LITERATURE REVIEW 1
Employee Turnover and the Balanced Scorecard
Erika Davis
School of Business, Liberty University
LITERATURE REVIEW 2
Abstract
Employees are the most important asset to any organization. Employees are used to keep the
company moving up the ladder of success. So, when companies experience a high employee
turnover rate it can have a detrimental effect on the not only the business aspect of the company
but the financial performance as well. When the turnover rate is higher, this can create low
productivity in the business because of the lack of workers. If the work isn’t being produced,
then in turn the organization loses out on profits and that hurts the business. Balanced scorecards
are beneficial to companies when this happens because it can keep track of the health of the
company. Balanced scorecards not only help track employee’s performance, but it also can
identify issues within the company that maybe effecting the health of the business and provide
solutions that will fix them. This method also makes room for employees to help in the decision-
making processes and feel more comfortable at the workplace. This review will examine
employee turnover and why it happens in organization. Then it will discuss how the balanced
scorecard can help to resolve issues and help achieve company goals. Throughout the paper the
importance of the balanced scorecard will be emphasized and how well it helps organizations
with this issue.
Keywords: employee, turnover, balance scorecard, performance, leadership, goals
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Employee Turnover and the Balanced Scorecard
Introduction
Employees are individuals that perform certain job functions to keep a company running.
Therefore, the amount of and the quality of employees can make or break a company. When
employee turnover is low that means that there are enough workers to perform the function and
employees are experiencing job satisfaction. Whereas, when employee turnover is high there
usually isn’t enough manpower and that will cause the company to experience a decline in their
profit for various reasons. The productivity of the company will drop because of the lack of
workers and that in turn effects the quality of the product or service that is being produced. That
effects the profits that the company will make on the outside because consumers are not
purchasing low quality products or dealing with low quality service. The company is also
affected on the inside because the company has spent money during the hiring process of an
employee, and it has gone to waste when the employee quits. These issues can be resolved
quickly if an organization has a strategic plan put into place to help retain their employees. This
includes having a good development and training program with the onboard of new employees.
Making sure employees knows what is expected of them and their position is essential to job
satisfaction. Lack of training is one of the reasons employees may decide to part ways with their
job. Leadership also plays a part in employee turnover. It is important that a manager/employee
bond is created. Leader effectiveness meditated the relationship between employee voice and
engagement. Also, that leadership effectiveness plays a significant role in stimulating
employees’ willingness to exert themselves on the job (Gyensare et al., 2019). These types of
relationships can boost the morale in the company making the environment more comfortable for
everyone involved and it makes for an easier decision-making process because there are effective
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communications processes put into place. These are just some of the reasons that can shift the
rate of employee retention.
A tool that can be used to help organizations ensure they are covering all aspects of
employee satisfaction is the balanced scorecard. The balanced scorecard enables firms to employ
a strategy-centered performance measurement system, one that focuses on managers’ attention to
critical success factors and rewards them for achieving these critical factors (Blocher et al.,
2019). A system created specifically for employees will reveal how employees are being treated
and if they are satisfied with their job position. It can also reveal what type of support is needed
from management to help with the performance of the employees. It creates positive employment
engagement and that should be a goal at all organizations because it helps with success. The
balanced scorecard approach is aimed at assessing what is needed for organizational success.
Therefore, the balanced scorecard is aimed at taking care of the most important qualities of an
organization when it comes to its success (Agarwal, 2021). A balanced scorecard decreases a
high employee turnover rate as well as increase employee retention and contribute to a
company’s success.
Employee Turnover Defined
Employee turnover is defined as when a company is constantly voluntary/involuntary
losing employees and then having to hire new individuals and train them to fill the positions that
are empty. Some organization with high turnover rates is described with an analogy “revolving
door” because people are continuously in and out of an organization at a high rate just like a
revolving door at a business. Employee turnover has a huge impact on an organization due to the
costs associated with employee turnover and can negatively impact the productivity,
sustainability, competitiveness, and profitability of an organization (Al-suraihi et al.,2021). The
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process of hiring and rehiring becomes a huge expense when the employee turnover rate is high.
When this happens, a company is taking money from other aspects of the business to fund the
hiring process of employees that they may or may not lose soon. While hiring the quality of
performance may decline because there are not enough workers. With a limited number of
workers, the work could be disproportioned. Remaining employees will have to take on that
extra work to keep the business running and that weighs heavily on the employee which could
cause them to quit as well. These are just a few of the issues that can arise in the company but
there are many more that can have a part in whether an employee will leave an organization.
