LIMITATIONS OF THE UNFOLDING MODEL OF VOLUNTARY TURNOVER Exploring the role of age in voluntary turnover processes

LIMITATIONS OF THE UNFOLDING MODEL OF VOLUNTARY TURNOVER Exploring the role of age in voluntary turnover processes

Master thesis, MscBA, specialization Human Resource Management University of Groningen, Faculty of Management & Organization

Feb., 2008

LENNART TEN HOVE Student-number: 1386948

Vechtvliet 15 7721 BS Dalfsen Tel: +31 (0)529-433817 E-mail: s1386948@student.rug.nl

Supervisor/University J. van Polen

ABSTRACT

This paper initiates further theoretical development of the unfolding model of voluntary turnover by Lee and Mitchell (1994) which describes different turnover paths and decisions by employees when quitting their job. Specifically, it is investigated whether the theory and the results of the model can be generalized to voluntary turnover processes among older employees. The results indicate that both the theory and the major results of the unfolding model of voluntary turnover are likely to be moderate to inaccurate predictors of voluntary leave among relatively older employees.

Implications are discussed.

TABLE OF CONTENTS

ABSTRACT 1

PREFACE 3

INTRODUCTION 5

Shock theory 5

Table 1: Decision Paths 8

Figure 1: Conceptual Framework ‘shocks’ 8

Formulation of main Research Question 9, 10

Main Research Question 10

THEORY 10

Previous research to voluntary turnover 10

Figure 2: The underlying theories 11

Figure 3: The ILM 12

The Unfolding Model 13

Concepts: decision paths 13

images (image theory) 14

screening (Figure 4) 15

Decision paths 16

Specific Research questions (RC 1.1 & 1.2) 18

METHODOLOGY 18

Data collection 18

Data analyses 19

RESULTS 20

Frequently occurring shocks/decision paths 20

Table 2 22

Job offer(s) 23

Job performance 24

Money/Incentives 25

DISCUSSION 27

BIBLIOGRAPHY 30

PREFACE

In contemplating a subject for my final thesis, I came up pretty quickly with the topic of ‘the aging population’. In my early enthusiasm I attempted to write a comprehensive literature review on turnover among older employees, without having concrete research questions. So, hindered by the lack of focus, my superiors advised me to pick a topic regarding age and turnover. I actually ended up studying ‘the unfolding model of voluntary turnover’ (of which more later) due to a suggestion of one of my supervisors. The implications of the model and model-testing seemed to be rather important to the field of turnover and combined with my own interest the model itself would

provide me with a more concise topic: voluntary leave among older employees. Interestingly, this is a rather new topic and I am curious about its developments in the coming years. Facing some difficulties, during the course of research I learned that supervision and feedback plays a crucial role in a working/writing process. Communication and mutual understanding on the goals set, are a prerequisite to a successful completion of probably any project. Add a couple of months to your thesis project, and you will gain the lesson of ‘never doubting oneself’ in the midst of trial and error. As such, I honestly am grateful to my two leading supervisors S.B. de Jong and J. van Polen, and my secondary supervisor P.H. van der Meer, who as I mentioned before, provided me with feedback and suggestions for correction on earlier drafts. A special thank to mr. van Polen for motivating me to finish. I would also like to express my gratitude to both of my parents; my dad, because you enabled me to take on this study and it is surely right that your (last) name is on this thesis. My mom, for creating an environment in which I could relax from time to time and for thoughtfully pointing me to the latest news on age- and work-issues in the local newspaper. For a thesis project unsuitable, but definitely a high-score in good will and commitment.

I also want to thank my dear girlfriend Hannah, for being so patient. I remember doubting my own

qualities, but you didn’t.

Lastly I thank the Lord Jesus, without whom nothing is possible.

February 2008,

Lennart ten Hove

INTRODUCTION

The theory that will be explored is the unfolding model of voluntary turnover- also known as shock- theory. Contrary to the majority of literature on voluntary turnover, the unfolding model of

voluntary turnover predicts that ‘shocks’ rather than job (dis)satisfaction predict most voluntary turnover. Job dissatisfaction induced voluntary turnover is a fact, yet it is wrongly viewed as the most important cause of voluntary leave according to Holtom et al (2005). Rather, one should look at certain ‘precipating events’ which are called ‘shocks’ as the major drivers of voluntary turnover.

A shock is defined as a particularly “jarring event that initiates the psychological processes involved in quitting” (Holtom, Mitchell, Lee and Inderrieden, 2005, p.339). For example, an employee is being passed over for a promotion or a merger/acquisition of the company he/she works for occurs. Furthermore the theory, (based on interviews conducted with voluntary leavers together with a review of voluntary turnover literature by Lee and Mitchell, 1994), proposes that, although people experience distinct circumstances when they leave, employees generally follow one of four psychological and behavioural-’pathways’ or ‘paths’ that ultimately lead to voluntary leave (they will be described in more detail in the theory section). These four paths were able to describe as much as 90% of voluntary leaving behaviour. Importantly, in three paths a shock was the major precipating event that ultimately lead to a voluntary leave- this in stark contrast with for example job satisfaction’s predictive power (3.6%, Lee et al.1996, 1999). Therefore the authors highlight that organizations should seek to systematically address shocks if they want to be effective in preventing voluntary turnover (Holtom et al, 2005).

