A firm-level analysis of employee attrition.

Most research on turnover has been conducted at the individual- or job-level of analysis, examining the cognitive processes that precede a jobholder's decision to leave a firm (see Cotton & Tuttle, 1986, for a review). Research conducted at the firm level has typically examined the dysfunctional consequences of turnover, particularly its costs for employers (e.g., Cascio, 1991; Mobley, 1982). Researchers have argued that some employee attrition is functional (e.g., Dalton, Krackhardt, & Porter, 1981; Dalton & Todor, 1979, 1982). They reason that employees who quit because of a recognized lack of fit between their abilities and job demands save managers and firms from further investment in efforts to provide training. Moreover, more costly senior employees can be replaced with less expensive, albeit often less experienced, junior employees.

Regardless of the reason, turnover clearly is consequential for organizations (Mobley, 1982). It has been suggested that some solutions to problematic turnover may be linked to the manipulation of organizationally controlled variables (Bluedorn, 1982; Edwards, 1979; Terborg & Lee, 1984). Further, turnover can be conceptualized as a behavior that is embedded in the context of a firm and its environment, indicating that an understanding of context is critical to an understanding of the behavior (cf. Granovetter, 1985). Thus an argument can be made for the importance of examining turnover as a firm-level variable (Baysinger & Mobley, 1983). There are, however, few published studies that take such a perspective. This void has been previously identified by Baron and Bielby (1980), who argue that firm-level research provides the necessary bridge between investigations conducted at an economic or industrial sector unit of analysis and research at the job or individual level. Recently, Cappelli and Sherer (1991) made a similar argument, suggesting that there has been little success in the past decade at building bridges between macro- and microlevels of analysis.

One likely explanation for the lack of firm-level turnover research is the difficulty associated with obtaining data on turnover and its possible correlates from a heterogeneous sample of firms. A second explanation is the lack of a cogent theoretical model to guide such an effort. Although social stratification theorists have developed propositions to explain the relationship between markets and employment outcomes such as turnover (e.g., Averitt, 1968; Beck, Horan, & Tolbert, 1978; Edwards, 1979), theoretical development at the firm level is lacking (Baron & Bielby, 1980). Further, research at the individual level has gradually reduced the role given to firm-level variables and environmental characteristics in favor of variables that are more easily measured, such as intention to quit (Cappelli & Sherer, 1991; Mobley, 1982). Thus, as Cappelli and Sherer (1991) report, a review of extant turnover studies provides few insights into the role played by external factors.

The purpose of this study is to examine, at the firm level, variables that have been linked to employee turnover in microlevel investigations and to industry turnover rates in macrolevel investigations. Four categories of variables are considered: firm characteristics, firm setting, work force characteristics, and benefit practices. We consider characteristics of a firm (e.g., size, industry, economic sector) to be largely fixed. Turnover explained by these variables is essentially a cost incurred due to a firm's chosen line of business. To a degree, firm setting is also not readily altered. Variance in turnover explained by location might provide information to decision makers about where to locate a facility, but once investment is made, employee attrition becomes a cost of doing business. Work force characteristics are also expected to be related to turnover. Because work force race and gender are difficult and often illegal to manipulate, particularly as a solution to a turnover problem, these too may represent fixed or relatively fixed costs. The final block of variables, benefit practices, are to a large extent within a firm's control. Variance explained by benefits is a portion of turnover that decision makers can manipulate through policies, rules, and procedures.

FIRM CHARACTERISTICS

SIZE

Studies examining the relationship between size and structure (e.g., Blau & Schoenherr, 1971; Hickson, Pugh, & Pheysey, 1969) have found size to be positively correlated with increased differentiation among tasks and functional areas within an organization. Size has also been found to be positively related to the number of hierarchical levels in an organization (Blau & Schoenherr, 1971). Together, these aspects of size would suggest that because of greater structural opportunities for advancement, larger organizations should have relatively lower employee turnover rates. Although size is generally thought to be negatively related to turnover, it should be noted that other researchers have suggested that size may have a negative impact on turnover because of its tendency to create higher levels of worker alienation (Terborg & Lee, 1984).

INDUSTRIAL SECTOR

Averitt (1968), Bluestone, Murphy, and Stevenson (1973), Edwards (1979), and Tolbert, Horan, and Beck (1980) are among those who claim a substantial link between industrial structure and individual work outcomes such as turnover. A distinction is made between oligopolistic (core) and competitive (periphery) industrial sectors that can be used for classifying organizations and their impact on employment. The emergence of these sectors is commonly linked to the development of a core of powerful oligopolistic corporations that grew to dominate the U.S. economy in the late 19th and early 20th centuries. In contrast, the periphery sector is characterized by much smaller firms operating in a relatively competitive environment.

As a result of the differential financial and political powers of the firms in these sectors, workers who are able to secure employment in the core sector theoretically can be assured of an advantage over their periphery sector …