A : Labour turover reduce productio, decrease output ad profit i Brewery sector. H 0 : Labour turover does ot cause work disruptio, icreased scrap ad overtime i Brewery sector. H A : Labour turover causes work disruptio, icreased scrap ad overtime i Brewery sector. H 0 : New employees are ot more subject to accidets, causes ot more breakages ad make ote more errors tha experieced worker i Brewery Sector. H A : New employees are more subject to accidets, causes more breakages ad make much errors tha experieced worker i Brewery Sector. Sigificace of the study: To kow the effect of labour turover i the brewery idustries i Nigeria. To kow how to tackle the problem of labour turover. LITERATURE REVIEW Labour turover affects both workers ad orgaizatios. Workers experiece disruptio, they eed to lear ew job specific skills ad fid differet career prospects (Alogoskoufia et al., 1995). Orgaisatios suffer the loss of job-specific skills disruptio i productio ad icur costs of hirig ad traiig ew workers. But icomig workers may be educated, more skilled ad have greater imitative ad ethusiasm tha those who leave. The effect of turover o workers is quite well uderstood. However we kow very little about the impact of turover o orgaizatios. This is due to limited availability of data, which has allowed oly sporadic study to these issues (turover ad hirig cost have bee studied by (Burgess ad Dorado, 1989; Hammermesh, 1995; Hammermesh ad Pfa, 1996; Hutchuso ad Jad Beruvides, 1997; Kersley ad Marti, 1997), have aalysed the impact of labour turover o productivity). Haskel ad Marti (2001) stated that a large hirig cost results where there is difficult i filig vacacies, they used variables that idicates whether maagers report that the establishmet experieced difficulty i hirig workers i the precedig years as a simple measure of hirig costs. To represet traiig costs, Haskel ad Marti (2001) used a measure whether workers who have doe similar work before receive traiig that last for 7 days or loger whe they joied the establishmet. This ca idicate establishmet where workers require specific skills ad thus where traiig costs are higher. I this research work, demographic classificatio of respodets were doe to help the researcher ad the reader to uderstad the characteristic of the samples i which the research questioaire or istrumet were admiistered (Owe, 1998). The resposes o the variables that have effect as a result of labour turover o the two Breweries were aalysed. A cross sectioal desig was used to collect data to aswer research questios ad relatioship amog variables (Asika, 1991). It was used to collect data for hypothesis testig. Descriptive method of aalysis was used to distribute the relevat research variables usig percetages. This research work is ivestigatig the extet each variables, such as icrease cost of recruitmet ad traiig, reduced productio, work disruptio, icreased scrap ad overtime as a result of labour turover has effect o Guiess Brewery Plc ad Bedel Brewery Limited. We have ot come across where this method of ivestigatio was adopted i the literature o the effect of labour turover i orgaisatios. The literature have always cited the effect of turover ad hirig cost i orgaisatios as earlier metioed o the sporadic research o this issues. Gario ad Marti (2007) aalysed the impact of labour turover o profit usig the efficiecy wage model of Salop (1979) by separatig icumbet ad ewly hired workers i the productio fuctio. They showed that a exogeous icrease i turover rate ca affect icrease i profit, but oly where orgaizatios do ot choose the wage. This effect of turover varies across orgaizatios as it depeds o turover costs; the substitutability of icumbets ad ew hires ad other factors. Their model was tested i UK ross sectioal establishmet level data ad they foud out that their productios were cosistet with the data. Turover rate is a give fuctio of wage ad other factors, i practice it may be edogeous. Marti (2003) used ecoometric model to geerate predicted values of the actual turover rate. High turover is prevalet amog those groups who have skills that are i short supply ad amog the youg ad also ew staff 116 Asia J. Bus. Maage., 4(2): , 2012 (Bolto, 1991). Bolto wet further to state that turover rate may ot be a problem if staff ca be cheaply ad effectively replaced ad that low turover rate will be a problem if it is expesive to replace staff ad if traiig staff takes sometimes. Bolto (1991) gave the formular for calculatig turover as labour turover is equal to the umber of employee leavig, divided by the average total umber of employee multiplied by 100 (i order to give a percetage value). The umber of employees leavig are measured over oe caledar year. Employees are importat i ay ruig of a busiess; without them the busiess would be usuccessful. However, more ad more employers today are fidig that employees remai for approximately 