business problem research

Benjamin Alayon

December 17, 2020

Research Methods for Managers

Abstract

"Employee turnover refers to the number or percentage of workers who leave an organization and are replaced by new employees." (Mayhew, 2019). High employee turnover is a big problem for any business; however, the customer service industry has a dramatic high turnover rate compared to any other industry.

Introduction

This research aims to know and analyze the causes and consequences of high turnover in the customer service departments, and how can it be prevented?

According to the Chron, "Employee turnover refers to the number or percentage of workers who leave an organization and are replaced by new employees". Nevertheless, there is more to it since there are various kinds of employee turnover. The common ones are involuntary turnover, referring to the turnover related to termination (where the cause is justified but not significant for this research) and, most importantly, voluntary turnover, referring to when an employee abandons the company of their own choice. The second type is the important one since it will be the one that will be deemed in the study. Also, turnover is also divisible in desirable and undesirable; voluntary turnover is almost always considered undesirable due to its consequences, (Chron, 2019).

"According to the Society for Human Resource Management's (SHRM) Human Capital Benchmarking database. In contrast:

· Companies in the services industry, such as accommodation and food and drinking establishments, have the highest annual rate at 35 percent." (Krell, 2012)

It is opposing to the annual turnover rate average that is around 15 percent across all industries. This just means that customer service industries must start focusing not just on customer retention but also on employee retention since these two are correlated.

To analyze the problem and find a hypothesis that will lead us to potentially prevent or improve a business employee turnover, we need to identify why it is a problem and why we need to lower the turnover rate.

The end goal of a private businesses is to generate a profit. As pointed by Mowday as the first problem that employee turnover presents, "Increased costs. A number of costs are associated with employees exiting the organization and recruiting, selecting, and training replacements" (Mowday, R. T. 1984, Table 1). This cost will affect the business profit, the highest the turnover, the highest the "operational cost", which is the focus consequence for this research to simplify things.

As for the causes, this research will focus in the areas that can affect an employee's work life in general, focusing on management, compensation, and workload. The cause for an individual to leave a company could be one or a combination of the any of the mentioned.

Literature Review

Customer service can be summarize as the aid and guidance given by a company to their customer, people who acquire its goods or use its services, (Lexico,na). However, nowadays, this definition falls short; when talking about customer service, what people refer to is outstanding customer service, which is every customer expectation. Such exceptional customer service comes from how customers feel during their experience more than the actual product. Regardless of the product's customer satisfaction (goods or service), the customer service will always be independent of it and will impact tremendously on the product itself, but not much the other way, (entrepreneur, na). It is a proved fact that most people will abandon a company's products or services over terrible customer service rather than the product itself; therefore, employees that work in the customer service field are a huge determining factor in how well a company perform, (businessnewsdaily, 2020)

In this paper, the customer service industry in the general idea will be the research field. Meaning it will consider any job that involves a high level of employee-customer interaction; it could be restaurants, call centers, gyms, dealership, fast food restaurants, and many others. The research problem will focus on employee turnover, which is one of the industry's biggest problems as an employer.

However, Scheiner explains how to calculate employee turnover "To begin, add the number of employees at the start of the year with the number of you had at the end and divide that total by 2. Then, divide the number of employees that left during the year by the outcome of the first equation. Multiply that by 100, and you've got your employee turnover rate.", (officevibe, 2020).

Scheiner also mentions that this calculation can be applied at any period length to make more significant estimation or find out seasonal turnover and, more importantly, at the time to compare to a standard, 10% is an ideal rate, (officevibe, 2020).

As stated, before voluntary turnover is generally undesired turnover and the customer service industry has an incredible high turnover, making it major variable when trying to optimize a company business model. In the United States, the average turnover rate is 22%, with 15% credited to voluntary turnover during 2018, (catalyst, 2020). This fact is not too bad when comparing to the 10% ideal rate. Nevertheless, when exploring some specific customer service industry sectors as standalone, it is evident that the difference between the ideal to actual rate is abysmal. Turnover in customer support centers have a turnover rate of 30-45% on average, (glowtouch, na), the restaurant industry had a rate of 74.9% overall in 2018, (restaurant.org, 2019) and the hotel industry have an annualized turnover rate of almost 74%, (hotelmanagement, 2016). In mathematical terms, if the average industry has a negative impact due to employee turnover, this impact is three to five times stronger in customer service.

Employee turnover has many consequences, such as employee burnout, low morale in the teamwork, transitional adjustment, decreased productivity, and many others, (officevibe, 2020). However, this study will concentrate on the company's perspective and focus on the financial consequences.

Turnover is not just employees departing; it is the process of replacing the former crew members, and it can take years to fill out a position and get them to the same level that their predecessor had, (officevibe, 2020).

