Based on the valence model of expectancy theory and the Cornell model of job satisfaction, this field study investigated the relationship between reward contingency, unemployment, pay satisfaction, job satisfaction, and functional turnover. The latter of which separates turnover into four categories: poor performing leavers, good performing leavers, poor performing stayers, and good performing stayers. It was conducted with a geographically dispersed sample of sales representatives (i.e., from 25 states and 66 cities), resulting in unemployment rates that ranged from 2 percent to 12 percent. The sales representatives were employed by four companies that paid different combinations of salary and commissions, ranging from mostly salary and little commission to 100 percent commission. A discriminant analysis accounted for 62 percent of the variance in functional turnover and achieved an overall classification hit rate of 67 percent across the four functional turnover groups. Follow-up univariate analyses indicated that objective reward contingency (R2=.34), state unemployment (R2=.11), state sales unemployment (R2=.08), education (R2=.09), and tenure (R2=.08) accounted for most of the variance in functional turnover. Perceived reward contingency, pay satisfaction, job satisfaction, age, and gender were not related to functional turnover.
Traditionally, it has been assumed that employee turnover was inherently bad, that frequent employee turnover was expensive, and that organizations should reduce turnover whenever possible Brayfield & Crockett, 1955 and Herzberg et al., 1957. Yet, it has also been argued that some kinds and levels of turnover are actually beneficial or “functional” for organizations Abelson & Baysinger, 1984, Dalton et al., 1981, Dalton et al., 1982, Mobley, 1982, Muchinsky & Tuttle, 1979 and Porter & Steers, 1973. For example, Hollenbeck & Williams (1986, p. 609) estimated that simply replacing poor performing leavers with average performing new hires would increase the revenues of retail sales persons in their study by “roughly US$112,000 per person per year.”
While thousands of studies have investigated why employees choose to leave their jobs (Mowday, Porter, & Steers, 1982), very little research has directly examined the organizational consequences associated with voluntary employee turnover. In this article, I attempt to extend previous work in the area of functional turnover in a number of ways. First, I review and discuss the different kinds of measures that have been used to examine functional turnover. Second, I present a general model of functional turnover that is based on the valence model of expectancy theory and the Cornell model of job satisfaction. Finally, I present the results of an exploratory test of this model.
These results, along with meta-analytic data (Williams & Livingstone, 1993) which indicate that reward contingency moderates the relationship between performance and voluntary turnover, suggest that reward contingency can contribute to a positive pattern of functional turnover where poorer performers are more likely to leave. However, this study and others Griffeth et al., 1990, Hollenbeck & Williams, 1986 and Phillips et al., 1989 also indicate that satisfaction variables are not consistently good predictors of functional turnover.
Unfortunately, there is much that is still not known about functional turnover. For example, do good and bad performers frame turnover decisions differently? When poor performers quit, is it primarily withdrawal from a negative situation? Or, conversely, when better performers quit, is it because they are attracted to a better job rather than withdrawing from their present job? Do better performers value different rewards than do poorer performers? How strong must reward contingency must be before functional turnover occurs? Will weak reward contingencies contribute to dysfunctional turnover and retention by encouraging good performers to leave and poorer performers to stay? Organizational efforts to influence and manage functional turnover are likely to be unsuccessful unless we address these basic questions.
