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Unformatted text preview: The Economic Impact of Employee Behaviors on Organizational Performance Wayne F. Cascio C onsider a recent quote from the Wall Street Journal: "It's no longer about what you own or build; success is hinged to the resources and talent you can access."' Unfortunately, recent statistics indi- cate that American workplaces are not doing a very good job of managing the talent they currently have. Thus: • Only 14 percent of American workers say they are very satisfled with their jobs. • Twenty-flve percent say they "are just showing up to collect a paycheck."^ • From January 2004, to January 2005, 24 percent of American workers voluntarily quit their jobs, a 13 percent rise since the previous year. That flgure varies widely by industry, though, with relatively low rates in man- ufacturing and transportation (roughly 15 percent), and relatively high rates in leisure and hospitality, retail, and construction industries (ranging from about 25-45 percent),' To appreciate what that means for an indi- vidual flrm, consider the number of people Wal-Mart employed at the end of 2004—1,600,000 people."* Its annual employee turnover rate is 44 percent—close to the retail industry average.' Each year, therefore, Wal- Mart must recruit, hire, and train more than 700,000 new employees just to replace those who left. • Women now outnumber men in managerial and professional jobs, yet many leave even blue-chip employers because they do not feel valued, their companies do not offer flexible-employment policies, or their work is not intellectually challenging. Rather than leave the workforce, most resurface at companies that offer more progressive policies.* Excerpted from America At Work: Choices and Challenges, Edward E. Lawler III and James O'Toole, eds. Used with permission of Palgrave Macmillan. CALIFORNIA MANAGEMENT REVIEW VOL 48, NO. 4 SUMMER 2006 41 The Economic Impact of Employee Behaviors on Organizational Performance • The fully loaded cost of replacing a worker who leaves (separation, replacement, and training costs), depending on the level of the job, varies from 1.5 to 2.5 times the annual salary paid for that job.^ Historically, for example, in 1914, when the prevailing wage was $2.34 per day, Henry Ford offered his assembly-line workers $5 per day. Why? Because a turn- over of 370 percent meant hiring almost 50,000 people a year just to maintain a workforce of 14,000!* In fact, the behavior of employees has important effects on the operating expenses of organizations in both the private and public sectors of our economy. These effects are not widely known, or even, in some cases, appreciated by employers, but they are, nonetheless, very real. Costco Versus Sam's Club: A Tale of Two Employment Strategies^ In 2004, Costco employed 68,000 workers, one-fifth of whom are union- ized, while Wal-Mart's Sam's Club employed 102,000. In terms of wages alone, ....
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