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Researchabstract:
 Institute: National institute of business management
 Faculty: Business management
 Degree programme: advanced diploma in business management
 Author: group research
 Researchtitle: The frequent employee turnover in sales department
 Supervisor: Mr. Baratha Devanarayane
 Year: 2014
 Number of pages:
 Number of appendix: 4
Overview:
The objective of this research report is to ascertain the causes, effects and solutions to
the frequent labour turnover in union assurance PLC. with the help of essential
theoretical background.
Frequent labour turnover has become a phenomenon which many insurance
companies have been struggling hard to overcome with as this has undermined their
potentials and strengths.
The research methodology adopted is the qualitative method which involves the use
of telephone interviews as well as face to face interviews with former employees and
Therefore, both types of interviews assisted to get facts from the former insurance
professionals of the sector which gave vital points on the reasons for their leaving and
why many of their former colleagues also left, the effects and what can be done to
solving the problem. The discussion sessions with the management and the
questionnaire we have provided to get feedbacks from existing employees about their
level of satisfaction on different criteria were important to reveal valuable information
on plus points as well as minus points of the organization.

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Also, in the theoretical framework, the research emphasized more on the relevant
motivation theories both: the process and content theories like: Theory x & y,
Hierarchy of needs, ERG theory, etc. as these helped to emphasize on motivation and
its reaction to performance in workplace.
Transcribes of the interviews were equally given to help with the data analysis on the
premise which conclusion was drawn.
On the final note, conclusion was given.

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Table of content
 Research abstract……………………………………………………… 1
 Table of content………………………………………………………... 3
1. Introduction
1.1. Aims/ objectives of the research………………………………………. 5
1.2. Research problem……………………………………………………… 5
1.3. Structure of the research………………………………………………. 6
2. Introduction to the insurance industry and Union Assurance PLC.
 Targeted organization: Union assurance PLC.
 Department: sales department of motor insurance sector
2.1. The history and consolidation exercise in Sri Lankan insurance sector 7
2.2. Brief introduction about Union Assurance PLC……………………... 10
2.3. Reasons for employee turnover………………………………………. 13
2.4. Effects of employee turnover………………………………………... 18
2.5. Tips to overcome employee turnover………………………………… 20
2.6. Exit interviews and its importance…………………………………… 25
3. Theoretical background
3.1. The value and importance of employees…………………………….. 27
3.2. What is employee turnover…………………………………………... 29
 Types of employee turnover…………………………………. 30
 What is turnover rate………………………………………… 31
 How to calculate turnover rate………………………………. 31
3.3. Overview of management and motivation theories…………………. 32
3.4. Motivation theories………………………………………………….. 38
 Maslow’s hierarchy of needs……………………………….. 38
 Herzberg’s two factor theory……………………………….. 39
 Theory “X” and theory “Y”………………………………… 41
 ERG theory…………………………………………………. 42

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 Equity theory………………………………………………… 43
 Expectancy theory…………………………………………… 44
 Goal setting theory…………………………………………... 46
 Theory of needs……………………………………………… 47
3.5. Literature review: …………………………………………………...48
 Definitions on employee turnover……………………………. 49
 Definitions on motivation…………………………………….. 50
 Previous research reports
 Nigerian insurance sector…………………………. 50
 Indian insurance sector……………………………. 55
4. Researchmethodology:
4.1. Instrumentation……………………………………………………… 57
4.2. Project procedure and time………………………………………….. 58
4.3. Data collection………………………………………………………. 59
4.4. The analysis plan……………………………………………………. 60
4.5. Validity and reliability……………………………………………….60
4.6. Scope and limitation………………………………………………... 61
4.7. Presentation of data
 Description of data analysis……………………………….. 63
 Analysis results…………………………………………………………………. 63
5. Conclusion…………………………………………………………………………………………. 68
 List of references………………………………………………………………………….. 72
 Appendices…………………………………………………………………………………… 74
 Sample questionnaire for existing sales agents………………………………. 74
 Sample questionnaire for former employees…………………………………. 77
 Sample questionnaire for management…………………………………………. 79
 Evaluation form for exit interviews………………………………………………… 80

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1. Introduction to the research:
1.1. Aims / objectives of the research:
The Sri Lankan Insurance industry is a very robust industry with lots of potentials in
terms of financial assets. The industry has several companies in different areas of
insurance and it should have been seen as one of the best sector as the need for
insurance is too critical in any economy. The research is significance to the domain of
finding practical reasons to less growth and wastage of capital in the organization due
to higher rate of employee turnover and applies theoretical knowledge we have gained
in the class room to the actual business scenario to find strategies to overcome the
existing to better in shorter period of time. The study is emphasized on impact that
creates from changes in environment, competitor activities, employee expectations
and implementation of recruitment and selection as well as training and development
process. As it is a service oriented organization, it is crucial to identify the importance
of human resource and ways of effectively utilizing human resource in order to ensure
the quality of the service. As well as indirect impact towards the bottom line to
identify the controllable factors and to be proactive to changes in environment to get
the competitive advantage.
 To identify the challenges faced by Union Assurance PLC. due to frequent
turnover of sales agents in the sales department.
 To identify the reasons for frequent employee turnover
 To identify the effects of employee turnover
 Provide suitable and practical suggestions to minimize the employee turnover
to a manageable rate within a time period of 1 year.
1.2 ResearchProblem
It is imperative for employees to leave one company to another for career progression.
There are several factors that make a staff change employment as it may be because
of better working conditions. For an example is an organization provides poor salary

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and fringe benefits, job dissatisfaction, family pressure due to geographical relocation,
and some other reasons employees tend to resign from their current job and try to find
out a job which can satisfy their needs and wants in more advanced level. However,
the case of frequent labor turnover in Union Assurance PLC has leaded the
organization to poor growth and wastage of capital. The problem is worst in the sales
department when compared to other departments. For this reason, our research group
is interested in finding out what could be the cause for this unpleasant frequent
resignation of staff in the sales department and what should be done to get the staff
motivated and retained so that the organization’s productivity level and profitability
can be attained.
1.3 Structure of the research
This research work tends to adopt research methods that are very effective and
scientific. The research methods will be aimed towards ascertaining why staff in the
Union Assurance PLC. Frequently resigns and what that can be done by the
organizational management to overcome this condition the industry is facing.
 The research method which has used is the qualitative means of research
where-by the research group will make use of voice recorder to get down
the responses from a targeted group of the interviewed persons and get the
facts extracted out for our analysis.
 Research has done by targeting 3 different criteria of employees.
o Management of Union Assurance
o Existing sales agents in the sales department
o Former employees of Union Assurance PLC.
 Highlighted facts were noted down by the interviewers with the purpose of
using them while preparing research report.
 Questionnaire was distributed among existing sales agents in order to get
their idea and level of satisfaction about working conditions, management
styles etc.

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 Former employees were interviewed via telephone calls as well as face to
face interview sessions and a separate set of questions given to get their
feedback on different areas.
2. Introduction to the insurance industry and Union Assurance PLC.
2.1. The history and consolidation exercise in Sri Lankan insurance sector:
Insurance business in Sri Lanka commenced with the introduction of the Coffee and
Tea Industry. During this period, there were only few insurance providers operating in
the world like; the Insurance Office Ltd., Royal Assurance, New India Assurance Co.
Ltd., and Ocean Accident and Guarantee Corporation Ltd. All those insurance
providers were managed according to the British law. The primary entrants to
Insurance business in Sri Lanka were the Agency Houses which managed plantations
and were acting as Agents of Overseas Insurance handling mainly their in-house
plantation business. With the development of economy necessity of life insurance
emerged and which creates a golden opportunity to entrepreneurs who were interested
in engaged into the insurance business. As a result, in the early part of the 20th
century, Life Insurance Companies too were established. For an example; Original
Insurance Co, Pearl Assurance etc.
Sri Lanka insurance companies were established soon after the passing of the
Companies Act of 1938. Ceylon Insurance Company that was established followed by
other Companies like Colombo Insurance, Lanka Life etc., who endeavored to serve
the needs of the local populace. The local community became more aware of
Insurance only after the promulgation of the Motor Traffic Act 1938, which made
Party Insurance compulsory, means any vehicle is not permitted to travel in Sri Lanka
without at least a third party insurance to cover the external party who can be affected.
At that time, there was no specific legislative framework to authorize, supervise or
control the Insurance business in Sri Lanka.