It would be interesting to find out whether addressing these ‘shocks’ prevents voluntary turnover

among older employees as well as for younger or middle-aged ones. Indeed, in this theory no

distinction is made between age groups, though there might be some reasons why this should be

done. Before we discuss them, it is important to define what kind of voluntary quits exactly are

included and what is meant by ‘shocks’ more specifically. Voluntary leave occurrences supposedly

initiated by ‘shocks’ excludes voluntary (early) retirements, and as such applies only to voluntary turnover during a person’s employment period. It includes ‘internal turnover’ (a.k.a. occupational mobility without job mobility, Shnyper, 2004, like for instance promotions) as well as job mobility- which occurs when an employee switches employers. Although generally labour mobility decreases with age (Shnyper, 2004) it is difficult to present exact estimates of the number of persons older than 55 that engage in it. Occupational mobility statistics for 2003/2004 indicate that nearly 400,000 ¹ employees of 55-years and older switched occupations ² . Occupational mobility captures the number of persons switching occupations either internally or externally. However, in contrast with ‘shock’ theory it does not take into account persons who take up the same occupation after they switch employer. Also, in ‘shock’ theory voluntary leave is not limited to persons finding another job after they leave.

Although the theory offers an explanation for the entire psychological and behavioural process involved in voluntary quitting, it claims that turnover-prevention policies should be aimed at the major antecedents or initiators of this process: ‘shocks’. A shock is an undeniable, single event prompting a person into a deliberate judgment about his/her job. A shock need not necessarily lead to voluntary leave, but it might. Also, the nature of the event (whether it is experienced positive, neutral or negative, whether it is expected or unexpected, stemming from within or outside the organization) can be of any kind. There are two different types of ‘shocks’ differentiating between personal events outside the job and events that are related to the job/organization. Examples of personal ‘shocks’ are the birth of a child, the death of a relative and a change of jobs by spouse.

Examples of organizational ‘shocks’ are fight with one’s boss, receiving an external job offer and being passed over for promotion.

1

Derived from statistics from the Bureau of Labor statistics (Shnyper, 2004, p.30). 4.3% of approx. 9 million occupational mobilitants equals 387,000 persons.

2

The number of persons engaged in either internal or external repositioning is captured in ‘Occupational Mobility’ statistics. These

however, do not include the number of persons taking up the same occupation as they had with their primary employer after they

leave. In shock theory, voluntary turnover is not limited to persons finding another job after leaving their employer, though that

might be the case.

What happens after a ‘shock’ occurs is summarized in the four pathways. In short, the onset of a certain pathways depends for an important part on personal and organizational contexts that

surround the person experiencing it, whether a person has a pre-existing plan in case a shock occurs and receives an alternative offer or looks for one (Holtom et al 2005). The first pathway to

voluntary leave is initiated by a shock event occurring. Consequently, the person involved tries to

‘mirror’ the event (i.e. the present shock and it’s surrounding circumstances) to past organizational and personal experiences. If the past situation fits the current one, a ‘match’ occurs. In that case a

‘script’ is present (i.e. an obvious response) and a persons already knows how to respond because of past experiences, leading to almost immediate leave without considering or looking for alternative jobs. In pathway two the employee does not have a script ready, and therefore goes on to compare the event (i.e. the present shock and its surrounding circumstance) to his/her personal images (a persons images consist of a persons values, goals and plans for goal attainment). The ‘shock’ event appears incompatible with a person’s images (e.g. ‘image violation’). The person, unwilling to change or adapt their images leaves his/her job without searching for alternatives. Pathway three starts similar to pathway 2, yet in this case the employee arrives in a state of relative job

dissatisfaction after an image violation has occurred, followed by a search for alternatives.

Therefore, in pathway three employees generally take longer before leaving. The pathways are shown in table 1.1. The conceptual underpinnings of ‘shock theory’ are schematically shown in figure 1. Note that the fourth theorized path is not initiated by a ‘shock’, but by a ‘precipating state’

of job dissatisfaction. This path will not be discussed in further detail, because it is not initiated by a

‘shock’, which will be the focus of this paper.

‘Shock’ + it’s surrounding circumstance Table 1 Paths of the

Unfolding Model

Attribute 1 2 3 4A 4B

Initiating event Shock Shock Shock Job

dissatisfaction Job

dissatisfaction

Scripts/plan Yes No No No No

Image violation Irrelevant Yes Yes Yes Yes

Relative job dissatisfaction Irrelevant Irrelevant Yes Yes Yes

Alternative search No No yes No Yes

Offer or likely offer No No Yes no Yes

Time Very short Short Long Medium Long

Source: Holtom et al 2005.

Figure 1: A conceptual framework of ‘shock theory’

Compared to

Personal Images (values, goals, plans for goal attainment)

Construct a frame of reference of personal and organizational experiences

Match

Script-driven decision (Pathway 1)

No match

Incompatible (An image violation occurs)

Compatible The employee stays

A person thinks of quitting* a.k.a. mental deliberations.

Change image

Relative job dissatisfaction Leave without search for alternatives (Pathway 2)

Initiation of comparison job alternatives

with current job (Pathway 3)

Tests of the ‘shock’ theory are promising when it comes to describing the voluntary turnover processes and proposing ‘shocks’ as the major initiating events that lead to voluntary leave.