23 to 24 moths, accordig to the Bureau of Labour statistics. The Employmet policy Foudatio states it costs a compay a average of $15,000 per employee, icludig separatio costs, paperwork, uemploymet; vacacy costs, icludig overtime or temporary employees ad replacemet costs icludig advertisemet, iterview time, relocatio, traiig ad decreased productivity whe colleagues depart. Providig a stimulatig workplace eviromet, which fosters happy, motivated ad empowered idividuals, lowers employee turover ad absetee rates, promotig a work eviromet that fosters persoal ad professioal growth, promotes harmoy ad ecouragemet at all levels, so the effects are felt compay wide. Aother effect of labour turover is that orgaizatioal effectiveess dimiishes if employees caot stay o the job (Stear, 1991). This corroborates the fidig of Ovadge (1998), which stated that today s highly competitive ad chaotic eviromet requires retetio of people who will be willig to perform if orgaizatio are to survive ad hrude (1980) also ackowledge that employee turover is good idicator of the effectiveess of a orgaizatio staff fuctio. Bureau of Labour Statistics (2008) whe accoutig for the costs of labour turover i orgaizatios, has estimated the cost of employee turover to for-profit to be up to 150% of employees remueratio package. These are both direct ad idirect costs. Direct costs are leavig costs, replacemet costs ad trasitio costs ad idirect costs are loss of productio, reduced performace levels, uecessary overtime ad low moral. The extet of the effect of these costs is what we wat to study i Brewery idustries i Nigeria, amely Guiess Brewery Plc ad Bedel Brewery Limited. Testa (2008) i his research work, oted that high turover rates of skilled professioal is ot desirable ad ca pose as a risk to orgaisatio due to huma capital cost. He emphasized that these employees by their skillful ability are likely to be re-employed withi the same idustry by the competitor. Turover has its cosequeces apart from the cost implicatio as a result of recruitig ew staff ad traiig replacemet. Ubeku (1975) stated leakage of vital iformatio to competitors by the departig staff as oe of the cosequeces of labour turover. He also emphasized that the traiig givig to the departig staff may ot be realized ad that this might ecourage other staff i orgaisatio to resig their appoitmet for other establishmet. hrude (1980) corroborated the fidigs of Testa (2008) by statig that the cost of turover for competet people is high, sice replacemet of key employee meas that a ew employee must be able to carryout to those rules ad resposibilities which were formally performed by the employees. Ad to udergo a learig process may take 3 to 6 moths, depedig o replacemet ability to acclimate to ew job. For a outsider, this ivolves learig the busiess, culture ad workflow withi a eterprise, for a isider it may ivolve ew resposibilities ad tools. This also bothers o loss of huma capital through traiig, skill ad kowledge as postulated by Testa. Although, labour turover icrease orgaisatioal cost, disrupt orgaisatio pla, ogoig projects ad cause utold hardship to orgaisatio, but there are some advatages to it. These advatages are replacemet of separated employees with ew oes who could brig experieces, kowledge, practice ad skill. Turover ca be driver to orgaizatioal reewal. Although high turover is expesive, low rate ca be cost savig. Also competet oes with lower remueratio could replace employees with higher remueratio. The orgaisatio ca udergo some form of restructurig, merger of some positios, which ca improve bottom lie. Turover ca eable orgaisatio elimiate poor performaces, umotivated workers ad people who are difficult to get alog with. RESEARH DESIGN AND METHODOLOGY Methodology: A cross sectioal desig was used i this study. A cross sectioal desig is explaatory ad exploratory ad etails collectio of data to aswer research questios ad relatioship amog variables (Asika, 1991). It was used to collect data for hypothesis testig. Descriptive method of aalysis was used to distribute the relevat research variables usig percetages. Z-test statistics was used for hypothesis testig about proportio of oe or two samples Z-test statistics was used i hypothesis testig because of large sample. The populatio of sample size: The populatio of study was made up of 552 staff of Guiess Brewery Plc ad 612 staff of Bedel Brewery Ltd. The etire size of populatio was The sample size was determied usig Yamae (1964) formula which is stated as follow: = N/(1+Ne 2 ) 117 Asia J. Bus. Maage., 4(2): , 2012 where N = Populatio size = Sample size e = Level of error = 0.05 I = a theoretical costat 1164/[1+1164(0.05) 2 ] 1164/3.91= = 298 samples alculatio of Stratum Allocatio usig Kumar (1976) techique: h = XN H /N where h N H N = stratum allocatio = sample size = strat
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