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The Insurance Industry was nationalized in line with the prevailing economic policy
of the country, then socialist Government in Sri Lanka. At the time of Nationalization
in 1961 there were more than 60 local and Foreign Insurance companies and Agency
houses. With the promulgation of the Insurance Corporation Act, No.2 of 1961, the
Insurance Corporation of Sri Lanka (ICSL) was established in 1961 as the sole insurer
authorized to transact Life Insurance business in Sri Lanka with the aim of protecting
both customer and the service provider as well as the external parties who can be
affected in the case of an accident. Thereafter with the enactment of the Control of
Insurance Act, No.25 of 1962, the ICSL was empowered to regulate and control the
activities of insurance providers in Sri Lanka. In the best interest and protection of
insuring public were made very clear.
In 1964, General Insurance was nationalized as provided in the Finance Act of 1963
and ICSL was authorized to be the sole Insurer to transact both Life and General
Insurance business in Sri Lanka. The Insurance Corporation of Sri Lanka was initially
incorporated to underwrite Life Insurance, enjoyed monopoly status from 1964 in all
classes of Insurance. The existing private companies were prevented from
underwriting new business, but were liable to service old policies. General Insurance
policies posed little problems companies faced difficulty in serving the long term Life
Insurance policies. Many companies had liquidity problems and some policyholders
lost money. That monopoly system was operated and lasted nearly 18 years.
In 1979, the insurance (special provisions) Act, No.22 was enacted providing for the
establishment of subsidiary Corporation of ICSL or Independent Corporation to carry
on the business of any type of insurance.
In 1980, another State Insurer, the National Insurance Corporation (NIC) was
incorporated with the objective of crating competition after 18 years of monopoly by
the ICSL. But state monopoly still continued. The NIC structure provided for eight
Principle Agents, seven of whom were from the private sector was selected on the
basis of prior experience in the industry. The principle agents who got the permissions
were Acland Finance and Investment Ltd., Aitken Spence and Co. Ltd., Carsons

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Cumberbatch and Co. Ltd., Ceylinco Ltd., James Finlay and Co. (Colombo) Ltd.,
Mercantile Credit Ltd., Protection and Indemnity Ltd. and Whittall Boustead Ltd.
These principle agents were functioning as underwriters for the NIC and were
authorized to underwrite and settle claims on behalf of NIC up to limits.
In 1986, “the Control of Insurance Act. No.25 of 1962” was amended opening the
doors for the private sector to venture into the field of Insurance. Control of Insurance
(amendment) Act. No.42 of 1986 permitted public companies too to carry on
insurance business in Sri Lanka after 25 years of state dominance. Three companies
listed below registered and obtained license in terms of the amended legislation and
commenced insurance operations in competition with the two state corporations in
1988. The companies which ware named; Ceylinco Insurance Co. Ltd, CTC Eagle
Insurance Co. Ltd. and Union Assurance Ltd.
In 1993, both ICSL and NIC were converted to Limited liability companies. ICSL
changed its name to Sri Lanka Insurance Corporation Ltd., (SLICL) and NIC to
National Insurance Corporation Ltd. (NICL), which was taken over by Janashakthi
Insurance Co. Ltd., in 2001. In the latter part of 1994 and 1995 two more companies
were emerged from the same mother company, Janashakthi Life Insurance Company
Ltd., and Janashakthi General Insurance Company Ltd., commenced operations
handling exclusive Life Insurance business and General Insurance business
respectively and subsequently in 2000 these two companies merged as Janashakthi
Insurance Co. Ltd.
In 1999, Co-operative Insurance Company Ltd., commenced operations. In June
1999, CTC Eagle Insurance Company Ltd. has changed the name as Eagle Insurance
Company Ltd., consequent to the company becoming a member of Zurich Financial
Services Group and then being absorbed by the Aviva Group. December 1999,
another new Insurance Company, Asian Alliance Insurance Co. Ltd., commenced
operations transacting General Insurance business and since March 2000, they have
started transacting Life Insurance business too. Hayleys AIG Insurance Co. Ltd., a
joint venture between American International Group (AIG) and Hayles Group also
commenced operations transacting General Insurance business and since March 2000,
they started transacting Life Insurance business. Six more Insurance companies are
now competing in the local market having established since 2001.

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2.2 Brief introduction about Union Assurance PLC. :
Union assurance is one of the Sri Lanka’s largest providers of life and general
solutions, anchored by a team of experienced and dynamic professionals, a strong
capital base and reinsurance partnership with highly rated global reinsurers. Union
assurance offers a wide range of tailor-made insurance products and services that
are of international standards. The union assurance brand is positioned on the
promise of “trust”. They strive to deliver this promise by being transparent while
dealing with their life insurance customers, offering convenience to their general
insurance customers and being respectful while dealing with all stakeholders.
 Company registration number : PQ 12
 Tax payer identification number (TIN) : 134001372
 VAT registration number : 1340013727000
Vision of the organization:
 “To be the most sought after provider of insurance solutions”
Mission of the organization:
 “To provide protection, financial security and create wealth for our
customers, adding value to our employees, field staff, business partners,
shareholders and the community”.
Values of the organization:
 Behavior
 Excellence – strive for excellence in everything you do
 Be the best you can be
 Caring- fostering a great place to work by supporting each other to reach
our full potential

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 Innovation- innovating constantly, reinventing and evolving
 Trust- building strong relationships based on transparency and
convenience with internal and external customers
 Ethics and integrity – doing the right things always
For 21 years, Union Assurance created a good life and general business around a
“caring” brand platform. There is several key areas Union assurance PLC. Considers
while operating in business context;
 What those seeking insurance solutions can expect from their service agent
 What Union Assurance can provide its stakeholders
They began the probe by conducting thorough interviews with their staff and field
sales teams based in all areas and all business divisions. Interviews disclosed that the
employees regarded Union Assurance as a reliable organization that is professional,
trained, motivated, knowledgeable, skilled, meticulous and accountable for their
actions. In other words, they thought of Union Assurance as a trustworthy entity.
The information was crucial for Union Assurance to create a positive image in the
minds of its stakeholders. Therefore, the next step was to conduct detailed research to
gain verification whether trust was a feature that present and future customers of life
and general insurance valued from their insurance agent.
The research clearly shows that current and future customers of life and general
insurance wanted to associate with a “trustworthy” insurer because they need an
organization which can give maximum return for their investments. In the life
insurance component, where there is much under-penetration, they realized that
transparency in their business transactions would serve to establish trust. A company
that always delivers a quality service would be seen as a trustworthy company by the
customer. Therefore satisfying the customer has become the key to success of Union
Assurance PLC.
As Union Assurance provides for both life and general insurance solutions, they
required a “corporate” level quality to float the trust platform. Based on the research,

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they came to know that customers will trust a corporation that would treat them with
“respect”.
The core-positioning of Union Assurance's brand: "trust" and the key drivers of this
positioning with regard to life, general and corporate business divisions are illustrated
below:
 Union assurance PLC. Provides a large variety of insurance packages, which
can be mainly categorized into 3 areas.
 Personal insurance
 Business insurance
 Buy/ renew/ claim
 Personal insurance has divided into 7 sub categories.
 Motor insurance
 Home insurance
 Travel insurance
 Health insurance
 Personal accident
 Life investment and protection
 Investment linked
By considering all above information we have decided to elaborate on frequent labor
turnover of sales agents in sales division of personal insurance.

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2.3. Reasons for employee turnover
Employee turnover is expensive. While some turnover can be expected, poor
management can cause the normal turnover to climb to an excessive level. Obviously,
it’s important for organizations to reduce turnover rates. However, in order to reduce
these rates, organizations must first understand the main reasons employees leave for
other positions. Good people don’t leave good organizations, they leave poor
managers.
1. The job or workplace was not as expected.
 Many workers have an unrealistic expectation about the job or workplace or in
some cases are deliberately misled during the interviewing process. More than
six in 10 turnovers begin with some kind of grievance or unexpected scenario,
for an example, employee may have to report to a different superior as did not
agreed in the letter of appointment, different working conditions, absence of
proper delegation of authority or unmanageable work load. The problem
usually starts with managers hiring in such a big hurry that they don't take the
time to give a realistic preview of the job. Or they oversell the job or company
for fear that the candidate won't consider the job or company as they are. Of
course, most new hires will quit when they discover the realities, resulting in
costly turnover.
2. There is a mismatch between job and person.
 Every manager should know by now that getting the right people on the right
job at right time to get the maximum use of employee talents and abilities.
Tasks which have to be performed under a particular job title should be match
with the working capacity of the employee. Employers of choice take hiring
very seriously. If they cannot find the right person, they postpone hiring. They
analyze the talents and personality factors that separate the best workers from
the average ones. Great employers tend to use behavior-based interviewing
and multiple interviewers. They check references with skill and persistence.
They emphasize quality of hire over time to fill or cost per hire. Mostly, they
are interested in building a superior talent pool, and they know it all begins

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with selecting the right person in the first place. The following are just a few
ways we let the matching process go wrong.
 The need to hire quickly.
 Managers think that the skills that make people eligible for the job are more
important than the talent that makes them suitable for the job.
 Managers think that anyone can do the low-level jobs well. And by doing so,
they disrespect the excellence it takes to keep customers coming back.
 Managers wrongly think that training will transform the wrong people into the
right people. Training polishes the skills of the employees, but it cannot
convert the employees into another person who is totally different from the
real one.
3. There is too little coaching and feedback.
 Lots of companies talk about making their managers better coaches, but more
than 60 percent of employees, especially younger ones say that they don't get
enough feedback. Lack of feedback is the number-one reason for performance
problems. We know that many managers just give feedback once a year at
performance appraisal time, but it will not enough to new recruits to
understand their weaknesses and identify the ways of overcoming them. Close
supervision is highly important to utilize human resource in an effective
manner in order to achieve organizational goals and objectives. Most
managers fear giving honest feedback, mainly because they haven't been
trained to do it well. Obstacles include managers who are reluctant to discuss
career issues with their employees, rigid time-in-grade policies that restrict
employees from advancing when ready, and managers who hoard and stifle
talent by blocking movement to other departments.
4. Workers feel devalued and unrecognized.
 There are many different reasons why workers may feel devalued: inequality
of pay for similar work, not being acknowledged for a job well done, being
treated with disrespect, having their differences regarded as negative rather

