The moderating impact of training and development on the relation between blue-collar turnovers on the organization performance of apparel industry in
Problem Statement:
Does the voluntary turnover of blue-collar operators affect the performance of the apparel industry in Egypt?
Literature:
Chapter 1:
What is turnover?
Many definitions for turnover like it is psychological result of that employee is already start to disengage with the organization so he take the decision to leave the organization (Amlan Haque, Mario Fernando,Peter Caputi, 2019), sometimes turnover defined as the leaving of employee to his organization and need to be replaced with another one to cover his/her work (Mathis, R. L., & Jackson, J. H., 2010), but turnover is not a sudden or immediate decision of the employee it is firstly start with turnover intention which is the tendency or intention of employees to stop working from their jobs voluntarily at their own choice (Zeffane, 1994), one of the most important definition of turnover is the movement of an employee from one organization to another, most of the studies are focus on the leaving of an organization but not focused on entering another organization (L.Prise, James, 2001), this give new definition for employee turnover including the rotation of the employees between organizations, jobs and functions with in different organization (Ongori, 2007)
Type of Turnover:
Employee turnovers can be classified namely in to 1) involuntary turnover and voluntary turnover, 2) functional turnover and dysfunctional turnover or 3) uncontrollable turnover and controllable turnover (Mathis, R. L., & Jackson, J. H., 2010)
There are 4 factors that lead to the voluntary turnover of talents (Jenner, S. and Taylor, S., 2000):
• Outside factors: This happens when the employee leaves the organization due to reason not related to the organization like illness, death, change his living location, ……….., most of the time this kind of factors are uncontrolled.
• Functional turnover: this kind of turnover mainly includes all the kind off resignations at which both the employee and the organization agree and mainly this happened when the employee is not satisfied with the culture of the organization as well as show low performance less than what the organization expects from him/her.
• Push factors: Here the problem is dissatisfaction with work or the organization leading to an unwanted turnover. This is where there are significant opportunities for employer action to address the problem.
• Pull of rivals: The opposite side of the coin is the attraction of rival employers.
Voluntary turnover cannot happen without the presence of other factors. Employees are leaving organization to another organization they think that it will be better (Lee, T. W. and Mitchell, T. R., 1994)
Theories of voluntary turnover:
Many theories and models explained the employee voluntary turnover starting from early 19s as March and Simon explained how turnover can be happened within the organization as the more satisfaction of the employee the less turnover rate within the organization (March, J., & Simon, H, 1958),while OP and Porter and Steers identify another theory of the reasons off turnover as each employee has set of expectations if the organizations cannot meet the expectations of the employee will be dissatisfied and the turnover will be increased within the organization (Porter, L., & Steers, R., 1973), Lee and Mowday find the factors lead to the voluntary turnover on the organization by them model which identify that turnover can be happened due to different factors within the organization like the relation with supervisor, Career planning, Career decision making within the organization and even there is strong relationship between the individual variables and organization variables (Lee, T. & Mowday, R., 1987), while in 2004 Peterson described the satisfaction of the employee and link it with different factors in his model as the satisfaction of the employee was identified as job scope, role stress, group cohesion, compensation, met expectations, and negative affectivity. Antecedents of commitment were identified as procedural justice, expected utility of internal roles, employment security, job investments, extra organizational loyalties, time and behavioral conflicts with work, conditions of job choice, and commitment propensity (PETERSON, 2004)
One of the most important models of employee voluntary turnover is Unfolding Model of Voluntary Employee which show that the employee follow one of 5 pathways to leave the organization the first pathway is the positive shock like he/she can go to another location, the second pathway happened when employee get negative shock from his/her organization like annual increment is less than his/her expectation, unfair performance evaluation, the third pathway happened when the employee get better offer from another organization and he or she will fit better with a new organization, based on the employee’s values and strategy, the fourth pathway happened when employee feeling with dissatisfaction without get other job offer or opportunity but he/she decided to leave the organization and the fifth pathway happening when the employee feel dissatisfaction but he or she got another job offer so he/she decided to leave the organization to another one (Lee, T. W., Mitchell, T. R., Wise, L., & Fireman, S., 1996)
By focusing on organizational characteristics and relationships, addressing employee-supervisor relationships, career concerns of employees, and work-life balance, the model assumes an HRD perspective. HRD has an opportunity to develop human expertise along those lines and use this theoretical foundation to measure its strategic contribution toward achieving organizational goals, namely, improving bottom-line performance by reducing employee turnover (PETERSON, 2004).