That’s why it is important to first find out what the root cause is of the turnover so management
can handle the issue effectively. Many organizations bureaucracy is the main contributing factor
to performance as a result leadership is compelled to use any means necessary to get their
employees to rise to the challenges to meet the level of performance that is required by the
organization to meet their goal (Martins et al., 2019).
Being that there are many jobs available in the world, money isn’t enough to keep
employees committed to one organization for a long period of time. It is easy for an employee to
leave a job knowing there is other work available when they are feeling undervalued at their
current place of employment. It is beneficial for the employee to enjoy their job and that is called
job satisfaction. Job satisfaction is one of the most analyzed attitudes in the organizational
behavior field and is defined as the degree to which the individual positively evaluates his or her
job experiences (Martins et al., 2019). When job satisfaction is absent it can lead to high turnover
rates, illnesses and absenteeism among other things. Whereas, when it is present it can lead to
better work relationships, employee growth, rewards, and just a happier work environment
overall. Job satisfaction has very little to do with the monetary value that is paid to the employee
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but everything to do with how the employee feels once they clock into to work for the day. An
employee could have a well-paying job and still decide to leave because the job is draining them
mentally. These days it is becoming more common for employees to choose a job that is better
for their mental health over a job that just keeps the bills paid. An employee needs to feel the
support of their leadership and be appreciated for the work that they produce daily. If an
employee doesn’t like the job if will show in the work that they produce and that can have a
negative effect on the company and its consumers. If things are bad for a company internally,
eventually it will show externally and that can push customers away, causing a decline in profit.
Employees have several reasons to leave their workplaces, such as job stress, job satisfaction, job
security, work environment, motivation, wages, and rewards (Al-suraihi et al.,2021). This is why
it is essential for an organization to understand what their employees need. Then they can adopt
strategies to make sure their needs are met so that employee performances can continue to
increase. An organization must implement a strategy that increases job motivation, job
satisfaction and job productivity and that will in turn reduce the issues that are causing the high
turnover rate.
Some organizations may not see employee turnover as an issue because of the size of the
business. If it is a larger company than they already have a good amount of an employees, and
they can pull in just as many as they lose. Whereas with a smaller company employees
continuously leaving could cause a company shutdown. The hiring process is the same for all
companies, they conduct a vetted process to find the most qualified candidates and then train that
person to do that job. That process can get costly and utilize many resources. So, if the same
position must continuously get filled the expense will continue to get higher and the company is
losing out on money they should not have to spend. High staff turnover rate can affect the
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smooth running of firms. Staff turnover has negative administrative effects on the organization;
in addition, staff turnover has negative financial effects on the organization; and staff turnover
negatively affects the social setup of an organization (Butali et at., 2021).
Without effective leadership within an organization then you will find that firms can be
affected negatively (Miao et al., 2021). Employees watch their leadership teams. They watch
how they act and how they carry themselves as well as how they go about making decision for
the company. This can affect how the employee carries themselves at the job. If the employee
sees that their manager does not care about something the employee will start not to care.
Therefore, management must lead by example and know that they are being studied daily.
Effective leadership is important to all organizations. A lack of effective leadership can therefore
bring out other behaviors like leadership effectiveness, job performance, team performance,
OCB, counterproductive work behavior, antisocial behavior, ethical behavior, academic
performance, health, job satisfaction, organizational commitment, and turnover intention (Butali
et al., 2021). The work that needs to be produced does not decrease because there are not any
employees around to do it. The organization must adapt and work with what they have until they
are able to hire more workers. Employee turnover increases the work the remaining employees
must carry out. This is done to continue customer satisfaction because when the income is
decreased it can become a liability for the company. But on the employees side it creates
employee burnout. The employee becomes over worked and in turn can lower their morale over
even worse cause them illness. The bottom line is the productivity must be balanced across the
board to retain happy employees and not just happy consumers.
