Managing the Impact of Employee Turnover on Performance: The Role of Process Conformance

Zeynep  Ton; Robert S. Huckman

Article | Organization Science | January – February 2008

Managing the Impact of Employee Turnover on Performance: The Role of Process Conformance

Abstract

We examine the impact of employee turnover on operating performance in settings that require high levels of knowledge exploitation. Using 48 months of turnover data from U.S. stores of a major retail chain, we find that, on average, employee turnover is associated with decreased performance, as measured by profit margin and customer service. The effect of turnover on performance, however, is mitigated by the nature of management at the store level. The particular aspect of management on which we focus is process conformance—the extent to which managers aim to reduce variation in store operations in accordance with a set of prescribed standards for task performance. At high-process-conformance stores, managers use discipline in implementing standardized policies and procedures, whereas at low-process-conformance stores, managers tolerate deviations from these standards. We find that increasing turnover does not have a negative effect on store performance at high-process-conformance stores; at low-process-conformance stores, the negative effect of turnover is pronounced. Our results suggest that, in settings where performance depends on the repetition of known tasks, managers can reduce turnover's effect by imposing process discipline through standard operating procedures.

Keywords: Customer Focus and Relationships; Governance Compliance; Retention; Standards; Service Operations; Business Processes; Retail Industry; United States;

Format: Print

13 pages

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Citation:

Ton, Zeynep, and Robert S. Huckman. "Managing the Impact of Employee Turnover on Performance: The Role of Process Conformance." Organization Science 19, no. 1 (January–February 2008): 56–68.

National retailers, most notably Walmart and Best Buy, are making big bets on their ability to fill this need for local health care. At first glance, these moves are a bit surprising given that these companies have not traditionally been focused on health care delivery. But inroads made by e-retailers has left these companies with two sets of resources—large store locations and an army of low-wage employees—that are at risk of becoming stranded assets. And recent announcements from Walmart and Best Buy suggest that the companies may see the provision of local health care as an opportunity to redeploy their store employees.

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The case describes a program that CVS Health recently implemented to improve medication adherence, an important problem from a societal, public policy, and firm perspective. A test of the program, costing hundreds of thousands of dollars to implement, increased the proportion of adherent customers by 1.4 percentage points. Students are asked to quantify the system-wide economic benefit of this improvement and draw upon insights from behavioral science to examine approaches for boosting medication adherence.

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Managing the Impact of Employee Turnover on Performance: The Role of Process Conformance

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