Interviews showed that certain ‘shocks’ lead to voluntary leave more frequently than others. For example external job offers were one of the most frequently occurring shocks that initiated voluntary leave. Older employees however, probably receive much less external job offers (and internal ones for that matter) than their younger colleagues. Knowledge on such types of shocks can serve as a good unit of analysis to investigate whether shocks also initiate voluntary leave among older employees or for example, to a lesser degree than among younger employees. Organizations and managers will value this information when they do not have the time or resources available to conduct an extensive turnover survey themselves about the major ‘shocks’ in their organization or industry (as is suggested by Holtom et al). Moreover, this will allow them to fine-tune their turnover prevention strategy to retaining valuable older employees which can become particularly useful in times of future labour scarcity. In short, this paper will show with the use of existing literature that future research on shocks is needed to determine exactly which shocks have what type of impact on voluntary leave among relatively older employees. Though in some cases inconclusive, the existing literature shows enough proof to justify future research on this issue. As such, limitations of the existing ‘shock’ results (summarized in Holtom et al, 2005) with respect to the older age group are showed.

The subject of older employees in the workplace is likely to become an increasingly important topic during the next decades, with over 20% of the workforce positioned in the 55-years and older age group (an increase of almost 50% between today and 2015 in the U.S (McMahan, Sturz 2006). The authors make it clear that organizations should start to address ‘shocks‘ if they want to be effective in retaining employees. However, what kinds of ‘shocks’ to address might be dependant on a persons age (i.e. ‘shocks’ are age-related). This knowledge will help HR- managers to apply the right measures to retain the age group 55-years and older.

To sum up, the main research question that will be dealt with is:

Do shocks initiate voluntary turnover processes for older employees?

We will go on with a more extensive summary of the theory of ‘shocks’ accompanied by a review of the empirical findings on types of ‘shocks’. Three types of ‘shocks’ and their unique relation to older employees is showed with the use of other literature. .

THEORY

With the exception of a few theoretical additions, ‘shock’- theory utilizes concepts from both

‘push’- and ‘pull’-theory to understand what causes employees to voluntarily leave an organization (Lee and Mitchell, 1994). Pull-theorists aim to understand the causes of voluntary turnover through concepts external to the employee. For instance, they may focus on (the perception of) job

alternatives as the antecedent to voluntary turnover. As such, pull-theory tends to view labour demand and supply as the major initiators to voluntary leave. Push-theory on the other hand, looks to job perceptions and job attitudes as the major causes of voluntary employee turnover. For example, the links between certain job attitudes like job satisfaction and turnover are defined and tested in this area of research. Though these theories had been studied separately, it was expected that their combined effort would increase understanding of voluntary turnover (Hulin, Roznowski and Hachiya, 1985). The unfolding model integrates concepts from both theories to

explain/describe the voluntary turnover process and/or behaviour (see also figure 1).

One of the first papers to combine push- and pull theories to explain voluntary leave was probably

that of March and Simon (1958), in which it was suggested that voluntary employee turnover is a

product of an individuals perceptions about the ‘ease and desirability of movement’. During the

course of additional research, the concept ‘ease of movement’ was equated to job alternatives and the desirability of movement to job satisfaction (Jackofsky & Peters, 1983). With these two

concepts ready, Mobley (1977) started studying the different ‘linkages’ that connect job satisfaction and voluntary turnover. ‘The Intermediate Linkages Model’ (ILM, figure 2) covering a total of seven psychological steps or links theorized, in short, that job dissatisfaction leads to an alternative job search, which leads to an intention to quit one’s current job if the alternative job is more

attractive than the current one. Empirical testing of the ‘linkages’ showed that the suggested

connections do exist, nevertheless the entire process was an ineffective predictor of voluntary leave.

Figure 2: The underlying theories

Mainly by ‘Psych. oriented’ researchers Mainly by ‘Market oriented’ researchers

What causes an employee to leave an organization?

Use concepts external to the employee to understand voluntary leave

Pull Theory

Focus on supply and demand of labor as antecedents

Example; Focus on job alternatives and how they are perceived

Use concepts internal to the employee to understand

voluntary leave

Push Theory

Focus on job perceptions and attitudes as antecedents

Example; Links between job

perceptions, attitudes, intention to quit and turnover

The Theory of ‘Shocks’ integrates;

- Concepts from both push and pull theory to explain/describe the

voluntary turnover process and behavior.

- Defines conditions when none of them is able to describe

turnover

The seven steps of the ‘Intermediate Linkages Model (ILM) model (Mobley, 1977)

Figure 3

Job dissatisfaction leads to;

1) A person thinks about quitting

2) Evaluation utility of searching another job and costs associated with quitting

3) Intention to search for another job 4) Search for alternatives

5) Evaluate acceptability alternatives 6) Compare alternatives to present job 7) Intention to quit and eventual turnover

Main constructs: Job satisfaction and job alternatives.

Note: It is assumed that employees can also skip steps.

The ILM was extended in 1978 by Mobley, Friggeth, Hand and Meglino with additional labour market, organization, job and personal variables and was tested further in this form in the years following. It was found that differences in job satisfaction levels, expected utility of a present job and an intention to leave existed between persons who left early/almost immediately, those who left later and those who stayed (Youngblood, Mobley, Meglino, 1983).

