Negative Effects of Lack of Employee Retention on the Organization in Banking Sector

 Negative Effects of Lack of Employee Retention on the Organization in Banking Sector

Employee turnover poses a significant challenge for organizations across diverse sectors. Regular staff turnover hinders productivity, disrupts workflow, and substantially increases the expenses associated with recruiting and integrating new employees. This phenomenon has the potential to engender a feeling of uncertainty within the workforce, so diminishing the level of engagement and morale among the remaining employees (Huselid, 1995). There are several variables that might contribute to low employee retention, including inadequate compensation and benefits, limited prospects for career advancement, ineffective leadership, and a mismatch between organizational culture and employee aspirations.

Low worker retention in the banking business can result in significant repercussions for both the organization and its stakeholders. To begin with, elevated turnover rates result in increased costs associated with the recruitment and training of fresh  employees. The process of regularly recruiting and training new employees consumes resources that could otherwise be allocated towards investments in innovation or the improvement of services. A  financial institution that experiences frequent turnover of tellers may encounter challenges in upholding consistent levels of customer service, perhaps leading to client dissatisfaction and potential decline in business.

Moreover, the loss of experienced employees could lead to disruptions in the workflow and decreased production. Employee attrition in the banking sector can lead to transaction inaccuracies, delays in processing, and ultimately tarnished reputations due to the crucial importance of accuracy and productivity. Consider a scenario in which a seasoned loan officer resigns from a bank due to dissatisfaction with their job. Their nonattendance not only results in a lack of information but also hampers the efficiency of loan application processing, perhaps causing frustration among colleagues and clients.

Insufficient employee retention rates could exert a negative impact on organisational culture and employee morale. Frequent turnover has the potential to cultivate a culture characterised by instability and uncertainty, thereby eroding employee confidence in both management and the business as a collective entity. This phenomenon has the potential to lead to a decrease in engagement, a rise in rates of absence, or even a cascade of voluntary departures. For instance, a financial institution may encounter challenges in cultivating a conducive work atmosphere, leading to a decline in employee satisfaction and productivity if it consistently struggles to retain exceptional management.

Increase in Costs -  The process of recruiting and providing training for new personnel incurs significant costs. Job marketing, recruitment efforts, onboarding processes, training programmes, and decreased production resulting from the learning curve all incur costs. Increased attrition rates possess the capacity to significantly augment these expenditures, hence impacting the company's financial performance.

Loss of skills and knowledge - Skilled staff possess crucial institutional knowledge regarding the organisation, including its procedures and culture, which is at risk of being lost. The departure of individuals carrying this expertise may lead to potential errors, inefficiencies, and disruptions in workflow (Huselid, 1995).

Decrease in  Productivity: Frequent turnover can disrupt team chemistry and workflow as new workers require time to adapt and achieve their maximum capabilities. Furthermore, the motivation and morale of surviving staff members may be negatively impacted when they observe frequent departures from their colleagues.

Negative Impact on Company Culture -  High turnover rates can foster a culture of instability and uncertainty, thereby affecting the overall organisational culture. Excessive turnover can diminish staff members' sense of belonging to the firm and its objectives, resulting in less engagement and loyalty.

Customer Impact -  Employee turnover can have an effect on customer satisfaction. The absence of recognisable faces  be seen by customers, prompting inquiries over the consistency and quality of service. Moreover, it may require a considerable amount of time for newly recruited employees to establish the rapport and skills necessary to effectively cater to customers.

Difficulty in planning - The process of planning for succession can provide challenges, particularly in situations when turnover rates are elevated. Organisations  face challenges in identifying and cultivating future leaders due to the frequent removal of key positions. This  impede growth ambitions and hinder long-term strategic planning.

Damage in Reputation - Persistent turnover has the potential to negatively impact an organization's reputation as an appealing workplace. Recruitment challenges can be exacerbated by unfavourable assessments posted by former employees on platforms like Glassdoor, which can dissuade potential candidates from submitting their applications (Grubb, 2006).

 Loss in Competitive Advantage - The competitive advantage of organisations that rely on employees  as a crucial resource can be compromised by high turnover rates. Departing highly skilled employees to rival firms can have detrimental effects on an organization's reputation, hinder creativity, and obstruct growth.

References 

Abdulai, Ibrahim & Kamara, Fatmata. (2019). An Effective Employee Retention Policies as a Way to Boost Organizational Performance. Journal of Human Resource Management. 7. 41.

Chipunza, C., Samuel, M.O. (2009), Employee retention and turnover: using motivational variables as a panacea. African Journal of Business Management, 3(8), 410-415. 

Collins, C.J., Clark, K.D. (2003), Strategic human resource practices, top management team social networks, and firm performance: the role of human resource practices in creating organizational competitive advantage. Academy of Management Journal, 46(6), 740-751. 

Grubb, P.L. (2006), Accessing communication affects on employee retention. PhD Dissertation. Alabama: University of South Alabama. 

Heathfield, S.M. (1995), Top ten ways to retain your great employees. Available from: http://www.humanresources.about. com/od/retention/a/more_retention.htm. [Last retrieved on 2010 May 23]. 

Huselid, M.A. (1995), The impact of human resource management practices on turnover, productivity, and corporate financial performance. The Academy of Management Journal, 38(3), 635-672.