"The average cost-per-hire in the United States was $4,129 in 2016, with an average of 42 days to fill an open position". The turnover process includes separation, replacement, and training costs; on top of that are losses in productivity that are hard to quantify most of the time. $617 billion was the total cost of voluntary turnover in the US during 2018, (Catalyst,2020).

To effectively find a way to counter employee turnover, companies need to understand where the problem originated and pinpoint the critical causes that push employees to decide to leave. Many variables can push an employee to leave their company without really wanting it; some of these causes are common denominators all over the industry.

Good leadership is probably one of the most critical factors in order to keep employees happy and productive. Lack of bad management is hugely detrimental for a company and affects it in many ways, and looking closer, and it contains a few of the reasons why employees quit.

The manager's job is to manage. When a lack of skills to guide the staff, either training or just simply giving constant feedbacks, the employees feel disoriented and overwhelmed with the tasks are assigned, and what is expected from them or they just loose the motivation to work and end looking that motivation somewhere else. Proper feedback and instruction lead to employee and team development and success, (entrepreneur, 2015).

The other side of the coin is when managers micromanage employees, even the minimal task. As Jim Smith mentions, "Micromanagers appear insecure regarding their employees' ability to perform their jobs without the manager directing every move", (Peoriamagazines 2009). Employees do not want to feel lost in their path, but they also do not want to feel their ability is questioned. They want to be instructed on their job, perhaps how to accomplish it, and get some feedback when is done; employees want to be empowered in their own workload.

Lastly, managers are far more responsible for employee turnover for other not as common but valid reasons as employees feeling undervalued, creating and keeping control in a proper working environment, and keeping organizational stability. That is why good leadership and management is the most important variable for employees to stay or leave a job, (Peoriamagazines 2009).

Competitive pay and benefits may not be the reason number one why employees leave companies; however, it is one of the most common across any industry. Even though in some sectors of the customer service industry, pay retribution could be considered high, such in the restaurant, hotel, casinos, and others, many are underpaid or feel that high pay rate does not amount to the working conditions and workload. In most cases, they have little or no benefits, making a substantial difference in employee's life, (entrepreneur, 2015).

Furthermore, when a raise or a promotion is frozen due to a crisis, this pause tends to remain that wait for longer than it should. Then, employees find themselves forced to look for new possibilities and to find out that even in crisis, there is plenty of business hiring with better offers to survive such crisis, (Peoriamagazines 2009). This matter is a significant aspect to considered nowadays with the COVID 19 crisis.

The last leading cause of employee that this research will be addressing is job burnout. According to the World Health Organization, burnout is defined as "Burnout is a syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed", (WHO, na).

With global economic growth, organizations are forced to maximize their resources. As the main resource organizations have, especially in the customer service industry, employees are forced to work at max capacity. Sometimes, the max capacity line is lost quickly and employees end working twice or more than they should. This situation sets the employees in a stressful position that generates burnout, affecting their performance, disposition, and work-life balance in most cases, (Peoriamagazines 2009).

"Burnout costs the US more than $300 billion a year due to factors such as absenteeism, turnover, and reduced productivity", (Catalyst, 2020)

Considering management performance, pay and benefits, and burnout as the main reason to study for the high turnover in the customer service field, preventing or decreasing the turnover rate should not lay far from the causes. Successful employee management begins during the employee selection. Interviews are critical to determining the candidates that, besides having the competence to perform the job, also fit the company's culture, environment, and people, (World Street Journal, na).

Secondly, the onboarding, the better the onboarding, the better the employee will be related with the organization. According to Robert Gabsa "employees learn what makes the company unique, employees learn exactly how their jobs help fulfill the company's mission, and employees experience the mission and values of the company", (SHRM, 2018).

Further down the road, managers need to be attentive to individual work and personal needs and address them within the reasonable. More schedule flexibility, feedback and empowerment are ways to demonstrate to the employees that is a teamwork effort and the manager have a good leadership in the team, (Forbes, 2017).

Lastly, one of the most significant rewards and the cheapest (free) is praise. Positive feedback at the time of improving a skill or performance during a task is vital to keep employees on track and happy with their professional growth. The other equivalent, often forgotten by managers, is to praise the employee when the job is done right, (Forbes, 2017).

A manager can take many other actions to decrease employee turnover through their leadership that are not mentioned, yet they come as a package with managers and their management style to help as well.

Payment retribution and benefits are probably the most straightforward problem to solve theoretically. If the company is profitable, it should keep a regular rate of pay raise, adjustment on benefits and/or additional gratifications such bonus, field trips, and group rewards. The important is that this action should occur at least once a year since it is a standard and what employees are used to receiving from the industry in general, (World Street Journal, na).