Just before that, Steers and Mowday (1981) proposed the following process of quitting; they

proposed that a person’s values and job expectations (i.e. ‘met expectations’) influenced affective

job attitudes (i.e. job satisfaction, organizational commitment and job involvement). The affective

job attitudes in turn would influence the intention to leave or stay, and together with several ‘off-

the-job’ (i.e. non-work) variables would lead to an actual intention to quit or stay, which would

predict actual leave or quitting. Steers and Mowday (1981) added that the relation between the

intention to leave and actual leaving actually differs across employees, implying different turnover

processes across employees. For some an intention to leave predicts immediate leave, for others it

leads to an alternative job search (which predicts quitting). Subsequent testing showed that the

relationship between the variables themselves was indeed present in many cases, yet the prediction

of actual turnover occurrences by those variables (again) was rather small ( i.e. the intention to

leave predicted about 6% of leaving, Lee and Mowday, 1987). Perhaps foreseeing these empirical

findings, Hulin et al. (1985) suggested that job satisfaction and job alternatives need not always be

both equally important (or present) in the voluntary turnover process (i.e. temporary workers are more sensitive to job alternatives than permanent staff). Also, due to differing individual and organizational circumstances employees can be expected to focus on different factors (i.e. differing cognitive processes) in the voluntary turnover process and need not be limited to just job

alternatives and job attitudes alone. Rather, voluntary turnover is a combination of labour market variables, job alternatives, different foci and job attitudes.

Voluntary turnover research then mediated to two main directions of research (Lee and Mitchell, 1994). In the first the aim is to deepen the research on job satisfaction and voluntary employee turnover (and the linkages that connect the two). Although the validity and reliability of turnover antecedents (see above) was well-established, this type of research (still) left a large part of the causes of voluntary turnover unexplained (Lee and Mitchell, 1994). Secondly, an approach that incorporates several general withdrawal behaviours like absenteeism and transfers next to turnover to predict voluntary turnover. Lee and Mitchell (1994) do not actually adopt findings from this type of research, mainly because its validity at the time was not yet well-established. Few additional research on this topic has been executed since, with the exception of Donovan (1999) for example, who found some support for the relationships described by the adaptation/withdrawal model.

According to the authors themselves (Lee and Mitchell, 1994) the unfolding model can be seen as a third direction in turnover research based on concepts from the previously discussed ILM by

Mobley (1977) and the extensions by Steers and Mowday (1981) and Hulin et al (1985).

Taking these concepts into consideration; “there appear to be multiple types of turnover decisions and each requires different mental deliberations” (i.e. ‘steps’ of thinking, Lee & Mitchell, 1994, p.

56). Correspondingly, the theory of voluntary turnover presented by Lee and Mitchell (1994) starts

by emphasizing that individuals make different decisions in their voluntary turnover process, thus

allowing for turnover scenario’s in which the concepts mentioned above may or may not apply. The

theory of ‘shocks’ specifies the conditions under which those theoretical insights apply (i.e.

captured in the ‘decision paths’). When they do not apply, additional (voluntary) turnover processes are suggested.

The major additional process applied in the theory is the process of making a decision (i.e. how a decision is made). How a decision is really made is assumed to be covered by ‘image theory’

(Beach, 1990). That theory makes the following assumptions about a decision process ³ ; 1)“Evaluation seldom is extensive”

2)“Choice occurs relatively rarely”

3)“Behaviour largely is pre-programmed”

4)“Decision makers posses a variety of different strategies for making choices, many of which have quite different aims than the maximization of expected utility”

5)The economic view of decision making (i.e. choosing among options) is abandoned.

According to image theory, the most important concept in making decisions is ‘screening’. Instead of focusing on a choice between options (as was frequently done), one should focus on what determines (decision) options if the goal is to understand how a decision is made (this is supported by Beach, 1993); “screening is a mechanism that determines whether incoming information of potential changes in people’s behaviour actually become options in a decision process” (Lee &

Mitchell, 1994, p.57). Specifically, during the process of screening it is estimated by an individual whether “new information can be integrated easily into a set of three domain-specific images” (Lee

& Mitchell, 1994,p. 58). In other words, it is estimated by an employee whether an event or a piece of information (e.g. being passed over for promotion) is compatible to his/her personal images. It is assumed that a person has three types of images;

1) a person’s picture of how things should be, consisting of a person’s values, morals, beliefs, principals and so forth (i.e. the value image);

2) a person’s desired future, mostly in the form of his/her goals (the trajectory image) and

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Taken from Beach (1993, p 272), also described in Lee & Mitchell (1994)

3) a set of plans and strategies which an individual believes to be effective in achieving those goals (the strategic image).

The three types of images serve as private criteria (also called ‘thresholds’) and new information or an event needs to pass these criteria before it becomes a decision option. This process is also called the ‘compatibility test’. Further, “the screening process is based exclusively on violation of fit and is non-compensatory; good (or fitting) aspects do not compensate for incompatible aspects” (Lee &

Mitchell, 1994, 58). There is substantial evidence that compatibility tests are important in job choices (e.g. Caldwell& O’Reilly, 1990; Edwards & Cooper, 1990) which is probably why Lee and Mitchell (1994) adapt this theory. An overview of ‘screening’ is presented in figure 3.