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than prized, not receiving the right resources, and having to work in an
unacceptable physical work environment are a few. Unfortunately, all these
are symptomatic of viewing employees as interchangeable, disposable, and
easily replaceable, which is still very prevalent in most of the businesses.
The desire to be recognized, praised, and considered important is our deepest
craving, yet 60 percent of employees say they feel ignored or taken for
granted. There are actually understandable reasons for this. Many of today's
managers were told as young employees, "If you don't hear from me, it means
you're doing a good job." So they manage their own direct reports the same
way. Some managers don't pay enough attention to their employees to know
when to recognize their contributions. And still others believe that recognition
is the job of human resources, not theirs.
5. Workers suffer from stress due to overwork and work-life imbalance.
 Most of the employers are wising up and realizing that showing sensitivity to
employees' needs actually pays off. It is important to maintain healthy balance
between work life and personal life for each and every employee. There are
several parties in the society who expect different types of things from us for
an example children expect from their father to spend some leisure time with
them, care from them, spend a vacation with them and many other things. At
the same time organization expects from him to attend office on time, finish
the task within the given time period, finish the projects on time etc. therefore
employees need to have a balance these 2 criteria to minimize stress and
perform their duties in an effective and efficient manner. These 2 areas are
called as quality of life and quality of work life (QL & QWL).
6. There is a loss of trust and confidence in senior leaders.
 If you don't have trust in your senior leaders, you basically have no foundation
for becoming an employer of choice. When the leaders are not sensitive to the
needs and wants of the employees, they improve their interest away from the
organization. They always looking for job opportunities which have higher
level of satisfaction than the current job and chances are higher for them to
resign from the current jobs and look for a better opportunity.

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7. Rude behavior of the managers.
 Studies have shown that everyday indignities have an adverse affect on
productivity and result in good employees quitting. Rudeness, assigning
blame, back-biting, playing favorites and retaliations are among reasons that
aggravate employee turnover. Feeling resentful and mistreated is not an
enticement for a good work environment.
8. The job did not meet expectations.
 It has become all too common for a job to significantly vary from the initial
description and what was promised during the interviewing stage. When this
happens it can lead to mistrust. The employee starts to think, “What else are
they not being truthful about?” When trust is missing, there can be no real
employee ownership.
9. Decision-making ability is lacking.
 Micromanagers appear insecure regarding their employees’ ability to perform
their jobs without the manager directing every move. Organizations need
employees to have ownership and be empowered. Empowered employees
have the freedom to make suggestions and decisions. Today “empowerment”
seems to be a catch-all term for many ideas about employee authority and
responsibility. However, as a broad definition, it means an organization gives
employees latitude to do their jobs by placing trust in them. Employees, in
turn, accept that responsibility and embrace that trust with enthusiasm and
pride of ownership.
10. Organizational instability.
 Management’s constant reorganization, changing direction and shuffling
people around disconnects employees from the organization’s purpose.
Employees don’t know what’s going on, what the priorities are or what they
should be doing. This causes frustration leading to confusion and
inefficiencies.

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11. Raises and promotions frozen.
 Over the years, studies have shown that money isn’t usually the primary
reason people leave an organization, but it does rank high when an employee
can find a job earning 20 to 25 percent more elsewhere. Raises and promotions
are often frozen for economic reasons but are slow to be resumed after the
crisis has passed. Organizations may not have a goal to offer the best
compensation in their area, but if they don’t, they better pay competitive
wages and benefits while making their employees feel valued. This is a critical
combination. Every employee who works in an organization expects to climb
up their career ladder while contributing to the success of the organization.
Therefore it is organization’s responsibility to help them to develop their
personal career while having the service of the employees.
12. Faith and confidence shaken.
 When employees are asked to do more and more, they see less evidence that
they will ultimately share in the fruits of their labor. When revenues and
profits increase along with workload, organizations should take another look
at their overall compensation packages. Employees know when a company is
doing well, and they expect to be considered as critical enablers of that
success. Organizations need to stop talking about employees being their most
important asset while treating them as consumables or something less than
valuable. If an organization wants empowered employees putting out quality
products at a pace that meets customer demand, they need to demonstrate
appreciation through actions.
13. Lack of vision
 Initially, no employee cares about the company’s profit but about their
personal interest and gains. These shortsighted employees come with high
expectations without realizing that the process would take some time.
Therefore, they tend to change jobs.

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14. Work environment
 Work environment is also the main cause for employee turnover. Every
employee would want to work in the environment that he is comfortable in.
This is one such reasons why employees jump from one company to another
in a just a couple of months.
15. Paucity of motivation
 Employees who leave due to lack of motivation are not among those who look
forward for a pat on their back, but those who would want to know if their
work adds value to the company’s growth.
2.4. Effects of employee turnover:
1. High Costs
 High turnover is expensive for companies to manage. Losing an employee
may bring costs such as severance pay and administrative tasks such as exit
interviews. More critically, organizations have to go through the recruitment,
selection and hiring process all over again. Once the organization recruited a
new employee, have to train him, which also costs time and money. In
addition to that, the company typically has opportunity costs that result
because a new employee can't immediately deliver the same sales or
production results as the former one.
2. Low Morale
 Morale in high-turnover companies is typically weak. Organizational culture is
the shared norms and value of a collection of employees who work together.
Motivating employees to share the vision of the business and perform at high
levels is difficult when colleagues and co-workers are vanishing all around
them. Workplace relationship is a key to an employee's satisfaction with work.
As friends and co-workers leave, remaining employees constantly have to
cycle through the process of getting to know new employees.

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3. Poor Performance
 High turnover means the basic level of experience across the organization is
lower than it otherwise would be. Employees with less knowledge and less
experience in a business and with their jobs won't produce as well as those
who know more about what they are doing. In sales and service jobs, sales
results and service satisfaction ratings are affected. The major challenge is that
high turnover contributes to a downward spiral that is tough to get out of,
since poor performance leads to poor business results, which often forces
companies to freeze salaries or cut back on training.
4. Management Frustration
 Managers quickly get frustrated with the constantly revolving door of
employees. In retail, for instance, a manager finds himself spending so much
time hiring and training new employees he can't coach and develop those who
have been around. This contributes to longer-term employees getting upset
and leaving. Plus, poorly equipped and developed employees place more
burdens on the manager to work hands-on in the business or store. This takes
away from his decision-making and supervisory duties.
5. Distractions
 One of the worst effects of high turnover is that it requires focus to fix. Some
businesses hire consultants to help get out of higher rate of employee turnover.
As organizations invest time, money and resources to correct high turnover,
they automatically take away from diversifying their business, marketing to
new customers and improving on performance.
6. Unfulfilled Daily Functions
 Many of the negative effects of turnover relate to performance quality, and
also companies with higher turnover may struggle to complete all necessary or
important daily functions. For instance, if it takes 10 workers to a complete a
given work task or function in a day, and only seven workers are currently
employed in that area, the company has to figure out how to deal with the

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unfulfilled daily work requirement. The section may fail to satisfy customer
demands on time and it always adversely affects the whole organization and
its reputation.
7. Lower Knowledge Base
 In organizations with high turnover, constant change in employee ranks means
average years of experience and background of employees are low. This
means employees are generally less familiar with work tasks they complete
and working effectively with customers. Employees with lower knowledge
always try to work according the “book” and often miss the valuable
opportunities which can be beneficial to the organization.
2.5. Tips to overcome the high employee turnover:
Reducing employee turnover is dependent on the total work environment
organizations offer for its employees. These recommendations about reducing
employee turnover are also common-sense, basic and incredibly hard to find in
organizations today.
1. Don't hire out of desperation.
 There is high risk of hire an employee because it is needed to hire “someone”
to fill the position yesterday. That is what temporary employees are for. If the
organization is looking for someone to fill the position long term, it is better
to take reasonable time period to do some research and gather as much
information as you can about a job applicant. Information that organizations
usually looking for is contact information for personal and business
references, a list of past and present employers, social security number, birth
date and educational and professional qualifications, previous employers and
job records, family background etc. These items will help organizations to
complete reference checks and to perform background checks to find out
about any past criminal activity.

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2. Offer skill testing.
 If the organization wants to decrease employee turn-around, it can perform
skill tests on job applicants. This can be done through human resource
department or can contract this responsibility out to a job placement agency.
This is one of the tools that will help you determine whether organizations
have found the best fit for each position your company has open. Not only
that, but it also cuts down on new applicant recruitment costs. Every company
has some form of testing or verification. Have a competition with it or an
incentive.
3. Offer an attractive, competitive benefit package
 If the organization has gone through the trouble of finding great candidates, it
is essential to make sure organization can persuade them to come on board
and have them stay. Money is not the number one reason people come to a
company or leave a company. But still it is critically important to keep a close
eye on existing rates of wages and other benefits which are given in the
industry and select best methods to attract most suitable and qualified
candidates for the job. And it is better if company can provide salaries with
components such as life insurance, disability insurance and flexible hours.
4. Level the workload.
 Employees often leave companies because they feel overworked. It's
frequently less expensive to hire an additional person, even part-time, than it
is to replace a seasoned staff member. Often we complain about an
individual’s performance but no action is taken. That hurts existing employee
morale as well. The workload which is delegated to an employee should
match with the working capacity of the particular employee. If the workload
is unmanageable there can be lot of grievances may arise and it will adversely
affect the productivity of the existing work force.
5. Show appreciation.
 Many employees almost always know when they are doing a job wrong.
However, these same employees very rarely ever hear from their employers

