Unmasking Turnover: Effects of Voluntary and Involuntary Separations on Unit Performance in the Retail Sector

Abstract

Whereas most previous studies of the effects of employee turnover on performance have used an aggregate measure of total turnover, this paper examines differences in the effects of collective involuntary and voluntary turnover. Analyzing 24-month observations for the stores of an apparel retailer, and using fixed-effects and instrumental variables estimation, we found that voluntary turnover was negatively (although not significantly) related to store performance. In contrast, involuntary turnover due to discharges and terminations of replacements was significantly and positively related to both store productivity and efficiency. These results show that the “functionality of turnover” depends on the nature of employees’ separations. In addition, the results suggest the need to expand the range of methods used for analyzing the link between collective turnover and organizational performance.