Does organizational performance affect employee turnover? A re‐examination of the turnover–performance relationship
| Published date | 01 March 2020 |
| Author | Weijie Wang,Rusi Sun |
| Date | 01 March 2020 |
| DOI | http://doi.org/10.1111/padm.12648 |
ORIGINAL ARTICLE
Does organizational performance affect
employee turnover? A re-examination
of the turnover–performance relationship
Weijie Wang
1
|Rusi Sun
2
1
Truman School of Public Affairs, University
of Missouri, Columbia, MO, USA
2
Department of Social Sciences, University of
Michigan-Dearborn, Dearborn, MI, USA
Correspondence
Weijie Wang, Truman School of Public Affairs,
University of Missouri, 236 Middlebush Hall,
Columbia, MO 65201, USA.
Email: wangweij@missouri.edu
Abstract
A common problem with using organizational performance
as the dependent variable is the ignoring of feedback effects.
The current conceptualization of the turnover–performance
relationship is mostly unidirectional, focusing on how turnover
affects organizational performance. Only a few scholars have
investigated the possible reverse relationship between turn-
over and performance. Aiming to further the research on the
feedback effect of organizational performance, this study
employed cross-lagged structural equation models that are
especially suitable for modelling the possible reverse rela-
tionships between variables. Data were collected from
public elementary and middle schools in New York City
over a three-year period. The results consistently show
that organizational performance was negatively related to
subsequent employee turnover. This research contributes
to the development of a more valid and comprehensive
understanding of the relationship between employee turn-
over and organizational performance.
1|INTRODUCTION
The employee turnover–organizational performance relationship has been studied extensively in the general
management literature. Several theoretical conceptualizations of this relationship have been developed, including an
inverted-U-shaped relationship (Abelson and Baysinger 1984; Meier and Hicklin 2008; Siebert and Zubanov 2009),
an attenuated negative relationship (Shaw et al. 2005; Ton and Huckman 2008), and a linear negative relationship
(Shaw et al. 2005; Park and Shaw 2013; Hale et al. 2016). In the public management literature, research on the
turnover–performance relationship has been growing but is still limited. Grissom et al. (2016) concluded in their
Received: 18 June 2018Revised: 5 September 2019Accepted: 6 December 2019
DOI: 10.1111/padm.12648
210 © 2020 John Wiley & Sons LtdPublic Administration. 2020;98:210–225.wileyonlinelibrary.com/journal/padm
review of turnover research in public administration that ‘the dynamics of the relationship between turnover and
performance remain uncertain’(p. 247). To name a few studies on the relationship, Meier and Hicklin (2008) studied
teacher turnover in Texas public schools and supported the inverted-U model. Lee (2018) used data from US federal
agencies and found an inverted-U relationship between employee transfer and perceived organizational performance
and a linear positive relationship between involuntary turnover and perceived organizational performance. An (2019)
found an inverted-U relationship between involuntary turnover and the performance of Florida school districts.
The current theorizing of the turnover–performance relationship is mostly unidirectional, focusing on how
employee turnover affects organizational performance. The inverted-U-shaped model, attenuated negative model and
linear negative model alltreat organizationalperformance as the ultimate dependent variablewith little consideration of
the potentialfeedback of performance.However, producingoutputs and outcomes is not the endof organizational pro-
cesses but feedback to organizational decision-making. March and Sutton(1997) argue that a unidirectional account of
how various variables affect organizational performance misses the rich feedback dynamics of organizational perfor-
mance, and thus is likely to failto fully account for the relationships. As the behavioural theory of thefirm contends,
managers constantly compare organizational performance with aspirational levels and make necessary adjustments if
there is a performance shortfall (Cyert andMarch 1962; Greve 2003). For example, organizations may strengthenper-
formance management, or cutslack resources or programmes that do not benefit performance immediately, leading to
an increase in involuntary turnover. In the meantime, these measures may change the psychological contracts that
employees have established with their organizations, or simply produce greater pressure on employees, leading to a
decrease in organizational commitment and an increase in voluntary turnover. Recent research in public management
has also startedto investigate howorganizational performance feedsback to affect managerialdecision-making,risk tak-
ing or performance information use (Meieret al. 2015; Ma 2016;Holm 2017; Nicholson-Crotty et al. 2017).
Unfortunately, only a few scholars have investigated the possible reverse relationship between turnover and
performance (Koys 2001; Glebbeek and Bax 2004; Meier and Hicklin 2008), and existing research has not suffi-
ciently captured the complicated relationship between the two (Grissom et al. 2016). Therefore, we take further
steps to examine whether a reversed relationship exists between employee turnover and organizational performance
with a method that is especially suitable for this task.
We tested our hypotheses using data from public elementary and middle schools in New York City over a three-
year period. Cross-lagged structural equation models were used to model the reverse relationship between teacher
turnover and school academic performance. With different measures of performance and employee turnover, we
found consistently that organizational performance was negatively related to subsequentteacher turnover.
This study has made several contributions: First, the major contribution is the finding of a reverse relationship
between employeeturnover and organizational performance. We find a missinglink and contribute to a more compre-
hensive understanding of the turnover–organizationalperformance relationshipin public organizations. Thefinding has
important research and managerial implications, whichare discussed in detail later. Moreover, our results support
March and Sutton's(1997) view that the feedbackeffect of organizational performance should not beignored in orga-
nization studies. We expand the burgeoning public management literaturethat has investigated the feedback effect of
organizationalperformance (Meier et al. 2015; Holm 2017; Nicholson-Crottyetal. 2017; Hong 2019).Specifically, we
examine performance feedbackon employee turnover, which hasnot yet attracted much attention.
2|LITERATURE REVIEW
2.1 |The impact of employee turnover on organizational performance
Several theoretical perspectives have been developed regarding the relationship between employee turnover and
organizational performance. Cost–benefit theories suggest that the relationship has an inverted-U shape. The idea is
that turnover is not always dysfunctional. At a low to moderate level, the benefits outweigh the costs because poor
WANG AND SUN211
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