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Labour Turnover and Labour Productivity in a Retail Organization

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Author Info

  • Siebert, W. Stanley

    ()
    (University of Birmingham)

  • Zubanov, Nikolay

    ()
    (Goethe University Frankfurt)

  • Chevalier, Arnaud

    ()
    (Royal Holloway, University of London)

  • Viitanen, Tarja

    ()
    (University of Otago)

Abstract

We study the impact of labour turnover on labour productivity using a panel dataset of 347 shops belonging to a large UK clothing retailer over1995-1999. For the within-shop link – holding constant the shop’s permanent characteristics – we observe an inverted U-shape effect of labour turnover on productivity. The productivity-maximizing rates of FTE-adjusted quits and hires are each about 20% per year, improving productivity by 2.5% compared to the zero turnover level. We explain the difference between this optimal level of labour turnover and its observed average (quits and hires each around 10%) through the costs of hiring estimated at about £600 per hire. By contrast, between shops, there is a positive link between average rates of turnover and average productivity, suggesting that an unobservable management quality factor generates both high turnover and productivity, which we discuss.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2322.

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Length: 29 pages
Date of creation: Sep 2006
Date of revision:
Publication status: published in: Academy of Management Journal, 2009, 52 (2), 294-313
Handle: RePEc:iza:izadps:dp2322

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Keywords: matched employee-firm panel data; retailing; labour turnover; labour productivity;

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References

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  15. Ann P. Bartel, 2004. "Human resource management and organizational performance: Evidence from retail banking," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 57(2), pages 181-203, January.
  16. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
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  18. Meagher, K., 1998. "The Impact of Hierarchies on Wages," Papers 98-16, New South Wales - School of Economics.
  19. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
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