Results of the studies
The main results of turnover studies show:
· Voluntary turnover of the employees is very expensive to the organization as the organization will lose the investment of training and preparation of the employee as well as will have hidden costs on the loss of productivity and the costs of hiring the replacement of the leaving employees (Ongori, 2007)
· Employees are the main factor of the success of the organization so the organization should treat them as one of the assets and take more attention to them to reduce the turnover rate by know exactly the reasons for turnover and overcome these reasons ate the least the controlled reasons (Ongori, 2007)
· The results of turnover include both direct and indirect costs to an organization. Direct costs include financial costs associated with an employee leaving, such as subsequent recruiting and training costs. The cost of replacing an employee, including separation, replacement, and subsequent training costs, has been estimated to be 1.5 to 2.5 times an employee’s annual salary (Cascio, 2006)
· As per the effect of the turnover the organization may lose indirect costs such as losing knowledge, skills, and productivity (Shaw, 2005)
· As one of the impacts of employee turnover is the loss of short term and long term productivity and capacity which effect on the performance of the organization (Heavey, A. L., Holwerda, J. A., & Hausknecht, J. P., 2013)
· When we have a gap between the leaving of the employee and joining off the new hiring employee the costs result from the loss of productivity should be doubled (Jiří Duda, Lenka Žůrková, 2013), lower labour productivity of a new employee represents 25 % of the work performance of a normal worker within the period of the first four weeks (MURTAGH, 2003)
The calculation of turnover:
The ratio of the number of employees has been resigned from an organization divided by the total number of employees within the organization in a certain period of time (Price, 1977)
Conclusion:
Voluntary turnover is the decision of the employee to leave the organization mainly due to the organization could not meet his/her expectations which lead to dissatisfaction of the employee so he/she take the decision to leave the organization, these expectations include the wages, fair performance evaluation as well as fair annual increment, work-live balance and good relation between the employee and his/her supervisor. Dissatisfaction may lead to leaving of the employee even if he/she doesn’t have any new offer or if he/she got negative or positive shock lead to take the decision to leave the organization. The way of calculating turnover is the ratio of the total number of voluntary turnover within the organization in certain period of time to the average total number of employees within the same period of time, the last conclusion is that voluntary turnover is very costly to the organization due to the loss of knowledge, skills, productivity as well as the short term and long term performance.
Chapter 2
What is performance?
The term performance has more than one definition as it can be defined as Set of key indicators used to measure both the efficiency and effectiveness of a set of actions (Monica Franco-Santos, Mike Kennerley, Pietro Micheli, Veronica Martinez, Steve Mason, Bernard Marr, Dina Grayand Andrew Neely, 2007), but it also defined as the report which gives the employee/ Organization the feedbacks about the outcome of certain actions (Bititci, U.S., Carrie, A.S. and Mcdevitt, L., 1997), again another definition for the Performance as it gives the organization the necessary information about the validity of the strategy of the organization (Ittner, C., Larcker, D. and Randall, T., 2003) while Omar Taouab and Zineb Issor linked the performance to the efficiency of the organization which represents the achievement of the goals using the limited resources of the organization (Omar Taouab and Zineb Issor, 2019), while Georgopoulos, B.S. & Tannenbaum, A.S found that the criteria used for assessing performance are productivity, flexibility, and organizational tensions (Georgopoulos, B.S. & Tannenbaum, A.S., 1957), but in 1967 the definition of the performances as the ability of the organization to exploit its environment for accessing and using the limited resources (Yuchtman, E. & Seashore, S., 1967), but Lupton descript the performance as the productivity rate and levels of motivation and satisfaction of its members are high, while rates of turnover, costs, labor unrest are low or absent (Lupton, 1977). Omar Taouab and Zineb Issor in 2019 defined the performance as the effectiveness and efficiency of an organization were similar, both are important for the organization to achieve the performance and economic returns to achieve the global performance of the organization (Omar Taouab and Zineb Issor, 2019)
The start of linking the performance with the customer was done by porter and Streets as they descript the Performance as a measure of how you can create value to the customer (Porter, L., & Steers, R., 1973), while in 2003 it was the start to the link between the performance and the strategy of the organization The ability of an organization to use its resources to achieve its objectives (Peterson, Gijsbers, & Wilks, 2003), in 2005 Verboncu and Zalman give a new definition to the performance as the particular result obtained in management, economics, and marketing that gives characteristics of competitiveness, efficiency, and effectiveness to the organization and its structural and procedural components (Verboncu, I. & Zalman, M., 2005), the modern school start to drill down the relation between the Performance and strategy by identifying that performance can be achieved through different factors such as evaluation, efficiency, effectiveness, and quality of the product (Bartoli, A. & Blatrix, C., 2015)
The concept of organization performance (Lebas, M. and Euske, K., 2006):
• Performance is a set of financial and non-financial metrics linked to the organization objectives
• Performance should be dynamic and flexible
• Performance may be illustrated by using a causal model that describes how future results can be affected by current actions.
