10-02-2024
Voluntary turnover costs billions across organizations annually, and organizations go to great lengths to minimize turnover and retain employees. Yet a healthy amount of turnover can also spawn new ideas and innovation.
What level of turnover is optimal versus sub-optimal? How can organizations best position themselves to thrive in the face of turnover and potentially capitalize on its benefits while minimizing its downsides? That is the dilemma Purdue’s Brian Dineen, Mitch Daniels School of Business Leeds Professor of Management, and his colleagues Yixuan Li (formerly at Purdue, now at the University of Florida), Zhefan Huang and Mo Wang of the University of Florida, and Danielle van Jaarsveld of the University of British Columbia addressed in their recent study.
The coauthors of “Voluntary Turnover Rate Fluctuations, Human Resource Practices, and Innovation: A Within-Organization Investigation,” forthcoming in Personnel Psychology, examined the relationship between turnover and innovation, finding that turnover in a given year negatively impacted innovation a year later, but that this only held when turnover was within a normal range for a particular organization. When turnover started to exceed a critical threshold above this normal range, innovation benefits actually began to materialize. The authors attribute this shift to organizations’ tendency to act as “Complex Adaptive Systems,” whereby they constantly adapt to changing environments.
As turnover represents an important environmental change, it forces organizations to draw upon routines or patterns that can help reestablish equilibrium, or it casts organizations into chaotic states by which they must establish new routines and patterns of working. At lower levels of turnover, the routines tend to “win out,” reducing the effects of turnover perturbances and returning organizations to established ways of working and thinking. At higher levels, however, compounding effects yield irreversible upheaval by which organizations spontaneously organize into new structures. In turn, these new structures can more readily spawn innovation.
This research also examined ways organizations might structure human resources practices to best capitalize on turnover fluctuations. Specifically, when organizations increasingly rely on interaction-facilitating HR practices, such as employee participation and group-based pay, the threshold whereby turnover benefits might materialize arrives earlier, meaning that while moderate turnover can still be detrimental, organizations might see benefits of turnover when turnover is still within a normal range. This ostensibly occurs because these practices incentivize idea exchange and coordination, thereby more quickly restructuring the organization. However, interaction-inhibiting practices such as individual-based pay tend to raise this threshold, such that innovation benefits only accrue at far-from-normal levels of turnover and accompanying structural changes.