22. 22
when they are doing their job right. Encourage employees by saying kind
words to them, and telling how much of a good job they are doing is enhance
their self confidence and give them feeling of importance of their contribution
to the organization. If employer does that, they will be more likely to accept
any words of advice on how to improve their work later on. Appreciation
need not to be given by financial terms. Even a word of appreciation may
mean a lot for an employee.
6. Hold regular review sessions.
 When employees are closely attached to their management team, they are
more likely to feel involved. More involved employees tend to perform at a
higher level and are more likely to achieve longer tenure. It is important to
keep employees informed of new policies and procedures. An informed and
educated employee is much more effective.
7. Knowledge sharing opportunities
 Provide opportunities for people to share knowledge while working via
training sessions, presentations mentoring others and team assignments.
Employees like to share what they know; the act of teaching others ensures
the employees own learning.
8. Hire multi- skilled employees
 Never neglect to hire people with the innate talent, ability, and smarts to work
in almost any position even if you don't currently have the "best" match
available. Hire the smartest people can help to reduce employee turnover.
They are the employees who are capable of perform in any job without
trouble. They are highly flexible and easily adapt to the change and rarely
come up with grievances regarding the job.
9. Frequent performance evaluation and feedback
 Offer performance feedback and praise good efforts and results to reduce
employee turnover. It also beneficial to the organization as to improve the
productivity as well as employees to identify their weaknesses and overcome

23. 23
them. It will highlight the employees who are capable of perform better in the
organization and organization can get suitable actions to reward and
appreciate their performance to encourage them for further development.
10. Involve employees in decision making process
 Involve employees in decisions that affect their jobs and the overall direction
of the company whenever possible. Involve them in the discussion about
company vision, mission, values and goals. This strategic framework will
never "live" for them or become "owned" by them if they merely read it in
email or hanging on the wall.
11. Recognize and celebrate success
 Mark their passage as important goals are achieved. This will motivate
employees to perform better in future and they know management is aware of
their activities and achievements. Therefore they try to get the attention of the
management through higher level of performance.
12. Make the work fun and challenging
 Most of the employees like to work in a place where stress and pressure low.
It is better if employer can play soft music while working which can make the
employee’s mind more peaceful. Encouraging employees to make best friends
among the peers is also important to create fun place to work. Job rotation can
be used to make the work more challenging and interesting. It will also make
the employee knowledgeable on how each and every function is implemented
in the organization.
13. Staff training and development
 Organization needs to show regular development plans to employees and try
to realize them management is worrying about employee’s future.
Management should discuss how employees feel about their job, their future,
and their general feeling about the working environment. Performance
evaluation has to be done continuously and whenever the gap between

24. 24
expected and the actual levels of performance is identified, management
should get actions to bridge those gap through training and development
programs.
14. Execute motivational programmes for existing employees
 Intrinsic motivation refers to motivation that comes from inside an individual
rather than from any external or outside rewards, such as money or grades.
The motivation comes from the pleasure one gets from the task itself or from
the sense of satisfaction in completing or even working on a task. Intrinsic
motivation does not mean, however, that a person will not seek rewards. It
just means that such external rewards are not enough to keep a person
motivated. An intrinsically motivated student, for example, may want to get a
good grade on an assignment, but if the assignment does not interest that
student, the possibility of a good grade is not enough to maintain that student's
motivation to put any effort into the project.
15. Do exit interviews.
 Labor laws suggest that organizations cannot hold a person from leaving.
When an employee goes, he/she just has to go. It will be very beneficial to
know the cause of why the employee chose to leave. Possible factors may be:
a better job offer, pursuit for growth, poor colleague relationships, below
average compensation, dislike for the nature of work, etc. Knowing what
problems to address, and taking action on them, will eventually lessen
turnover rates in the future.

25. 25
2.6. Exit interviews and its importance:
Exit interviews are interviews conducted with departing employees, just before they
leave. From the employer's perspective, the primary aim of the exit interview is to
learn reasons for the person's departure, on the basis that criticism is a helpful driver
for organizational improvement. Exit interviews are also an opportunity for the
organization to enable transfer of knowledge and experience from the departing
employee to a successor or replacement, or even to brief a team on current projects,
issues and contacts. Good exit interviews should consists of useful information about
the employer organization, to assess and improve all aspects of the working
environment, culture, processes and systems, management and development, etc.; in
fact anything that determines the quality of the organization, both in terms of its
relationship with its staff, customers, suppliers, third-parties and the general public.
Many employers ignore the opportunity that exit interviews offer, mainly because exit
interviews have not been practiced in the past, and starting them is a difficult
initiative. Exit interviews are a unique chance to survey and analyze the opinions of
departing employees, who generally are more forthcoming, constructive and objective
than staff still in their jobs.
From the departing employee interviewee perspective, an exit interview is a chance to
give some constructive feedback, and to leave on a positive note, with good relations
and mutual respect. Be calm, fair, objective and as helpful as possible. The exit
interview is an opportunity to shake hands and leave friends, not enemies.
Exit interviews and knowledge transfer
The days, weeks (or months in some cases) between the decision for the employee to
leave, and the employee's actual departure date offer a crucial opportunity for the
organization to gather important information and knowledge from the employee. This
is especially relevant in roles where the employee has accumulated a significant
amount of knowledge and personal connections, as typically applies in sales and
buying roles, and obviously business unit management. The knowledge of the

26. 26
departing employee commonly has immense value, and the recovery of it is often
overlooked altogether by the organization, until the employee has departed.
Exit interviews aims and outcomes:
 They provide an opportunity to 'make peace' with disgruntled employees, who
might otherwise leave with vengeful intentions.
 Exit interviews are seen by existing employees as a sign of positive culture.
They are regarded as caring and compassionate - a sign that the organization is
big enough to expose itself to criticism.
 Exit interviews accelerate participating managers' understanding and
experience of managing people and organizations. Hearing and handling
feedback is a powerful development process.
 Exit interviews help to support an organization's proper HR practices. They
are seen as positive and necessary for quality and effective people-
management by most professional institutes and accrediting bodies concerned
with quality management of people, organizations and service.
 The results and analysis of exit interviews provide relevant and useful data
directly into training needs analysis and training planning processes.
 Exit interviews provide valuable information as to how to improve recruitment
and induction of new employees.
 Exit interviews provide direct indications as to how to improve staff retention.
 Sometimes an exit interview provides the chance to retain a valuable
employee who would otherwise have left.

27. 27
3. Theoreticalbackground:
3.1. The value and importance of employees:
The value and importance of employees is often underrated and unfortunately
sometimes managers neglect to see employees as the valuable assets they are. All too
often employees are instead treated as liabilities instead of being valuable asset to the
organization. But, the reality is employees are an integral part of any business and are
needed if the organization is going to succeed.
One of the problems with understanding the true value of employees is the way many
managerial decision makers focus on saving money. One of the first places they look
to scale back is in the staff budgeting categories. Obviously a business must scale
back expenses from time to time in order to remain afloat, but make effective
employees to leave is not the way to minimize costs. When it comes to the practical
scenario, managing staff does cost a lot, there are salaries, benefits, pensions and
other tangibles associated with maintaining employees, however this can also be
perceived as a long-term investment.
There are several vital reasons why employees are important to a business and
keeping a steady pool of staff members can enhance the bottom line over the long
term. Some of these reasons are described in detail below.
• Business continuity
 Employees are the backbone of a business. These members of an organization
are the ones who manage customer service, ensure day to day operations are
running and conduct transactions. Actually employees are the people who
drive a business. While it is true that management plays an essential part of
ensuring a business succeed, it is the group of employees who follow through
and put any strategic plan in action. There is no way to success any kind of
business if there is no workforce to implement the decisions which are taken
by the management.

28. 28
• Source of knowledge
 Employees contain knowledge that is often irreplaceable. Front line members
of an organization know the customers well, which is vital to business success.
Today's customer has ample choices and without the services offered and
delivered by employees who know their customer population well, sales
would not be made and organizational will unable to retain existing customers.
Many industries are using automation to replace humans in specific job tasks;
this is often helpful and a valuable cost-savings measure, however computers
cannot replace human interaction completely. There are certain elements of
running a business that cannot effectively survive without the human touch.
Because knowledge, skill and the attitude should be there to create an effective
employee who is beneficial to the organization.
• Important skill sets
 The diversified skill sets employees possess add significant worth to a
company. Very often employees are equipped with not only knowledge, but
specialized skills that are invaluable. These employees are often hard to
replace, it is worth the effort to keep a talented pool of employees as members
of the organization are pretty important to a business. Everyone has something
to offer. And in most cases organizations like to retain multi- skilled
employees in the organization. Those are the people to who can perform their
duties at any job whenever necessary.
• Company loyalty
 Employees who are treated well usually possess a good deal of employee
loyalty. This too adds value to a business because with loyalty comes pride
and ownership. People who feel recognized as valuable members of a
company they work for usually will put a great deal of effort into their daily
tasks. This results in higher levels of innovation, performance and growth, all
of which are good for any business. Loyal employees are always actively
engaged with their job and they willingly get into the actions which are
beneficial to the organization without force.

