Employee Turnover and Organizational Performance in U.S. Federal Agencies

Abstract

Contrary to received wisdom, could turnover actually be good for an organization? Traditional research on turnover in the public management field treats turnover as a dependent variable, emphasizing its negative role on organizational performance without sufficient theoretical or empirical support. With an emphasis on the type of employee turnover as a situational factor, this research establishes the hypothesized relationships between different employee turnovers—employee transfers, quits, and involuntary turnover—and organizational performance, and tests them using panel data from 2010 to 2014 in agencies of the U.S. federal government. Empirical results challenge the accepted belief about the harmful effects of turnover on organizational performance: Turnover can be beneficial for an organization. The results confirm the relationship differs across the type of turnover involved: Employee transfers have an inverted U-shaped relationship with organizational performance, and involuntary turnovers have a linear and positive relationship with organizational performance. Given the use of a perceptual measure of organizational performance by remaining employees, these results imply that a low-to-moderate level of employee transfers is likely to increase organizational performance and that involuntary turnovers—an elimination of employees who presented poor performance or were involved in misconducts—contribute to improving organizational performance.