Balanced Scorecard
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When an organization uses a balance scorecard, they are trying to track the health of a
company and measure the plans they already have in place to see how well they work. A
balanced scorecard is mainly used to track an organizations financial performance, but it can also
be used to track employee performance as well. The tool gives the business access to all aspects
of its company so they can be assessed properly. The balanced scorecard is described as a
performance measurement system that can be applied either to large companies or small
companies that function to connect the vision and mission of the organization with the
operational activities of the company employee dialogue (Harihayati et al., 2019). Organizations
have visions and goals that are created when the business is first created. A balanced scorecard
can help a company to achieve those goals and stand behind the mission that they created, and it
can contribute heavily to a company’s success. Managers have been using the balanced scorecard
for their customers, finances, inside business and the growth and learning of their company. The
strategic goals implemented are the foundation of the balanced scorecard because how the tool is
used and created is based off those goals. In this scenario the balanced scorecard is used to
examine how the employee is currently performing at their organization. It then creates an
analysis of their growth and what can be learned to help them improve. Using the balanced
scorecard to the fullest will reveal whether employee performance is positive at the organization
or not. If that is not the case the analysis can ensure that leadership is improving the relationships
among their employees. It can also give employees the feedback they need to help them improve
at their job position. In helping the employee/manager relationships is will make the employee
more comfortable with giving the manger ideas on how the company can be better for its
employees. In return, management can reward the employees for helping. This could decrease
employee turnover cause the employees are feeling included and not just being overwhelmed
LITERATURE REVIEW 9
with demands all day. If leaders can take this information and engage employees in decision-
making opportunities, then this could change the overall view of how employees view their
organization (Llach et al., 2021).
The balance scorecard looks at four aspects in a company. The aspects are financial,
consumer, internal and learning and growth. The balance scorecard in this situation focuses on
the learning and growth aspect. This section will identify how employees are performing inside
their company by focusing on employee performance in the key areas of the organization. It
measures how effective the company is working together and whether the projects that are being
worked on are going to be finished accurately and in a timely fashion. The balanced scorecard
will allow for efficient communication between all units/divisions of the company during the
implementation of established strategies and implement feedback for adjustment of
predetermined goals for units and individuals with the company goals (Harihayati et al., 2019).
Monitoring KPIs from the different perspectives is essential to the success of a company.
When the balance scorecard puts an emphasis on the development of its employee that can really
get a good health analysis on the internal aspect of the company because it is not all about the
finances. Focusing on employee issues and resolving them will contribute to the success of the
organization. A balanced scorecard also contributes to the company staying in the competition
and being able to hang with their competitors. Having those unique plans implemented can make
the organizations stand out and bring in more consumers to shop the product and services. If the
balanced scorecard eliminates employee dissatisfaction and get management to help with the
issue this can improve employee performance and boost the success of the organization. It
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provides broad coverage of both financial and non-financial data which contributes to the overall
success of a firm (Blocher et al., 2019).
Organizations need to make sure that the metrics used in the balanced scorecard will
create the best results to be used to improve the relationships between management and their
employees and the organization. Metrics that can be used in the balanced scorecard to identify
areas of interest include training for new and existing employees. Incentives also can be
distributed for the best ideas that are given to help implement the plans. Other metrics that can be
included are how much turnover is happening as well as exit surveys. Exit surveys ask
employees questions about their experience with the company. It usually asks why the person is
exiting the job and what were some of the reasons that led to this decision as well as how can the
company improve. The information is collected so that the company can implement and improve
in the future. Monitoring the aspects is essential to the success of an organization. By focusing
on the learning and growth section on the scorecard the health of the organization can be
improved. Management has a front row view to the issues that need to be resolved. High
achievement in the learning and growth perspective contributes directly to higher achievement in
the internal process perspective, which in turn causes greater achievement in the customer
satisfaction perspective, which then produces the desired financial performance (Blocher et al.,
2019).
Retaining Employees
The review has discussed reasons why employees leave which could be internal or
external. Now it shifts to how to retain the employees, so an organization does not have to go
through the processes of rehiring continuously. Successful businesses tend to have a low
LITERATURE REVIEW 11
turnover rate because their employees are quitting and creating a revolving door company. The
organization is making sure they are treating their employees as valuables and not something that
can be easily replaced. Employees that have an increased job satisfaction are the ones that you
hold on to and try to keep happy and interested. This organization also has leaders that are active
communicators and listeners. They recognize that their employees have concerns that need to be
address and they are willing to involve the employees in the decisions to the issues. This builds a
family-oriented business and makes everyone more comfortable in the environment. Employees
will then build long term careers with their organization because they know they can excel and
improve. These are also the employees that will dedicate more time and put in more effort into
their organization by having high levels of productivity. When followers see that their leaders are
more accessible and receptive to their opinions and ideas, they will find it easier for them to
share their ideas and comments, and they will be more willing to engage in voice behavior (Zhu
& Akhtar, 2019). Managerial openness is a term that describes how employees are being heard.