29. 29
 On the other hand, employers have to play a critically important role in
recruiting, managing and retention of effective employees to ensure the
productivity and profitability of the organization. Employers should
comprehend the trick of getting the job done. The quality of work relies on
how well the supervisor can get the job done by the employees. The quality of
work that is obtained from an employee patted by the supervisor at the right
time is better than an employee who is nagged with respect to delivery time by
the supervisor. Actuation of the employee, recognitions at the right moment
for the right task, respecting one’s self esteem and non-ego bruises
complement the quality of work which in turn increases the productivity of the
organization and more chiefly retains the employee within the organization for
a longer run. The employer should understand that the relationship between
the external customers and internal customers is symbiotic. Without one, they
wouldn’t success the other. Businesses would have a pretty difficult time
succeeding without employees and it can be impossible in most cases.
3.2. What is employee turnover?
 When employees leave a company and have to be replaced, that's called
turnover. A certain amount of turnover is unavoidable, but too much can ruin a
company.
 Some employees will always retire, move away, go back to school, or leave
the workforce. This level of turnover is not only unavoidable, it can be
beneficial. It brings new people into the organization with new ideas,
knowledge and a fresh perspective. Through the knowledge they gathered in
their studies, organizations can take steps which are beneficial to the
organization in short run as well as in the long run.

30. 30
Types of Turnover:
 In the organizational context, there are two different types of turnover can be
identified.
1. Voluntary turnover:
 Voluntary turnover is when the employee chooses to leave for whatever
reason. When an employee leaves the company of her own volition, it's called
voluntary termination/ voluntary turnover. Employees give a number of
reasons for leaving their jobs. They may be accepting employment with
another company, relocating to a new area or dealing with a personal matter
that makes it impossible to work. When an employee voluntarily terminates
the employment relationship, she generally gives the employer verbal or
written notice of intent to resign from her job.
2. Involuntary turnover:
 Involuntary turnover is caused by layoffs and similar actions where the
decision for an employee to leave is made by the company and not the
employee. Employee termination for poor job performance, absenteeism or
violation of workplace policies is called involuntary turnover -- also referred
to as termination, firing or discharge. It's involuntary because it wasn't the
employee's decision to leave the company. Layoffs could also be considered
involuntary terminations, though layoff procedures usually are handled
differently from termination. Some layoffs have certain federal and state
provisions that aren't afforded to employees who are fired because of
performance or policy violations.
 As a general rule, voluntary turnover is the measure used to discuss and
compare employers. It is the type most directly affected by the front line
supervisors. Involuntary turnover, caused by layoffs, can be a long-term result
of high levels of voluntary turnover.

31. 31
3. Desirable and undesirable turnover:
 Turnover often creates negative impact upon the organization, yet turnover
isn't always a negative event. For example, desirable turnover occurs an
employee whose performance falls below the company's expectations is
replaced by someone whose performance meets or exceeds expectations. It's
desirable because poor job performance, absenteeism and tardiness are costly -
- replacing a poor performer with an employee who does his job can improve
the company's profitability. Desirable turnover also occurs when replacing
employees infuses new talent and skills, which can give an organization a
competitive advantage. Conversely, undesirable turnover means the company
is losing employees whose performance, skills and qualifications are valuable
resources.
What is turnover rate?
 Turnover rate is a calculation of the number of employees who have left the
company and it is expressed as a percentage of the total number of employees.
Although turnover rate is usually calculated and reported as a percentage per
year it can be for different periods.
How to calculate turnover rate:
 You calculate the turnover rate by dividing the number of employees who left
by the total number of employees at the beginning of the period. This number
is expressed as a percentage. You can calculate voluntary turnover,
involuntary turnover, and total turnover.
( 𝐧𝐮𝐦𝐛𝐞𝐫 𝐨𝐟 𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐞𝐬 𝐥𝐞𝐟𝐭 𝐝𝐮𝐫𝐢𝐧𝐠 𝐭𝐡𝐞 𝐩𝐞𝐫𝐢𝐨𝐝
÷ 𝐧𝐮𝐦𝐛𝐞𝐫 𝐨𝐟 𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐞𝐬 𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐝 𝐝𝐮𝐫𝐢𝐧𝐠 𝐭𝐡𝐞 𝐩𝐞𝐫𝐢𝐨𝐝)
× 𝟏𝟎𝟎%

32. 32
3.3. Overview of management and motivation theories:
Importance of management:
Managers influence all the phases of modern organizations. Sales Managers maintain
a sales force that markets goods. Personnel managers provide organizations with a
competent and productive workforce. Factory managers run manufacturing operations
that produce the clothes we wear, the food we eat, and the automobiles we drive.
Therefore manager’s role is crucial for any organizations to carry out whatever the
operations effectively and efficiently. Effective Management can be considered as
main resource of developed countries and the most needed resource of developing
ones. In short, all societies, whether developed or developing, need talented and
skilled managers with proper knowledge as well as attitudes in order to drive them on
the correct track towards achieving goals and objectives effectively.
Essentially, the role of managers is to guide the organizations toward goal
accomplishment. All organizations exist for certain purposes or goals and managers
are responsible for combining and using organizational resources to ensure that their
organizations achieve their goals. Since managers are making decisions to make
organizations profitable and successful they are paid higher than the other levels of
employees. They are the people who assigning activities those organization members
perform. If Management ensures that all the activities are designed effectively, the
production of each individual worker will contribute to the attainment of the
organizational goals. Resources will not be wasted and organization will able to earn
profits by each and every single rupee they invest on the organization. Management
strives to encourage individual activity that will lead to reaching organizational goals
and to discourage individual activity that will hinder the accomplishment of the
organization objectives. All managers must have a single minded focus on the
fulfillment of the organizational goals, when organizations achieve their goals in an
effective manner it drives individual employees to achieve their personal goals more
effectively and efficiently.
There are 4 major functions can be identified in the management process. Those
functions are interconnected and have the ability to influence on another function.

33. 33
The 4 functions are,
1. planning
2. organizing
3. leading
4. controlling
Planning: This is the first stage of the management process. This involves choosing
tasks that must be performed to attain organizational goals, outlining how the tasks
must be performed, and indicating when they should be performed. This step usually
focuses on attaining goals. Managers outline exactly what organizations should do to
be successful. Planning is concerned with the success of the organization in the short
term as well as in the long term.
Organizing:
When the planning has done, Organizing can be thought of as assigning the tasks
developed in the planning stages, to various individuals or groups within the
organization. Organizing is to create a mechanism to put plans into action. People
within the organization are given work assignments that contribute to the company’s
goals. Tasks are organized so that the output of each individual contributes to the
success of departments, which, in turn, contributes to the success of divisions, which
ultimately contributes to the success of the organization.
Leading:
Leading can be defined as guiding the activities of organization members in the
direction that helps the organization move towards the fulfillment of the goals.
Leading should be focused on pull the employees toward the goals, but should not be
something push the employees to achieve something by force. The purpose of
influencing is to increase productivity. Human-oriented work situations usually
generate higher levels of production over the long term than do task oriented work
situations because people find the latter type distasteful.

34. 34
Controlling:
Controlling is the following roles played by the manager:
1. Gather information that measures performance
2. Compare present performance to pre established performance norms.
3. Determine the next action plan and modifications for meeting the desired
performance parameters.
Controlling is an ongoing process and should be done carefully since it is the base of
next planning step.
Importance of motivation:
Motivation is important in business because it impacts mental and physical human
reactions. Highly-motivated individuals and staff have a willingness to get the job
done efficiently and effectively, resulting in higher productivity, increased revenue,
cost savings and satisfied employees and business owners. Employees and staff with
low motivation tend to work slower, without regard for productivity or efficiency, and
end up costing the business money. Low motivation can be caused by a lack of
direction or purpose, and can sometimes be reversed by the introduction of goals.
It is important for business owners and managers to understand how goals affect
motivation. Having no goals at all will cause low motivation, but badly-planned goals,
or those that are too vague or don't adhere to the company's direction, can have the
same effect. Goals that are well-defined, within the grasp of reality and adhere to the
company's primary objectives, mission and scope of work, will almost always result
in positive motivation. Motivation has an important effect on goal attainment. Even
the most well-defined, reachable goals will be difficult to attain if motivation is low,
and goals alone are not a sure cure for low motivation. The company's culture,
working atmosphere and attitude must be positive in order to raise motivation to
productive levels. The importance of a positive environment is a paradigm that every
business must understand, as employees working with undue stress and pressure will
invariably lose the motivation necessary to reach goals.

35. 35
There is an important balance between goals and motivation. Goal-setters within the
organization must always consider how goals will effect motivation, and how the
current motivation level will effect attaining the goal. One way to create and maintain
this balance is to add incentives to the goal that positively impact employees. When
employees see a reward on the horizon, motivation often improves and the goal has a
better chance at being realized. Ultimately, employees are motivated by factors that
directly and positively impact their careers and personal lives.
Methods that can be used to enhance intrinsic motivation among the staff:
Factor Description Guidelines
 Challenge People are best motivated
when they are working
toward personally
meaningful goals whose
attainment requires
activity at a continuously
optimal level of
difficulty.
1. Set personally
meaningful goals.
2. Make attainment of goals
probable but uncertain.
3. Give enroot
performance feedback.
4. Relate goals to learners'
self esteem.