Figure 4: Screening

Often the alternative is compared

to the status quo

The concept of ‘Screening’

New information

Important to understand the logic of a decision path

Compatibility test (the three types of images serving as criteria)

Fit No Fit

Information becomes a decision option

Information is rejected: no decision is made, status quo continues

Decision is made Decision is not made, status

quo continues

People have sets of images (i.e. value, trajectory and strategic) across different life domains. The main domains are work, family, friends recreation and ethics/spiritual (Mitchell & Beach, 1990).

An event or ‘shock’ can cause conflict between domains, slowing down the decision process.

Images are applied in a sequence; “information or options initially are compared to the relevant content domain (e.g. work, recreation) and images (i.e. Is this about my values, goals or actions?) then comparisons are made with the other images, starting with the value image and followed by the trajectory and strategic images. Also, the images can be “more clear or less clear, easy or hard to articulate, and strongly or weakly held” (Lee and Mitchell, 1994, p59) increasing or decreasing the length of the decision process. Furthermore images can be changed instead of rejecting or accepting an event or information. Lastly, multiple options can make it through the compatibility test, in which case the best option is chosen through a ‘profitability test’ (people can use different methods to test profitability, for instance a cost-benefit analysis). Taken together “more information, loose images, multiple alternatives and conflict among alternatives may lead to more cognitive activity”

(Lee and Mitchell, 1994, p59).

With this information in mind, the authors came up with four general decision paths; “a decision path summarizes how employees interpret their work environments and how they identify decision options and enact responses” (Lee and Mitchell, 1994, p60). In the introduction the general

processes involving the decision paths were discussed. Therefore, the decision paths themselves will be discussed in more detail here. Note again that the fourth decision path which is also part of the theory of ‘shocks’ is not included in our analysis, since it is not really initiated by an event or

‘shock’.

In the first decision path, a script is present (naturally even before a shock occurs). After the

occurrence of a ‘shock’ a person’s script is set in action, implying that a person leaves without

hesitation and further consideration of personal or organizational images. No job alternatives are

sought after or received. An example of such a ‘shock’ would be winning the lottery.

In the second decision path, no script or pre-existing plan is present before the ‘shock’. Instead, when the ‘shock’ is compared to a person’s images an image violation occurs, prompting a person to leave without looking for alternatives. In path three a ‘shock’ is incompatible to a person’s images and thus an image violation occurs. The image violation results in thoughts of quitting.

Correspondingly, a person initiates a search for alternative jobs and a comparison between

alternatives jobs and the present job is made. Note that the initial ‘shock’ can also be an alternative job offer. In that case the alternative job offer is compared to the present job. Because this path involves alternative jobs, a large(r) time span is involved in leaving. Finally, note that not all

‘shock’ events can initiate the same turnover path. For example, Lee et al (1999) indicate that job offers can only initiate path one and three. Partly because some amount of cognitive effort is

presumed to follow in the form of comparisons, and partly because a person can have a script ready in case of an alternative job offer (If that company offers me a job, I will take it). In path two

though no job alternatives (including external job offers) are considered nor is there a script present.

For more information about shocks and their accompanying pathways see Lee and Mitchell (1994) and Lee et al (1999), since their relation is not important for the present paper. The decision paths and their attributes are shown in table 1.

Having discussed the theory of ‘shocks’ in more detail, the main research questions can be split up in two sub-questions. The first research question was whether shocks initiate voluntary turnover processes for older employees? As mentioned before, the unfolding model of voluntary turnover argues that most voluntary leave is initiated by some shock, succeeded by an accompanying group of steps which together are called a pathway. Also, if organizations want to be effective in

preventing voluntary leave, they must “systematically address shocks and the critical role of these

shocks in the voluntary turnover process” (Holtom et al, 2005, p.338). So in response to the first

main research question, we could ask ourselves the following questions in trying to answer the main

research question:

1.1 What are the most important/frequently occurring/observed shocks?

and,

1.2 Are these shocks experienced by older employees to the same degree as by younger employees?

Put differently, this paper will investigate whether the ‘shock’ events discovered in empirical research by Lee and Mitchell (1994) can be generalized to older employees.

METHODOLOGY

Data collection

The data used in this research is drawn from two main databases;

EBSCOHost research Database ‘Economic literature and Business source premier’, and EBSCOHost research Database ‘Psychinfo’. The literature review of the unfolding model of voluntary turnover is largely based on two articles, Lee and Mitchell (1994) and Holtom et al (2005) and can both be found in these databases. Firstly, to find out what the most frequently observed shocks are in the research findings of the unfolding model of voluntary turnover, this paper resorted to Holtom et al (2005), in which the authors summarize their findings of over a decade on types of ‘shocks’. The authors used two main samples for research.

In both of them external job offers stood out as one of the most frequently observed shocks. In addition to external job offers, money was recorded as the second most important shock on average.

It is not exactly defined by the authors what is meant with ‘money’. They do mention a pay increase at an alternative job as a possible ‘money shock’ initiating turnover. It is assumed therefore, that

‘money’ can be any type of financial compensation/incentive. External learning opportunities (e.g.

an offered external opportunity for advancement) and merger or acquisition activity follow as the

third and fourth most frequent ‘shock’ respectively (the research results summarized in Holtom et al, 2005, will be discussed in the results section more in-depth). However, very few information could be found on the relationship between these two variables and age (i.e. external learning opportunities and merger/acquisition activity). There were however research results readily available on the relationship between age and the fifth most important shock- job performance issues. Therefore, this paper will discuss several outcomes of previous research on the relationship between age and job performance issues next to external job offers and money.