Burnout is most challenging to address since it can be trigger by many factors. However, it is important to recognize when it is happening and recover employees from it as much as prevent it. Three components characterize burnout: "Exhaustion is the central symptom of burnout"; "Cynicism, also called depersonalization"; and "Inefficacy refers to feelings of incompetence and a lack of achievement and productivity", (Harvard Business Review, 2016).

To prevent and recover from burnout, managers need to keep in mind that employees need to restock their emotional and physical strength. Managers need to ensure that employees have an adequate workload and make sure they match and balance with their personal life. Organization workshops that provide employees with tools to develop their working style are beneficial, (Harvard Business Review, 2016).

Besides these measures, managers can go further and provide extracurricular activities that promote meditation, relaxation, and self-examination, (Harvard Business Review, 2016).

Lastly is a good practice to reset expectations once a while. Sometimes, business trends tend to grow out of hand, and expectations are correct. However, the sum of expectations can be out of place, (Harvard Business Review, 2016).

Framework

From a manager's perspective, the most significant matters to reduce the high employee turnover in customer service are related to right or lousy management, influencing employees' work-life directly. Pay and benefits, influencing employee's sustainability. Lastly, burnout influencing the state of mind and body at the time of performing at work.

Addressing these central issues in an optimal way that benefits both the organization and the employee should lower the turnover rate.

The framework will focus on the problem as independent variables that change the turnover as a dependent variable.

Management

Performance

Burnout

Pay & Benefits

Employee

Turnover

Hypothesis

· H1: If customer service organizations have better leadership/management, then the employee will remain in the company for longer.

· H2: If the employee salary is raised 10%, then the employee will remain in the company for a year longer.

· H3: If the management team identify excessive workload patterns and adjust them preventing and recovering burnout, then the employee will enjoy and invest themselves more to work, therefore they will remain longer in the company.

Methodology

Research Design

This research intends to analyze the main factors that influence employee turnover, most explicitly to find why the customer service industry's turnover is so high. This study also focuses on offering potential solutions to minimize the effect of the agents mentioned above that can be used as a base for future studies.

The problems found in the literature review that promote a high turnover in the customer service industry are related to three main areas: Management performance, pay and benefits, and burnout. The performed survey during the research process offers empirical data to support the significance of these hypotheses.

Subjects

Due to the low participant resources, the sampling method chosen was convenience sample. The data was obtained via a survey administered to a pool that contained individual both with and without customer service background.

The sample are based in 15 respondents. The demographics questions target gender, age, annual salary, and customer service industry experience. The findings leaded to 6 males and 9 females, a predominant mode of 25-34 years old with a 46.7%, a even more predominant mode of Under $30k annual salary with 66.7% and only 5 respondent either work or worked in the customer service industry.

Next the pie charts for easier visualization for the demographic data.

Data Collection

As mentioned before the data was obtained from convenience sampling. The survey was sent out to Cambridge College students, specifically current students and professors in the classes: MMG 517 CA01 - Research Methods for Managers, MMG 505 CA01 - Graduate Writing, and MMG 525 CA01 - Statistical Decision Techniques for Managers during the Fall 2020 semester.

The survey was sent via email with a unique link to 46 prospects, with a total of 15 respondents. The survey aimed to be responded in less than five minutes anonymously.

The introduction of the survey follows:

"I am a graduate student at Cambridge College in the Management School. As part of my degree, I am required to take MMG 517 "Research Methods for Managers." This could introduce students to mixed methods research techniques. We learn how to create literature reviews and how to design research studies.

For the class, I am designing my research on high turnover in the customer service industry. As part of this research, I am hoping to conduct field surveys with students from Cambridge College. This survey is 𝐚𝐧𝐨𝐧𝐲𝐦𝐨𝐮𝐬, it should take you 𝐥𝐞𝐬𝐬 𝐭𝐡𝐚𝐧 𝐟𝐢𝐯𝐞 𝐦𝐢𝐧𝐮𝐭𝐞𝐬 to fill out, and I would appreciate it immensely if you fill it out (once).

This survey is intended to understand the reasons and possible solutions for high turnover in the customer service industry. If you work or worked in the customer service industry, please respond based on that job experience. If not, please respond based on the experience of your current or last job.

Thank you in advance for filling out the survey and helping in my research."

Instrument

The survey was designed with a series of questions related to the hypotheses in their majority. The questions were broken down into different phases. First, the demographic questions to have a baseline of the participants and their involvement in the customer service industry.

Second a series of questions related to the H1 and how leadership/management influence the research. The third is similar, however, related to H2 evaluating the pay/benefits variables. Followed by the fourth set closing the hypotheses questions which questions related to burnout, the variable in the last hypothesis, H3.

Finally, a concluding or contrast question to gauge the respondent's overall mood regardless of the hypotheses, and a comment question to give the participants to clarify any specifics regardless of their selections.

Below the specific questions in the survey.