36. 36
 Curiosity Something in the
physical environment
attracts the learner's
attention or there is an
optimal level of
discrepancy between
present knowledge or
skills and what these
could be if the learner
engaged in some activity.
1. Stimulate sensory
curiosity by making
abrupt changes that will
be perceived by the
senses.
2. Stimulate cognitive
curiosity by making a
person wonder about
something (i.e., stimulate
the learner's interest).
 Control People have a basic
tendency to want to
control what happens to
them.
1. Make clear the cause-
and-effect relationships
between what students
are doing and things that
happen in real life.
2. Enable the learners to
believe that their work
will lead to powerful
effects.
3. Allow learners to freely
choose what they want to
learn and how they will
learn it.
 Fantasy Learners use mental
images of things and
situations that are not
actually present to
stimulate their behavior.
1. Make a game out of
learning.
2. Help learners imagine
they using the learned
information in real- life
settings.

37. 37
3. Make the fantasies
intrinsic rather than
extrinsic.
 Competition Learners feel satisfaction
by comparing their
performance favorably to
that of others.
1. Competition occurs
naturally as well as
artificially.
2. Competition is more
important for some
people than for others.
3. People who lose at
competition often suffer
more than the winner’s
profit.
4. Competition sometimes
reduces the urge to be
helpful to other learners.
 Cooperation Learners feel satisfaction
by helping others achieve
their goals.
1. Cooperation occurs
naturally as well as
artificially.
2. Cooperation is more
important for some
people than for others.
3. Cooperation is a useful
real-life skill.
4. Cooperation requires and
develops interpersonal
skills.
Learners feel satisfaction
1. Recognition requires that
the process or product or

38. 38
 Recognition when others recognize
and appreciate their
accomplishments.
some other result of the
learning activity be
visible.
2. Recognition differs from
competition in that it
does not involve a
comparison with the
performance of someone
else.
3.4. Motivation theories:
Maslow’s hierarchy of needs
Maslow wanted to understand what motivates people. He believed that individuals
possess a set of motivation systems unrelated to rewards or unconscious desires.
Maslow stated that people are motivated to achieve certain needs. When one need is
fulfilled a person seeks to fulfill the next one, and so on. Maslow's (1943, 1954)
“hierarchy of needs” includes five motivational needs, often depicted as hierarchical
levels within a pyramid.

39. 39
This five stage model can be divided into basic (or deficiency) needs (e.g.
physiological, safety, love, and esteem) and growth needs (self-actualization).
The deficiency or basic needs are said to motivate people when they are unmet. Also,
the need to fulfill such needs will become stronger the longer the duration they are
denied. For example, the longer a person goes without food the more hungry they will
become.
One must satisfy lower level basic needs before progressing on to meet higher level
growth needs. Once these needs have been reasonably satisfied, one may be able to
reach the highest level called self-actualization.
Every person is capable and has the desire to move up the hierarchy toward a level of
self-actualization. Unfortunately, progress is often disrupted by failure to meet lower
level needs. Life experiences including divorce and loss of job may cause an
individual to fluctuate between levels of the hierarchy.
Maslow noted only one in a hundred people become fully self-actualized because our
society rewards motivation primarily based on esteem, love and other social needs.
Herzberg’s two-factor theory
Frederick Herzberg's two-factor theory, also known as the motivation-hygiene theory
or intrinsic/extrinsic motivation, concludes that while there are certain factors in the
workplace that cause job satisfaction, a separate set of factors can cause
dissatisfaction. The factors that motivate people can change over their lifetime, but
"respect for me as a person" is one of the top motivating factors at any stage of life.
According to Herzberg, intrinsic motivators such as challenging work, recognition,
and responsibility produce employee satisfaction, while extrinsic hygiene factors,
including status, job security, salary, and fringe benefits and employee dissatisfaction
may take place absence of benefits.

40. 40
Herzberg's theory appears to parallel Maslow's needs hierarchy. Individuals look for
the gratification of higher-level psychological needs having to do with achievement,
recognition, responsibility, advancement, and the nature of the work itself. However,
Herzberg added a new dimension to this theory, including factors that cause
dissatisfaction as well, such as company policies, supervision, technical problems,
salary, interpersonal relations on the job, and working conditions. This two-factor
model of motivation is based on the notion that the presence of one set of job
characteristics or incentives leads to worker satisfaction, while another and separate
set of job characteristics lead to dissatisfaction. Thus, satisfaction and dissatisfaction
are not on a continuum with one increasing as the other diminishes, but are
independent phenomena.
If management wishes to increase satisfaction on the job, it should be concerned with
the nature of the work itself – the opportunities it presents employees for gaining
status, assuming responsibility, and achieving self-realization. If, on the other hand,
management wishes to reduce dissatisfaction, then it must focus on the job
environment– policies, procedures, supervision, and working conditions. To ensure a
satisfied and productive workforce, managers must give attention to both sets of job
factors.

41. 41
Theory ‘X’ and theory ‘Y’
Douglas McGregor, an American social psychologist, proposed his famous X-Y
theory in his 1960 book 'The Human Side of Enterprise'. Theory x and theory y are
still referred to commonly in the field of management and motivation, and whilst
more recent studies have questioned the rigidity of the model, McGregor’s X-Y
Theory remains a valid basic principle from which to develop positive management
style and techniques. McGregor's XY Theory remains central to organizational
development, and to improving organizational culture.
McGregor's X-Y theory is a salutary and simple reminder of the natural rules for
managing people, which under the pressure of day-to-day business are all too easily
forgotten.
McGregor's ideas suggest that there are two fundamental approaches to managing
people. Many managers tend towards theory x, and generally get poor results.
Enlightened managers use theory y, which produces better performance and results,
and allows people to grow and develop.
McGregor's ideas significantly relate to modern understanding of the psychological
contract, which provides many ways to appreciate the unhelpful nature of X-Theory
leadership, and the useful constructive beneficial nature of Y-Theory leadership.
Theory ‘X’
 The average person dislikes work and will avoid it he/she can.
 Therefore most people must be forced with the threat of punishment to work
towards organizational objectives.
 The average person prefers to be directed; to avoid responsibility; is relatively
unambitious, and wants security above all else.

42. 42
Theory ‘Y’
 Effort in work is as natural as work and play.
 People will apply self-control and self-direction in the pursuit of
organizational objectives, without external control or the threat of punishment.
 Commitment to objectives is a function of rewards associated with their
achievement.
 People usually accept and often seek responsibility.
 The capacity to use a high degree of imagination, ingenuity and creativity in
solving organizational problems is widely, not narrowly, distributed in the
population.
 In industry the intellectual potential of the average person is only partly
utilized.
ERG theory by Clayton Alderfer
Clayton Paul Alderfer was an American psychologist who further developed
Maslow's hierarchy of needs by categorizing the hierarchy into his ERG theory
(Existence, Relatedness and Growth). This theory posits that there are three groups of
core needs (existence, relatedness, and growth), hence the label, ERG theory.
The existence group is concerned with providing our basic material existence
requirements. They include the items that Maslow considered to be physiological and
safety needs. The second group of needs is those of relatedness, the desire we have for
maintaining important interpersonal relationships. These social and status desires
require interaction with others if they are to be satisfied, and they align with Maslow's
social need and the external component of Maslow's esteem classification. Finally,
Alderfer isolates growth needs, an intrinsic desire for personal development. These
include the intrinsic component from Maslow's esteem category and the
characteristics included under self-actualization.
Alderfer categorized the lower order needs (physiological and safety) into the
existence category. He fit Maslow's interpersonal love and esteems needs into the

43. 43
relatedness category. The growth category contains the self-actualization and self-
esteem needs. Alderfer also proposed a regression theory to go along with the ERG
theory. He said that when needs in a higher category are not met, and then individuals
redouble the efforts invested in a lower category need. For example, if self-
actualization or self-esteem is not met then individuals, will invest more effort in the
relatedness category in the hopes of achieving the higher need they lack.
Equity theory
Equity theory is a theory that attempts to explain relational satisfaction in terms of
perceptions of fair/unfair distributions of resources within interpersonal relationships.
Considered to be one of the justice theories, equity theory was first developed in 1963
by John Stacey Adams. The belief is that people value fair treatment which causes
them to be motivated to keep the fairness maintained within the relationships of their
co-workers and the organization. The structure of equity in the workplace is based on
the ratio of inputs to outcomes. Inputs are the contributions made by the employee for
the organization.
Equity theory proposes that individuals who perceive themselves as either under-
rewarded or over-rewarded will experience distress, and that this distress leads to
efforts to restore equity within the relationship. It focuses on determining whether the
distribution of resources is fair to both relational partners. Equity is measured by
comparing the ratios of contributions and benefits of each person within the

44. 44
relationship. Partners do not have to receive equal benefits (such as receiving the
same amount of love, care, and financial security) or make equal contributions (such
as investing the same amount of effort, time, and financial resources), as long as the
ratio between these benefits and contributions is similar. According to Adams, anger
is induced by underpayment inequity and guilt is induced with overpayment equity.
Payment whether hourly wage or salary, is the main concern and therefore the cause
of equity or inequity in most cases.
In any position, an employee wants to feel that their contributions and work
performance are being rewarded with their pay. If an employee feels underpaid then it
will result in the employee feeling hostile towards the organization and perhaps their
co-workers, which may result in the employee not performing well at work anymore.
It is the subtle variables that also play an important role in the feeling of equity. Just
the idea of recognition for the job performance and the mere act of thanking the
employee will cause a feeling of satisfaction and therefore help the employee feel
worthwhile and have better outcomes
Expectancy theory by Victor Vroom:
Expectancy theory explains the behavioral process of why individuals choose one
behavioral option over another. It also explains how they make decisions to achieve
the result they desire. Vroom introduces three variables within his expectancy theory:
valence (V), expectancy (E), and instrumentality (I).
The three components of expectancy theory (Expectancy, Instrumentality, and
Valence) fit together in this fashion:
 1. Expectancy: Effort → Performance (E→P)
 2. Instrumentality: Performance → Outcome (P→O)
 3. Valence - V(R)

