The Effect of Employee Turnover Rate on the Financial Performance of Organizations: The Case of Hibret Bank S.C.

Abstract

This study investigates the relationship between employee turnover and financial performance at Hibret Bank, a leading commercial bank in Ethiopia. The study uses a mixed-methods approach, including a Pearson correlation analysis of turnover rates and gross profit, and thematic analysis of semi-structured interviews with the HR manager, finance manager, and branch manager. The results of the Pearson correlation analysis suggest a moderately negative relationship between employee turnover rate and financial performance, although the lack of statistical significance at the conventional level of 0.05 suggests that this relationship may not be strong enough to draw definitive conclusions. However, the thematic analysis of the interviews revealed several key themes related to employee turnover and its impact on organizational performance, including increased recruitment and training costs, loss of institutional knowledge, decreased productivity, and negative impact on team morale. The managers also discussed various strategies for mitigating the negative effects of employee turnover, including offering competitive compensation and benefits, providing opportunities for professional development and advancement, fostering a positive work environment, investing in training and onboarding for new employees, and tracking employee turnover rates. Based on these findings, we recommend that Hibret Bank take steps to manage employee turnover effectively and maintain financial performance, including conducting a detailed analysis of turnover data, developing targeted retention strategies, measuring financial metrics, and evaluating changes that decrease turnover. Future research could expand on these findings by including more variables, using a larger sample size, and using different research methods.