They are being taking seriously and their ideas are being accounted for. It also changes the
organizational culture, creating more personal relationships in the workplace, crafting each
employee experience in its own unique way.
A positive experience in the workplace can help an employee to find a voice in the
company. Leadership not only has to hear the employees’ suggestions but implement them as
well. Some many times employees voice concerns and the manager claims to take care of it and
never does. If an employee sees that their ideas are being implemented and used, then they will
continue to use their voice. It also puts ease on leadership because they don’t have to make all
the decisions by themselves. It also makes speaking up in a business simpler because the
employees know there are no consequences for what they say. Stated previously, employees
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mimic the actions of their leadership. Employees will push themselves to be better because they
want to be like their leadership and work as hard as they are working. They will in turn exhibit
more leadership skill and move up the corporate ladder.
Another important aspect of retaining employees is making sure that they are thoroughly
trained. If an employee expresses any issues about how to do their job that needs to be addressed
and fixed. No employee wants to be quickly trained and then thrown to the wolves to fend for
themselves after a quick rundown of the job description. Management should continue to check
on their employees, asking if they are having any comments or concerns about what they are
doing. Excessive pressure can lead to an employee feeling overwhelmed and want to quit.
Management should also make sure that employees have the time to learn their position. A
company with a high turnover rate may rush an employee to do the job correctly and that in turn
can create employee stress. Employee retention happens when an employee is motivated and
encouraged to be their best selves for the company’s sake. Letting employees know that going
above and beyond is appreciated and it does not go unnoticed. It is managements job to ensure
that all these things are happening to retain employees so that the organization can achieve their
goals and remain successful.
Summary
Employee turnover can be detrimental to any organization. It poses a lot of issues for the
company in all areas, and it can cause a huge decline in profits. It hurts the businesses finances
when the company is investing so much time and money in hiring only for the employee to
decide to quit in the future and having to repeat the process so frequently and quickly. Employee
turnover can cause companies to miss deadlines and not meet company quotas. Employees are
LITERATURE REVIEW 13
needed in all aspects of the company so when they leave, they create a dent in the company
because management must scramble to fix the issue because the company isn’t going to stop
running because employees are quitting. It also takes a lot of time to train an employee in a new
position and for them to be an expert in that department. They may not be performing as well
and then be forced to do so to help the number stay up. That could cause an issue as well. This is
why companies need to implement balanced scorecards in the company. This is essential to the
company because it can accurately reveal what the issue is an offer a quicker solution. The tools
can be used to increase employee engagement and job satisfaction for the employee. Creating a
happier work environment and even happier employees makes for a successful business that can
make calculated decisions without outside issues. The balanced scorecard will implement
processes and procedures that cater to the treatment of the employee making them the number
one priority. Balance scorecards not only employ the financial perspective but also learning and
growth-related, internal processes, and customer satisfaction perspectives (Llach et al., 2021).
Employees being more involved in the decision-making process can change their view on the
organization that they work for.
The balanced scorecard approach is aimed at assessing what is needed for organizational
success (Agarwal, 2021). In this scenario it needs to be focused on talent retention and taking
care of the essential qualities of a company success. If a company is aware that the employee
turnover is high and that it needs to be fixed, they can quickly jump into action and correct the
issues that are there. If there are plans created, they can be implemented and stop the high
turnover rates. This is the reason for the balanced scorecard. As mentioned in the beginning the
employee is the company’s biggest asset and they should be valued as such. Leadership
effectiveness plays a significant role in stimulating employees’ willingness to exert themselves
LITERATURE REVIEW 14
on the job and to cooperate towards a collective goal at the team, or organizational level
(Gyensare et al., 2019). In this organizational culture the employee/manager relationships need
to be examined so the bonds can be stronger. Making it easier for employees to approach their
managers with comments, concerns, and ideas.
A balanced scorecard can have a huge impact on decreasing the employee turnover rate.
Improving talent retention can create a positive outlook of the organization. It creates better
employee performance and keeps the company financially stable. This will help the company to
achieve their goals and keep the mission and the values created relevant. If all these things are
going on than that means that the employee is experiencing some sort of job satisfaction. Having
job satisfaction will reflect on employee growth, rewards, work relationship, and physical
working condition (Martins et al, 2019). For the balanced scorecard to be successful, leadership
must pay attention to how their employees are being treated. They must ensure that they are
listening to the employees need and wants and doing their best to meet them so that a safe and
happy work environment can be created
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