45. 45
Expectancy: Effort → Performance (E→P) Expectancy is the belief that one's
effort (E) will result in attainment of desired performance (P) goals. Usually, this is
based on an individual's past experience, self-confidence (self efficacy), and the
perceived difficulty of the performance standard or goal. Factors associated with the
individual's expectancy perception are self efficacy and goal difficulty. Self efficacy is
the person’s belief about their ability to successfully perform a particular behavior.
Goal difficulty involves how goals or performance expectations that are set too high
are most likely to lead to low expectancy. Control is one's perceived control over
performance. In order for expectancy to be high, individuals must expect to have
some control over the outcome.
Instrumentality: Performance → Outcome (P→O) Instrumentality is the belief that
a person will receive a reward if the performance expectation is met. This reward may
come in the form of a pay increase, promotion, recognition, or sense of
accomplishment. Instrumentality is low when the reward is the same for all possible
levels of performance.
Valence - V(R) Valence is the value the individual places on the rewards (R) based
on the needs, goals, values, and sources of motivation. Factors associated with the
individual's valence for outcomes are values, needs, goals, preferences, sources of
motivation, and the strength of an individual’s preference for a particular outcome.
Expectancy theory can help managers understand how individuals are motivated to
make decisions regarding various behavioral alternatives. In order to enhance the
connection between performance and outcomes, managers should use systems that tie
rewards very closely to performance. Managers also need to ensure that the rewards
provided are deserved and wanted by the recipients. In order to improve the
connection between effort and performance, managers should engage in training to
improve employee capabilities and help employees believe that added effort will in
fact lead to better performance

46. 46
Goal setting theory:
This theory was postulated by Edwin Locke and he posits that difficult and specific
goals increase human performance because they affect efforts, persistence and
direction of behavior. He further pointed out the intention to work toward a goal is
major source of work motivation. That is, all goals tell an employee what needs to be
done and how much effort will need to be expended.
The willingness to work towards attainment of goal is main source of job motivation.
Clear, particular and difficult goals are greater motivating factors than easy, general
and vague goals. Specific and clear goals lead to greater output and better
performance. Unambiguous, measurable and clear goals accompanied by a deadline
for completion avoids misunderstanding. Goals should be realistic and challenging.
This gives an individual a feeling of pride and triumph when he attains them, and sets
him up for attainment of next goal. The more challenging the goal, the greater is the
reward generally and the more is the passion for achieving it. Better and appropriate
feedback of results directs the employee behavior and contributes to higher
performance than absence of feedback. Feedback is a means of gaining reputation,
making clarifications and regulating goal difficulties. It helps employees to work with
more involvement and leads to greater job satisfaction. Employees’ participation in
goal is not always desirable.

47. 47
McCelland’s theory of needs:
 Needfor Achievement
 McClelland’s need for achievement focuses on how individual could behave
towards competition with a standard of excellence. Therefore, people
motivated by achievement need challenging, but not impossible, projects.
They thrive on overcoming difficult problems or situations, so make sure you
keep them engaged this way. People motivated by achievement work very
effectively either alone or with other high achievers. When providing
feedback, it is important to give achievers a fair and balanced appraisal. They
want to know what they are doing right and wrong, so that they can improve.
 Needfor Affiliation
 This is the need to be liked and to stay on good terms with most people.
People are motivated by affiliation work best in a group environment, so
management should try to integrate them with a team (versus working alone)
whenever possible. They also don't like uncertainty and risk. Therefore, when
assigning projects or tasks, save the risky ones for other people. Hence, when
providing feedback to these people, be personal. It's still important to give
balanced feedback, but if management starts your appraisal by emphasizing
their good working relationship and trust in them, they will likely be more
open to what management says. These people often don't want to stand out, so
it might be best to praise them in private rather than in front of others.
 Needfor Power
 This need is the desire to influence people and events. However, those with a
high need for power work best when they're in charge. Because they enjoy
competition, they do well with goal-oriented projects or tasks. They may also
be very effective in negotiations or in situations in which another party must
be convinced of an idea or goal. When providing feedback, be direct with
these team members. And keep them motivated by helping them further

48. 48
3.5 Literature review:
Definitions on employee turnover:
 Web Definition
The ratio of the number of workers had to be replaced in a given time period to
the average numbers of workers.
wordnetweb.princeton.edu/perl/webwn (8.5.2013)
 Definition: Employee Turnover is the Percentage of a company's employees
who leave during a specified period. Although it is most often expressed at
annual turnover rate, the calculation can be done for shorter or longer periods.
Turnover can be caused by employees who leave on their own. This is called
voluntary turnover. When an employee leaves because of a layoff or a
disciplinary firing this is called involuntary turnover. The total of the two is
called total turnover.
http://management.about.com/od/metrics/g/Turnover.htm (9.5.2013)
 The ratio of the number of employees that leave a company through attrition,
dismissal, or resignation during a period to the number employees on payroll
during the same period.
http://www.businessdictionary.com/definition/labor-
turnover.html#ixzz2Sm9YGt3M (9.5.2013)
 In human resource terms, employee turnover is a measurement of how long
your employees stay with your company, and how often you have to replace
them. Any time an employee leaves your company, for any reason, they are
called a turnover or separation.
http://education-portal.com/academy/lesson/what-is-employee-turnover-
definition-cost-reasons.html#lesson
 Turnover or staff turnover or labour turnover is the rate at which an
employer loses and gains employees. Simple ways to describe it are "how
long employees tend to stay" or "the rate of traffic through the revolving
door".

49. 49
Definitions on motivation:
 Internal and external factors that stimulate desire and energy in people to be
continually interested and committed to a job, role or subject, or to make an
effort to attain a goal
http://www.businessdictionary.com/definition/motivation.html#ixzz38uVqJd
00
 Motivation is the desire that fuels a person to do certain things based on the
wants and needs of a person. If a person wishes to meet these wants and needs,
then it necessitates him to motivate himself so that he can make certain moves.
A person is unique and apart from another so his wants and needs vary greatly
from that of the other. The same is true for the people's levels of motivation.
https://www.bookfresh.com/resources/article/what-is-the-definition-of-
motivation
 Motivation is the driving force that causes the flux from desire to will in life.
Motivation has been shown to have roots in physiological, behavioral,
cognitive, and social areas. Motivation may be rooted in a basic impulse to
optimize well-being, minimize physical pain and maximize pleasure.
http://en.wikipedia.org/wiki/Motivation
 David Myers thinks that "it is a need or desire that serves to energies behavior
and direct it towards a goal”.
 A.H. Maslow developed a theoretical framework for understanding
motivation. It arises from the needs and wants of an individual and drives the
people through action and work by doing which he makes efforts to fulfill the
needs and wants of an individual.
 S.Hall believes motivation to be a process where members of a group pull
together to effect an organization through loyalty and commitment.
 Dalton E. McFarland, motivation is the way in which urges, desires,
aspirations, control or explains the behavior of human being. Dublin thinks it
is the complex of forces starting and keeping a person at work in an
organization. Motivation is something that moves that person to action and
continues him in the course of action already initiated.

50. 50
 Previous research reports:
Source document: the frequent labour turnover in insurance companies in Nigeria.
Faculty: Business School
Degree programme: Bachelor of Business Administration
Specialization: International Business
Author: Ademola Olutosin Onashile
Supervisor: Miia Koski
Year: 2012
Essence of the research is to ascertain the causes, effects and solutions to the frequent
labour turnover in the Nigerian insurance companies. The research methodology
accepted was the qualitative method, which involves the telephone interviews
with the aid of a voice recorder. Telephone interviews are used to get facts from
former insurance professionals of the sector which gave vital points on the reasons
for their leaving and why many of their former colleagues also left, the effects and
what can be done to solve the issue. In the process of suggesting solutions, the
research has emphasized on relevant motivation theories like ERG theory, theory
X and Y and reactions of them.
The Nigerian insurance sector is full of different types of insurance activities, but
Nigerian people are not largely embracing the service of insurance compared to
other countries of the world. The researcher has had a little experience having
worked in the industry and he was curious to reveal the reasons for frequent
labour turnover. Then he decided to carryout proper, organized research on
causes, effects and ways to overcome frequent turnover with the contribution of
professionals known to him.
Since Nigeria is a very volatile country where there is political instability which
caused to have higher risk on assets. But still, Nigerian people are not much
interested and trust upon insurance and having negative attitude about the
industry. It is unavoidable to avoid the labour turnover because some of the
employees resign due to their personal problems or for career progression. There
are several factors that make a staff to change the employment as it may be

51. 51
because of better working conditions, job dissatisfaction, and family pressure due
to geographical relocation and some other reasons.
The history of insurance professionalism in Nigeria:
Insurance is designed to protect the financial well-being of an individual, company or
other entity in the case of unexpected loss. Since forms of insurance are required
by law, while others are optional. Nigeria is a country of about 170 million people
with the land mass of about 923768 square meters and immense human and
material resources is a former British colony. Until 1966, Nigeria copied british
parliamentary system of government. With the involvement of the international
trade activities it was necessary for some of the foreign firms to handle some of
their risks locally. The first insurance agency in Nigeria came into act in 1918 and
there was a slow growth between the period of 1921 and 1949. After
independence there was sudden growth insurance sector because of the entrance
of foreign investors into the Nigerian economy. With the development of
economies in 2006 and 2007, insurance companies have to diversify their
insurance policies and procedures to address different new areas to survive in the
industry.
Effects of labour turnover in productivity and manpower planning:
According to Forbes (1971) labour turnover has regarded as separation from an
organization and included promotion, transfer or any other internal movement
within the institution. There are 2 major types of employee turnover can be
identified in the business context.
 Controllable turnover
 Unavoidable turnover
Theadore et al (1964) postulated that labour turnover is the flow of manpower out
from and into the organization. From Pigors and Myers description, ait is obvious
clear what labour turnover rate or index could be measured.