• Performance may be understood based on each person involved on the assessment of the organization.
• The definition of the performance of each organization will depend on its characteristics.
• The results of the performance should be quantitative
Most Common Models of organization Performance Measurement:
Balanced Scorecard:
The Balanced Scorecard (BSC) model was developed in the early 1990’s by Robert Kaplan and David Norton. It is a tool used for describing, elaborating, and implementing a vision and the strategy of an Organization into fixed targets and a clear set of financial and non-financial performance indicators.
The introduction of a balanced scorecard means that the organization has clear strategic goals, objectives, initiatives, and each goal assigned to the responsible department/ employee (Horváth et al., 2004)
A balanced scorecard measure the performance of the organization using 4 perspectives (Omar Taouab and Zineb Issor, 2019):
▪Financial Perspective (How do we look at shareholders?): Controlling and monitoring the financial resources is a very important indicator for the success of the organization but the organization should take into consideration other perspectives not only the financial one same like some organizations doing.
▪Customer Perspective (How do customers see us?) : this perspective it measure the success of the company on covering the customer needs and requirements including price, quality, distribution channels as well as the customer expectations from the organizations in the future.
▪ Internal Processes Perspective (What must we excel at?): Understanding how internal processes of the organization are very important to reduce the wastes and increasing the value add to the product of the organization to reduce the costs and increase the profit of the organization
▪ Innovation and Learning Perspective (Can we continue to improve and create value?): All the achievements from the customer, internal processes, and financial perspective are strictly linked to the organizational capabilities to train and develop its human resources and innovation system.
The Performance Prism:
The Performance Prism (PP) was developed by a team of experienced consultants and researchers in the performance measurement area, they described a comprehensive measurement system that addresses the main business issues to which a wide variety of organizations (profit and non-profit) will be capable to relate (Neely, A., Adams, C., & Crowe, P., 2001)
The performance prism is considered a second-generation Performance Management system (Michaela, S. & Marketa, S., 2021)
It consists of five perspectives (Omar Taouab and Zineb Issor, 2019):
▪Stakeholder Satisfaction: identify all the stakeholders and the needs and wants of each stakeholder.
▪Capabilities: identify all the required resources for the organization to achieve the strategic goals including people skills, competencies, technology,
▪Processes: What are the processes we have to put in place in order to allow our strategies to work effectively?
▪Strategies: Identify the strategy which can achieve the needs and wants of the stakeholders
▪Stakeholder Contribution: What do we want and need from stakeholders to preserve and develop our capabilities?
The Performance Pyramid:
The main aim of the performance pyramid is to link the strategy of the organization with its operations by translating objectives from the top down (based on customer priorities) and measures from the bottom up (Tangen, 2004)
The Performance Pyramid contains four levels of objectives that affect the external effectiveness of the organization and simultaneously its internal effectiveness.
1. The first level includes the development of a company’s performance pyramid starts with defining an overall corporate vision, which is then translated into individual business unit objectives.