Such previous research findings will serve as good indicators on whether these shocks are likely to have the same frequency or importance in initiating voluntary turnover among older employees (as compared to, for example, young employees). The previous will be discussed in the first Results section.

Data analyses

As mentioned, external job offers and job performance stood out in both samples as the most frequent shocks that ultimately lead to voluntary turnover occurrences (Holtom et al, 2005). The money variable was the second most frequently indicated shock (see table 2 in the results section).

Whether older employees experience the external job offers, job performance issues and money issues is estimated by using research results from other papers ⁴ that contain information on the relationship between the shock variable and age.

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Being; Hutchens (1986); Scott et al (1995); Hutchens (1988); Ho, Wei and Voon (2000); Wilson, Parker & Kan (2007); Sonnenfeld (1978); Warr, 1993; Avolio, Waldman, McDaniel (1990); Daveri and Maliranta (2007); Judge, Thoresen, Bono & Patton, 2001; Staudinger & Baltes,1996; Spitulnik, 2006; Delp, Haslett and McDaniel,1996; Warr, 2001; Strerns & Doverspike 1989; Cotton & Tuttle 1986; and Darden, Hampton and Boatwright, 1987; Wruck, 2000; Lawler, 1995; Shaw et al, 1998;

Parsons, 1997;, Gupta and Jenkins, 1980; and Powell et al,1994;. Reilly, 2007; Herzberg, 1968;

Scott et al., 1988; Beach's,1990; Beach,1993; Beach and Strom 1989; Beach, Smith, Lundell and

Mitchell, 1988 respectively.

RESULTS

Frequently occurring shocks/decision paths

The results that will be evaluated in this section are research results from Lee et al (1996) using the nursing profession as a sample, results from Lee et al. (1999) sampling accountants, results from Lee, Mitchell, Sablynski, Burton and Holtom (2004) sampling international bank employees, unpublished results using local bank employees, unpublished results from the Department of Corrections of a southern U.S. state (presented in Holtom et al 2005) and finally results from Holtom and Inderrieden (2003) among a group of persons enrolled in the Graduate Management Admission Test (GMAT-test), summarized by Holtom et al (2005). The results are summarized in table 2 on the next page. Note that both samples consist of post-turnover interviews/surveys. As such, in both samples, only persons who had left their job were assessed on ‘shock’ experiences. It would be interesting to know the amount (and age) of employees that experienced a ‘shock’, but decided to stay though no information is given about these types of employees by Holtom et al (2005). It is imaginable (if not very likely), that older employees react differently to ‘shocks’ than younger employees though both experience the same event. For example, two employees have a fight with their boss, of which one is older than 55 years old and the other in his thirties. In response to this the younger person might decide to quit his/her job with or without searching for

alternatives. The older person on the other hand decides to stay because he/she anticipates that finding another job is unlikely (in general older persons are less job mobile than younger ones), or because he/she retires in a few years.

Although Lee & Mitchell (2005) count internal promotion opportunities as possible ‘shocks’, this type of voluntary turnover is not represented in both samples. For example, to asses ‘shocks’ in the GMAT-sample, persons in the GMAT-survey were first asked if they were still employed by the same organization (referring to the job indicated at an earlier survey date), and, if answered with

‘no’ were asked what the main reason for leaving their job was. Furthermore in the sample of

several organizations a sample was collected of employees who had left a particular firm. Older employees might be more sensitive to internal promotions. For example, because of a certain work- history with the company their expectation might be relatively high.

On an aggregate level, more than half of the respondents indicated that they experienced shocks.

Pathway three is the most frequently occurring pathway for any sample. In aggregate it accounts for

83% of the shock-initiated paths. Most shocks were unexpected (91% of the cases), equally divided

across personal and organizational issues (53% and 47% respectively) and rather equally distributed

across the experience qualifications positive, neutral and negative. Across the individual studies

(i.e. all studies except the GMAT-study) as much as 40% of the respondents indicated that external

job offers were the reason for leaving, for the GMAT-study that number was even higher; almost

60%. Chi-square tests revealed that external shocks (like job offers) are rather similar across

employers in different sectors. Other frequently observed shocks across the individual studies were

job performance issues (15%), merger or acquisition activity (13%),

Source: Holtom et al (2005)

and fights with boss or co-worker (11%). Across the GMAT-sample these were money (14%) and external learning opportunities (11%). Although these shock types are important reasons for leaving for employees on an aggregate level, the question rises whether most of them are likely to be

important for the voluntary departure of older employees, which we will discuss below.

Job offer(s)

Holtom et al (2005) indicated that an external job offer is the most frequently observed shock employees experienced, implying that this is one of the most frequently observed shocks among older employees as well. Although research on the relation between age and job offers is rather scarce, the ones discussed here seem to indicate otherwise. The general tendency seems to be that job offers decrease with age, a tendency that is supported by the observation that older employees take longer to be re-employed after they leave or lose their job.