52. 52
Labout turnover rate:
(No. of leaves during the year / average no.of employees during the year) * 100
The labor stability rate/ index:
(No. of employee with more than 1 year service / avg. no of employees) * 100
According to Theodore et al labour turnover may be due to the following reasons;
1. If the job threaten or appear to endanger employee’s physical welfare
2. If a person finds himself in close proximity to severe accident
3. Socio- psychological conditions
4. Individual injured, so that he no longer can perform the required work
 According to Maslow, labour turnover determines based on hierarchy of
needs.
How can labour turnover be addressed?
Higher rate of employee turnover tremendously hurts company bottom line or
profitability level. It also becomes a huge threat for the Nigerian insurance industry.
And here are some highlighted possible ways to reduce its potency.
 When the right set of people are recruited from the inception
 By setting the right compensation and benefit packages
 Making annual review of compensation and benefit packages
 Pay attention on employee personal needs and offer more flexibility
 Creating enabled social interaction and a rewarding work environment
 Consider reporting accomplishment up the chain

53. 53
 Ask employee teams for weekly or monthly update of their achievements
 Display challenging, clear and structured career path
Theoretical framework
Overview of management motivation theories:
Motivation at work is very essential toward getting the best out of workers and
also attaining productivity at work.
Definitions of motivation:
Theories of motivation:
1. Goal setting theory
2. Expectancy theory
3. Equity theory
4. Hierarchy of needs theory
5. Two factor theory
6. Theory X and Y
7. ERG theory
8. MC.Celland’s theory of needs
Researchmethodology and analyze plan:
Main instrument used for this research was the interview sessions conducted with
former insurance companies professionals in Nigeria. Project was commenced during
the summer time of 2012 academic year. The researcher got himself engaged by
drafting some prepared interview questions by targeting former professionals of
insurance companies. The interviews were industry based and not company based.
Validity and reliability of the research report:
The latest and most relevant theories of motivation are used to protect the reliability
of the report. Constant quality checks have been carried out at every stage of the
research. The facts which are gathered from respondents were actually tally with what

54. 54
is expected to draw conclusion and related to the some key terms used in the
motivation theories.
Scope and limitation:
The coverage for this research work was limited only to the interviewed former staff
and writer’s intuition. Project was challenged by limited time to get the professionals
ready for interviews.
Presentation of data:
Set of questions asked from the interviewees to get the information for the analysis.
Conclusion:
Research was centered on the frequent labour turnover in insurance sector in Nigeria.
It is not based on single insurance company, but all the companies operating in the
insurance sector as a whole. The researcher has used the means of telephone
interviews through a voice recorder gadget to collect information from the former
professionals. Higher rate of employee turnover can affect to a large extent high
productivity level of any industry. The companies in the Nigerian insurance industry
have tried to maximize their profits through following procedures, but those activities
have become a major reason for the higher rate of employee turnover in the industry.

55. 55
Source document: Sales Force Turnover, An Exploratory Study of the Indian
Insurance Sector
Author: suman pathak
Academy of Higher Learning, India
vibhuti tripathi
Motilal Nehru National Institute of Technology, India
The insurance sector in India is rising rapidly to bring in growth and employment
opportunities. The insurance sector in India is one of the important categories of
the economy and is growing at the rate of 15%-20% per annum. Together with
banking services, it contributes to about 7% of the country’s GDP. According to a
report by the associated chambers of commerce and industry of India, a growth of
over 200% is likely to be seen in Indian insurance business by 2009-10, in which
private insurance business would grow at 140% in view of aggressive marketing
techniques.
Insurance companies are basically human intensive and human resources act as an
undoubted differentiator. The quality of manpower attracted and retained by
insurers and their abilities and ambition are harnessed would bra litmus test for the
industry. Traditionally insurance business is managed by a large number of
insurance agents who work on a commission basis. The turnover of insurance
agents has usually been high in this business. The highest employee turnover is at
the financial advisors level, where the entry barriers are low but targets and work
pressures are very high.
Employee turnover is a larger problem currently faced by insurance companies, as a
major part of their revenue lost. Analyzing the causes of employee turnover is
imperative for insurance companies. A survey was conducted among 350
employees who had left insurance companies in the city of Lucknow, the capital
of Uttar Pradesh in India to analyze factors that influenced their decisions. The
survey was conducted during January-March 2009.The required data were
gathered through a presented questionnaire. Employees join insurance companies
due to various reasons. There are growth opportunity, unemployment, attractive
salary, flexibility of time, job security and etc. According to survey safety and

56. 56
security (23%) is the main reasons for employees join insurance company.
Company reputation and growth opportunity (13%) are also main reasons for
employee joint the insurance company due to survey.
These are the reasons for employees who had left insurance companies. Better job
opportunity, better salary , target pressure, No time for the family, Job insecurity,
Relocation and Bad work culture. These seven reasons divided in to three factors.
The three factors are stress, career advance and environment. Stress factor include
three reasons. These are target pressures, no time for family and job insecurity.
Career Advancement includes better job opportunity and better salary. Relocation
and Bad work culture includes in to environment factor. As result of survey, target
pressures, better job opportunity, better salary and bad work culture are affecting
mostly to employees to left the insurance companies. According to the survey,
stress (35%) is the main factor for employee turnover. Environment (14%) and
career advance (15%) lesser effective for employee turnover in insurance
companies. According to the survey 60% of the sales force leaves the company in
less than one year.
Survey reveal that stress, career Advancement and environment influence an
individual’s decision to leave insurance companies. It is suggested that the
companies may define job roles for a clear understanding of an employee,
including clear documentation of the process and the job performed. This will
reduce the stress level of employees significantly. Companies should focus on
having education and ongoing learning for the workforce, sponsoring employees
on post programs and treating applicants and employees in the same way as one
treats customers. The exercise would help employees developing their knowledge
base and their chances to grow within the organization. Researchers have also
made an attempt to integrate Maslow’s Needs Hierarchy underlying influencers
for sales force of insurance companies to leave the organization.

57. 57
4. Researchmethodology:
4.1. Instrumentation:
The main instrument used for this research project was the interview sessions
conducted with the former employees in Union Assurance PLC.
Apart from the former employees we have interviewed current employees of
the sales department via questionnaires in order to have an idea about
satisfaction level of the employees. Questionnaires were given by both Sinhala
and English languages to provide higher level of understanding to the
employees.
Not only the employees, the research area has expanded to address the
managerial levels to get management’s feedback and their view points on
benefits and other allowances provided by the organization for the betterment
of the employees.
Since it is not enough to have firsthand information to get more accurate date
we have observed some previous research reports and articles which was done
by both academics and professionals on the subject.
A copy of the interview questions is included in the appendix session for
perusal purposes.
 The rationale behind these verbal interview sessions was to get their
opinions regarding the states of insurance in Union Assurance PLC. as
well as in Sri Lanka. Feedbacks we gathered through the interview
sessions were really helpful to identify reasons for the frequent employee
turnover in Union Assurance PLC. And develop appropriate suggestions
to minimize the trend.

58. 58
4.2. Project procedure and time:
The research task commenced nearly 2 months time period from the 2nd week
of June to 31ST of March 2014.
The supervisor advised on how the research could be kick-started by
formulating the research table content which will help with building structure
of the research report. He also guided on deciding on the types of theoretical
framework (literature review) that may be relevant for the research project and
advised on how facts needed for the research can be gotten through the use of
a voice recorder and notes in conducting interviews. He provided us areas to
be addressed to get more accurate and targeted information for the research.
And from here, the research work made a constant progress from every stage
of support and guidance we got from the supervisor.
Activity June
W 2
June
W 3
June
W 4
July
W1
July
W2
July
W3
July
W4
Discussion with the supervisor
Identify sample group from the
population
Preparation of questionnaires
Preparation of interviews
Company visit to Union Assurance
PLC. and interview management
and obtain data
Analyze obtained data

59. 59
Visiting Union Assurance PLC.
and interview employees and get
feedback
Analyze the obtained data
Preparation of the research report
from analyzed data
Adding up the collected data based
on the research problem
Providing recommendations
Finalizing of the research report
4.3. Data collection:
 Topic data collection discuss about the methods of collecting data for
the research, relevant data can be divided into two different categories
as primary data and secondary data. Primary data are the fresh data that
is collected specially for the subject research and secondary data are
the data which already available as findings of previously done
researches or surveys other sources like internet, newspapers, leaflets,
annual reports etc.
 Primary data collection has been carried out by using both formal and
informal methods. Questionnaire to the employees, interview sessions
with both management and the employees can be named as formal
methods of collecting primary data.
Telephone conversations with former employees can be considered as
informal method of collecting primary data for the research. Though
they are first hand information, they did not carry out a structured way