2. The second level of the pyramid, short-term goals of cash flow and profitability are set as well as long-term targets of growth and market position.
3. The third level contains day-to-day operational measures (customer satisfaction, flexibility, and productivity).
4. The last level includes four key performance measures (quality, delivery, cycle time, and waste).
Conclusion:
As of now each organization has its own definition of performance depends on the requirements of the organization, the main purpose of performance on the organization is to measure the financial and non-financial performance of the company which is mainly linked to the strategy of the company to be sure that the organization achieves all the assigned goals, the most important performance model is the performance pyramid model which links the KPIs with all the levels of the strategy starting from the vision to objectives and link it with internal and external effectiveness of the organization.
Chapter 3: Training and Development:
Once a training program is complete, worker productivity is expected to increase. The benefits will be to the company, due to an increase in worker output and productivity, and to the worker, as the increase in output should translate into higher wages and opportunities for career advancement (Kaufman, B., & Hotchkiss, J., 2006)
Training alone may offer many benefits, but a much greater impact could be found when using Human Resources strategies that entail many different organizational commitment practices and policies. An effective training program is one such organizational practice that can lead to greater employee commitment and a more stable workforce which lead to fewer turnovers. The majority of employees believe that upon training there is the likelihood that they will receive a promotion and carrier development. ( Isabel Cheloti Mapelu, Lucy Jumah, 2013)
HRM practices not only enhance the productivity and performance of the employees, but well-designed HRM practices especially appraisal, training, and development of the employees may also gain the commitment of the employees and may positively affect their attitudes and behavior. It is further supported empirically that there is a significant relationship effect between HRM practices and organizational commitment and turnover intention (Vimala Kadiresan, Mohamad Hisyam Selamat, Sugumaran Selladurai, Charles Ramendran SPR & Ramesh Kumar Moona Haji Mohamed, 2017)
Conclusion:
Most of the studies show that there is a direct relationship between employee development and training and the turnover rate as training and development increase the satisfaction of the employees and reduce the turnover rate as the less developed the more turnover rate as well as there is an effect of the development of the employees and the performance of the organization as the training and development maybe reduce the effect of the turnover on the performance of the organization.
Chapter 5:
Chapter 4:
Apparel industry analysis in Egypt (Egyptian Textile & Clothing Industry Outlook, 2020):
Egyptian Textile Industry has a complete vertically integrated functioning model, starting from raw materials up to finished products of Apparel and Home Textile.
The apparel sector accounts for 3% of GDP and 27% of the industrial output. 25% of the total industry is focused on textile production, of which 12% are engaged in home textiles, 8% in cotton yarn, and 5% in other textiles. The public sector dominates the production industry with 50% in spinning, 60% in hemming, and 60% in weaving. The private sector owns 90% of the garment side of industry. The spinning and weaving sector is being dominated by large-scale industries with a strong influence on the public sector.
As per research data of 2019, its textile sector consists of 3,243 companies with a total investment of 3.2 billion USD. Textile industries of Egypt produce 315 million apparel and export 305,000 tons of cloth and apparel annually. US constitutes 80% of the country's export market, followed by EU and Arabian countries comprising the remaining 20%.
The size of Egypt’s population is one of its other strengths. Its labour force, close to 18 Million, is an excellent source of productive and inexpensive labour combining semi-skilled, skilled and highly qualified employees. The labour force has grown at an average rate of 2.70% a year. Low wages have encouraged the use of labour-intensive technologies. The weight of the work force of the Egyptian textile and apparel industries in Egypt’s total employment does not exceed 7.7% which is the lowest compared to Pan-Euro and Pan-Med countries. Meanwhile, Egypt has become worldwide labour cost competitive, expressing the lowest textile total cost of labour, which is considered a vital opportunity to grasp within the Pan-Euro-Mediterranean labour intensive apparel manufacturing. Egypt is equipped with 15 commercial ports facilitating its exports
Egypt’s annual inflation is expected to reach 13% in 2018, while the devaluation of the local currency has increased the competitiveness of the Egyptian Textile Industry, hence becoming by far much cheaper of any textile and apparel manufacturing country in the region
Egypt’s industry has consistently remained flexible in terms of production quantity and lead time and thus presents the possibility of producing quantities as low as a few hundred pieces. A large base of European and American customers are already served from Egypt, representing almost 90% of Egypt’s Apparel exports
Egypt offers a favourable cost-effective environment due to its infrastructure, reliable low cost electricity, gas and water utilities.