According to Hutchens (1986) and Scott et al (1995) firms that backload compensation (e.g.

compensation that increases with time and/or age) tend to hire younger workers instead of older ones. Firms with backload compensation tend to keep new hiring to a minimum for older employees, because of the large fixed costs associated with them. Thus it is likely that older employees receive less job offers than younger employees from firms that work with backload compensation systems. In addition, Hutchens (1988) found that actual job opportunities decline with age.

Scott et al (1995) found that higher insurance and/or pension costs associated with older persons

negatively affected employment opportunities for older persons, with firms that had (proper) health

care plans. Especially in firms that had relatively costly health care programs the number of newly

employed persons in the age group 55-64 was significantly lower than in firms with less costly

programs. Note that older workers are potentially more expensive to insure. From their research

follows that older employees are likely to receive less job offers from firms that have more

generous health care plans. Also, they observed that such firms “have older employees but not newly hired employees” (Scott et al, 1995, p.783). Thus it follows to reason that older employees are less likely to receive job offers from firms with health care plans (in the U.S.)

According to Ho, Wei and Voon (2000) older workers are more likely to be unemployed than younger workers (in the Hong Kong labour market) and receive fewer job offers than their

counterparts. For example, persons aged between 45 and 54 years old were on average roughly two months longer unemployed than persons aged 25-34. According to their observations, the number of job offers declines with age.

After examining consumer sales and nursing positions in New-Zealand, Wilson, Parker & Kan (2007) conclude that “increasing age has a cumulative, and negative, effect on the selection

outcomes of applicants” (p.38), an observation with is likely to “reduce the probability of receiving a job offer and provide lower returns to job search” (Wilson, Parker & Kan, p. 40, 2007). Note that this result is particularly interesting because the nursing profession was part of the sample of employees used in Lee et al (1996).

Thus, the finding that 40% of the employees across industries and professions indicated that external job offers were their reason for leaving (Holtom et al 2005) is likely to be moderated by age in a negative way.

Job performance

Sonnenfeld (1978) wrote a summary of performed research on the relationship age-performance.

Sadly, the study is not conclusive about the nature of the relationship due to mixed research results.

For example, sales persons are said to experience their peak when they are about 55 years old. Yet

other evidence says that age does not affect manual labour and clerical output much, and thus

affects productivity very little, neither did it seem to affect attendance, or separations. On the other hand, absenteeism rates do seem to increase with age in heavy industry and construction.

Two other papers found respectively that job performance is unrelated to age (Warr, 1993) and that age is a very limited predictor of job performance (Avoid, Waldman, McDaniel (1990).

In a more recent study, Daveri and Maliranta (2007) found that industries in Finland that were not experiencing heavy technological shocks productivity and wages were not affected by seniority almost to the indefinite, in the forest industry. However in the electronics industry the seniority- productivity curve shows a reversed u-shape, meaning that performance would decrease after a certain age. They attribute this mainly due to fast technological change in high-tech industries.

Finally, one’s level of performance can be influenced significantly by factors like type of work, work environment and training (Staudinger & Baltes, 1996, Spitulnik, 2006). Yet older employees generally receive less training and support, which they need more than younger individuals (Delp, Haslett and McDaniel, 1996, Warr, 2001).

Seen from that perspective, employers might actually hinder optimal performance among older workers because they are unwilling to invest in their employees (which in turn may influence job satisfaction levels). In fact, Ho, Wei and Voon (2000) found older workers are already in jobs that offer less training opportunities (in Hong Kong).

On the other hand, it should be noted that older employees are less able to adapt to or acquire new skills which could seriously raise the cost of training them (Strerns & Doverspike 1989).

Although it is a common idea that performance decreases with age, this paper only found little

evidence to support that notion. Instead, the majority of the results of the research discussed here

seem to indicate that it remains rather constant. Also, we found that for older persons other factors

might be the underlying cause of poor job performance. Therefore it is expected that the job

performance variable can be generalized to older persons as well.

Money / incentives

Although it is well-established in several important papers that money is negatively related to general turnover, the major reviews lack an analyses of the effect of the money variable across age groups (i.e. Cotton & Tuttle 1986 and Darden, Hampton and Boatwright, 1987), though the

unfolding model applied the outcomes of such (and other) research to explain the process of voluntary turnover (e.g. job alternatives, luck, inertia, different foci and job attitudes).

Nevertheless, the general consensus seems to be that "compensation systems serve as a selection device, or a way to attract and retain individuals with the desired skill and attribute set, to an

organization"(Wruck, p.280, 2000, Lawler, 1995). Contrary to job performance, the literature on the relation between pay and voluntary turnover seems to be quite conclusive and the results well- established; Shaw et al (1998) investigated the relationship between pay and voluntary turnover, and found that is was negatively related, as did Parsons (1997), Gupta and Jenkins (1980) and Powell et al (1994). Though widely supported, it remains to say that all these papers do not account for (possible) differences in this relationship across age groups. Though there is some (small) evidence that that might be the case. For example, it is known that, at least in the Hong Kong labour market, older persons expect lower wages than before after being unemployed (Ho, Wei and Voon, 2000). Furthermore, Reilly (2007) states that the desire to earn a higher salary declines with age, particularly among older females in the U.S., (though he mentions that this result might differ across society’s layers between the poor(est) and rich(est)).