1. Demographic questions

1. Gender - male, female

2. Age - seven options with a range from Under 18 years old up to 65 years old or older

3. Salary ranges - six options with a range from Under $30k to Over $50K

2. Base question

1. I work or worked in the customer service industry – Yes/No

From this point all the questions below are rated from 1 to 5, with 1 as strongly disagree and 5 as strongly agree.

3. Good leadership (rated from 1 to 5, with 1 as strongly disagree and 5 strongly agree)

1.  Flexibility

1.  I believe my current boss is very inflexible

2.  My current boss has no issue with me having a flexible schedule

2. Communication skills

1.  My boss does not communicate goals clearly

2.  I feel like my input is value and heard at work

3. Recognition and rewards

1. My boss praises me for my achievements

4. Motivation/coaching

1.  My boss does not give me a regular feedback

2.  My boss inspires me to work harder

4. Pay/benefits  

1. Pay

1.  I would be happy if my pay rate was 10% higher.

2. Benefits

1. I would be happy if my company paid 25% of my insurance premium

5. Burnout

3.  My workload is adequate regarding my job description

4.  My company provide organizational, time management or similar topics workshops

5.  My job environment is stressful

6. Contrast question

1. I would likely change work soon

7. Additional comments (empty box, not required)

Results

The data obtained from the survey was used to compare with each other, but before was recoded in the same scale. All categorical data that was not in a scale of ordinal numbers was recoded. For example, the gender variable was recoded from male and female to 1 and 2. Also, all hypothesis questions stated with a negative connotation (purposely done to not lead the respondent's answer) were recoded to positive. For example, in the survey item "I believe my current boss is very inflexible" the scale was inverted, meaning value 5 is now 1 and 1 is 5, leaving the item as follow "I believe my current boss is not very inflexible". This procedure was executed to have a straightforward analysis between variables. Meaning is a correlation is positive, both variables are positively codependent.

Furthermore, the variables were renamed to identify the number of the hypothesis they belong to and their field, also the same for the contrast and demographic items, following the bullet points presented in the survey.

After this procedure, the crucial calculation is to compare all the hypothesis variables against each other and against the contrast question. Pearson correlations were performed across all then desirable variables with a crosstabulation method using SPSS IBM software. The results can be seen in the following table, where the blue squares group each hypothesis set of variables.

Table 1. Pearson Correlations

Additional to the correlation, a T-test was applied in all the variables that seem to have a high correlation. For this research purposes, a high correlation is defined by 0.3 or higher. The next table shows the significant value as is the only value seek in this research from the T-test.

Table 2 T-Test significance

Discussion

The Pearson correlation calculus shows interesting values. According to the hypothesis formulated and how the survey questions were tailored to prove this hypothesis, all the questions should be in theory, highly correlated, at least inside their group. Furthermore, all the questions should have been highly correlated to the contrast question (Ctr-6). As observed from the table 1, more than half of the questions are not highly correlated. Additionally, one of the second hypothesis questions is inversely correlated, which should not be the case due to the variables' positive normalization.

We can infer a few options taking into account these results. First, we can assume that the hypotheses are wrong, so there is such a discrepancy between all the questions. Looking at question H2-4.2.1, which states, "I would be happy if my company paid 25% of my insurance premium", this should be a positive correlation. Maybe the predominant younger population is not motivated by benefits and seeks more direct monetary compensation, such as a salary raise.

Also, observing the same question H2-4.2.1, the negative implication can originate in a lack of proper formulation. Potentially the reader wants the company to pay a portion of the premium as stated but higher than 25%. Therefore the answer was negative, and the results do not match the expectation. The lack of proper formulation could be a problem in any of the other questions as well.

Lastly, there are severe limitations in this research, and they are most likely to be the cause of so many variables not correlating and the negative correlation. The first limitation is the type of sampling; due to the lack of time to obtain the proper data the source was a convenience sampling. Ideally, the survey would be run only among customer service employees, hopefully with more than a year of experience. However, the survey was run across Cambridge College students, not providing the proper data.

The second limitation is very detrimental for the research. The sampling size obtained was 15 respondent, which is extremely low sampling and most likely provides an incredible error in the means.

Conclusion

This research has a concrete statement, vast literature, and an intuitive and straightforward framework and reasoning to follow. This research can be taken as a base for further investigation; however, it is highly recommended not to consider any numeric value as definite to have any data-driven decision. The data provided is most likely not validated for two reasons. The sampling is compromised due to the high flexibility in the convenience sampling taken. Second, the sampling obtained should be five to ten times bigger at least to get any mathematical accuracy.

Just after fulfilled those requirements is when the data-driven analysis is recommended. It is also recommended that if a lack of correlation or inversely correlation is shown in the results, the survey must be revised or complemented with a second survey. Also, interviews with customer service managers can be a smart way to complement this research with qualitative analysis since up to this point there is only quantitative analysis.

References