The advantages of the Egyptian Textile Industry stands on the in-house availability of the raw material of Egyptian Cotton, portions of which Turkey and India imports from Egypt in order to produce high quality products made of 100% Egyptian Cotton for the worldwide demand. Fabric production includes fine Egyptian cotton fabrics, shirting, fabrics for trousers/shorts, worsted wool fabrics, denim, fleece, jersey, flat/woollen knits, technical fabrics, and more. Apparel production includes active sportswear, outerwear, underwear, suits, socks, infant wear etc. Production of made-ups includes a wide variety of bed, bath, and table linens, kitchen accessories etc.
The textile and apparel industry is an important one to Egypt, contributing 30% of industrial production and 10% of total exports. The EU partnership agreement with Egypt allows Egypt to export textile and apparel products to the EU countries, without custom tariffs (Free Trade)
Egypt has Free Trade Agreements applying in Egypt like
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EUROMED – EU-EGYPT FTA
QIZ – USA-ISRAEL-EGYPT FTA
EGYPT – TURKEY FTA
EGYPT – RUSSIA ECONOMIC TREATY
COMESA- EGYPT-AFRICAN COUNTRIES FTA
TRADE ACCORD – EGYPT-CHINA
PAFTA – EGYPT – ARAB COUNTRIES REGIONAL FTA
EFTA – EGYPT-EFTA STATES FTA
AGHADIR – EGYPT, JORDAN, TUNIS, MOROCCO
MERCOSUR – EGYPT-LATIN AMERICA FTA
BILATERAL ECONOMIC AGREEMENTS WITH: JORDAN, LEBANON, MOROCCO, SYRIA AND TUNISIA
As per ECE (Apparel Export Council of Egypt) Egyptian apparel sector increased during 2020 by 6%, Based on these statistics about apparel industry, Leaders Company has a huge potential to become successful in Egypt Market as well as the worldwide market.
At the other hand the new industrial zones will increase the chance of more competitors in Egypt market as well as in the worldwide market.
The effect of turnover in performance in different studies:
The study of turnover of nursing sector of outpatient centres from a health-care system show that employee turnover has negative effect on the operational performance specially in losing the knowledge and skills of leaving employees but the organisations with strong group-oriented organisational cultures are somewhat protected from these negative effects (David C. Mohr, Gary J. Young, James F. Burgess, Jr, 2011), While the study of South Korean firms indicates that voluntary turnover leads has negative impact on the performance among firms with lower usage of communication practice (David Jinwoo Chung, Andrea Kim, Youngsang Kim, 2021), while The study of municipal police departments in USA show that the voluntary turnover of sworn officers has significant effect in the performance of crim control (HUR, 2013) and the study of the effect of turnover in banking sector in USA show that the voluntary turnover lead to the less performance due to using less as it’s unexpected turnover lead to loss of knowledge and skills (Paula Morrow and James McElroy, 2007) but some studies show no significant impact of turnover on Jordanian services sectors’ profitability (Lina Warrad. & Rania Al Omari , 2015), while employee turnover in financial institutions private sector in Nigeria has negative impact on the performance of the organization and affect the image of the organization of the market (Abolade, 2018), and in 2020 the study show that high labour turnover rate in the construction industry is negatively impacts the productivity and performance of construction businesses (Olabode Adekunle Ayodele; Alice Chang-Richards, Ph.D.; and Vicente González, Ph.D., 2020), this study was confirm the same result of 2014 study done by Rory, Bruce, Skaggs and Mark which show the high turnover of the operators in the manufacturing firms has negative impact on the performance while the service firms are less affected by the turnover rates (Rory Eckardt, Bruce C. Skaggs, Mark Youndt, 2014)
Some models of the factors affect the performance of the organization:
Researchers have demonstrated a much stronger relationship between job satisfaction and firm performance. In a conceptual discussion of why loyal employees and customers improve the bottom line (financial performance), conditions that support high internal customer service predict high customer satisfaction. Internal customer service refers to how employees are treated in the organization and how they treat each other in work related situations. Those employees who feel they are treated well and receive high levels of customer service from other personnel and departments are less likely to leave the organization. Consequently, companies with low employee turnover and high customer loyalty have larger profits. (Reio, Thomas G., Jr.; Kidd, Cathy A., 2006)