Finally, Herzberg (1968) argued that employers should be aware of (a distinction between) extrinsic and intrinsic rewards. Scott et al. (1988) show that total motivation is greater if both intrinsic and extrinsic rewards are high for a regular sample of employees.

It is imaginable that employees become more sensitive to intrinsic (e.g. job design) reward sources

instead of extrinsic (e.g. money) ones as they age, for example because they want to spend more

time at home, with hobbies, grandchildren etc. If that is true, it is likely that older employees favour

money/financial incentives less then do their younger peers. There is no evidence though that older persons might value certain job design approaching/changes more than they do compensation.

Money could be less of a ‘shock’ to (older) employees that are/have engaged in deferred payment programs ⁵ which are frequently arranged under conditions of remaining with the company until retirement, or not switch to a competitor (Foote, 1964).

On the other hand, it is also possible that older employees become more sensitive to financial incentives as they age, for example because of the compensation policy in the company they work for. That policy might favour those who stay loyal to the company.

In sum, it cannot be said with surety whether older employees will experience ‘money shocks’ to a lesser degree, or whether they are more or less sensitive to them than younger ones.

DISCUSSION

Since the unfolding model of voluntary turnover does not account for different age-groups in interpreting their results, it makes good sense to expect that the results might apply to younger employees better than to older employees.

The goal of the present research was to investigate whether the shocks job offers, money and performance issues are experienced by older employees to the same degree as younger employees.

With regard to the job offer variable, it was shown that older employees are extremely likely to experience less of them than younger/medium-aged employees do. Consequently, this result of the unfolding model will not be as helpful in retaining older employees, increasing the cost of

preventing voluntary leave without adding to the results.

5

The term usually applies to a form of compensation after retirement

Regarding the money variable we could not be conclusive. That is, it cannot be said with surety whether older employees experience ‘money shocks’ differently or to a lesser/greater extent than younger employees do. There is some reason to suspect that older persons become less sensitive to money as an incentive, for example due to an increasing valuation of extrinsic rewards with a persons age, or due to deferred payment arrangements.

To this day there is almost no research available that makes a distinction across age groups for the relationship money- voluntary leave. Not even the major reviews on general turnover do so (Cotton and Tuttle 1986, Darden, Hampton & Boatwright 1987, Griffeth, Hom & Gaertner 2000).

Therefore, although it is evident that an increase in money/incentives decreases voluntary leave in general (i.e. Holtom et al, 2005 showed that money is an important variable when it comes to voluntary leave) it is difficult to make absolute statements to what degree money would be an effective incentive in retaining (or preventing turnover among) older persons. Future research and publication of information on the moderating effect of money on the relationship age/turnover is needed to battle voluntary leave among older persons more accurately. It is likely that researchers that investigated the money-voluntary leave relationship have data present on the age of their subjects. Such information would be extremely valuable in using money as an incentive to prevent leave among the elderly.

With respect to job performance it was found that lower performance among older individuals

should preferably be first considered in the light of ample training opportunities, type of work and

work environment. In addition we found that job performance remains rather stable with age,

leaning towards decline. We showed that a common cause of this decline is often lack of training. It

is often argued that training older employees is more costly since such employees tend to have a

shorter pay-off period, making training (too) expensive compared to younger employees. However,

there are indications that a reversal going on in the trend of lifetime employment. Job descriptions

change, together with new technologies: “younger people move around more today; older workers,

who get fewer offers to move, are more likely to stay on. What’s more, technology skills no longer

have a very long shelf life, so it doesn’t make sense to withhold training from anyone based on age”

says B. Goldberg, author of Age Works: What Corporate America Must Do to Survive the Graying of the Workforce (Free Press, 2000, Fusaro, 2001).

Also, when the demand for labour will start to increase as predicted (Toossi, Monthly labor review, 2006) it will be worth the time and money to retain older employees by providing the necessary training.

That brings us to a limitation of the current work. Since the amount of voluntary leavers in the 55- years and older age group is relatively small, the information presented here will only be relevant in societies were the scarcity of workers will increase. The practicality of the results lies for a great deal on future prospects of the labour market and/or of a projected labour shortage. Preventing voluntary leave among older employees is likely to cost both extra time and money, and that will only pay off when labour is not available elsewhere. According to the OECD (2004) though, the aging of the population in OECD countries will be substantial. In a research on possible policy reforms that may offset the decrease in participation rates due to aging, they conclude that “the combined effect of possible reforms targeting prime-age women, older workers and youth might suffice to stabilize the average participation rate in OECD countries over the next 25 years but will be insufficient to offset the additional reduction of participation likely to be caused by demographic changes beyond 2025” (OECD, 2003,p. 4). In the U.S. the expectation of a future labour shortage is also expected, mainly due to a large-scale exit of the ‘baby boomers’ generation (Toossi, Monthly Labor review, 2006)

But even in economies like China’s labour shortages are being projected (i.e. Hawser, 2008).

From the outset, the goal of the Lee and Mitchell (1994) was to develop a general theory of

voluntary turnover. This paper investigated whether the corresponding ‘shocks’ can be generalized

across age groups. Through the use of theory, this paper presented ample data to oppose that

statement in the case of job offer ‘shocks’, while for the job performance and money/incentive

‘shocks’ it could not be determined with surety. Until that data is presented, managers looking to retain older employees should be cautious in their interpretation of Holtom et al’s (2005) research results.

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