Strong Relation between employee attitudes (used interchangeably with job satisfaction) and organizational performance was identified as job satisfaction and satisfaction with job security were the main factors affect the performance of the organization. In other words, higher return on assets and higher performance of the organization were positively correlated with higher job satisfaction. This included three specific attitude characteristics, Satisfaction with work environment, Satisfaction with security, and Overall Job Satisfaction (Schneider, B., Hanges, P. J., Smith, D. B., & Salvaggio, A. M, 2003)
Knowledge management has impact on the information system and lead to employee satisfaction which affect the turnover rate of the employees and the mainly the information system and employee satisfaction has positive impact on the organization performance (Arisman, 2017)
HRM practices not only enhance the productivity and performance of the employees, but well-designed HRM practices specially appraisal, training and development of the employees may also gain commitment of the employees and may positively affect their attitudes and behaviour as well as the satisfaction of the employees which lead to reduce the turnover rate within the organization. It is further supported empirically that there is a significant relationship effect between HRM practices and organizational commitment and turnover intention (Vimala Kadiresan, Mohamad Hisyam Selamat, Sugumaran Selladurai, Charles Ramendran SPR & Ramesh Kumar Moona Haji Mohamed, 2017)
Conclusion:
As per the studies of the factors affect the performance of the organization they are many factors affect the performance of the organization rather than the employee turnover but most of that studies was generic and on our study we will focus mainly on the voluntary employee turnover as well as the effect of the training and development on the turnover of the employees within the organization.
As per the different studies of the relation between voluntary turnover which is affected by the training and development and the performance of the organizations that the manufacture sector is mainly affected negatively and the performance of the service sector is less affected by the turnover, The effect of turnover is not related to certain level on the organization but might be affected by the size of the organization.
Based on the previous studies and the indications of the apparel industry in Egypt we seem that the effect of turnover will be negatively affect the performance of the organizations as well as will be very costly to the organization specially in losing the knowledge, skills of the qualified operators and loss of productivity as well as the quality of the product in the different stages of manufacturing.
Our study will focus on the voluntary turnover of blue collars operators in the apparel industry in Egypt as they are the key players on this industry and the loss of them means the loss of qualified and high skilled employees and how the level of training and development will affect the rate of turnover within the organization as well as affect the performance of the organization and based on the study of this industry in Egypt it show that new competitors are going on to the market as well as the current producers are going to increase them capacity of production to cover the new demand of the external customers as well as the demand of the local market with less qualified operators which will increase the competition on the qualified operators on the market and increase the turnover rate of the qualified employees.
Theoretical Framework:
As per our conclusion we will study the main variables which are the performance of the organization and voluntary turnover rate within the organization but they are some moderating variables affect the relation between turnover rate and the organization performance will be covered on this study such as the training and development of the employees, next is the definition of each variable will be used on our study:
1- Performance (Phenomena/Dependant variable): as per (Lebas, M. and Euske, K., 2006):
a) Performance is set of financial and nonfinancial metrics linked to the organization objectives
b) Performance should be dynamic and flexible
c) Performance may be illustrated by using a causal model that describes how future results can be affected by current actions.
d) Performance may be understood based on each person involved on the assessment of the organization.
e) The definition of the performance of each organization will depend on its characteristics.
f) The results of the performance should be quantitative
2- Voluntary Turnover(independent variable): the leaving of employee to his organization and need to be replaced with another one to cover his/her work (Mathis, R. L., & Jackson, J. H., 2010)
3- Training and Development (Moderating Variable):
Refers to educational activities within a company created to enhance the knowledge and skills of employees while providing information and instruction on how to better perform specific tasks (Team, 2021)
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