'Employee Turnover' is the ratio of the number of employees and officers that has to be replaced in a given time period to the average number of workers. There are evidences that in a competitive environment, employee turnover rates could be much higher. Sometimes this could be costly to a business entity or an organisation. Certain level of turnover is not only unavoidable, but also it can be beneficial. It brings new people into the organisation with new ideas and a fresh perspective. What may be desirable to an employer may be unexpected to an employee. A healthy employee turnover rate, as desired by the policy-makers, is useful to ensure fair practices and better development of the sector.
Like other business entities, a bank management does face the challenge of handling 'employee turnover'. In the context of Bangladesh, over the years, the trends and patterns of employee turnover has changed with the change in market structure, competition and growth. Today, there is growing competition among banks of the country to attract performing bankers to get better services and accrue higher profits.
Taking the advantage of growing availability, in many instances, a number of employees are also in the quest of new jobs. The write- up is an attempt to examine employee turnover behaviour of the banking sector with special reference to Bangladesh.
Form firm/bank points of view, it is generally considered undesirable to have high employee turnover, because this means the office is made up of mostly newly hired employees without many years of experience at the company. Costs are generally related to recruitment and selection, personnel process and induction, training of new personnel and above all, loss of knowledge gained by the employee while on job. Additionally, it results in understaffing which in turn lead to decreased effectiveness and productivity of the remaining staff.
Apart from monetary cost, non-monetary cost such as deteriorated reputations, loss of customer's loyalty, reduced branding trust, etc. may bring long term impact. Turnover may have a negative impact on the employee as well. The individual may lose long-term benefits and may be a victim of the 'grass looks greener' phenomenon.
Alongside cost, both employers and employees could be benefitted out of an employee turnover. A business entity could be benefitted by reducing cost and displacement of poor performers. An employee could be benefitted in the form of career progression, better salary, better position, and social status. From the point of view of an economy, the movement of existing workers among different jobs is an important mechanism facilitating changes in the industry and geographic structure of employment.
In some circumstances, low turnover can be a bad sign. In many instances, distressed businesses maintain very low employee turnover. There are evidences that employee turnover is higher with higher level of growth and employment. To come up with a level that is reasonable, companies often look to industry averages. A goal might be to keep turnover to a level no higher than the average for the industry. Both relatively high and relatively low turnover could be costly. Several tools and instruments are in use in different business organisations to obtain benefits from employee turnover, and to retain good performers. Some of these include exit interviews, training and development, counter offers, knowledge management, forced retention etc. These instruments do not have same or equal effects, and results are different in short and long terms. The ideal targets for an effective Employee Turnover Strategy should be: reducing turnover for high performers; increasing turnover for low performers; and attracting high performers of the sector.
The intensive and continuously increasing competition in the banking sector has brought changes in the trends in turnover patterns. In the initial phases, private sector banks heavily relied on nationalised banks to pick mid- and senior-level bankers. It can be seen that even most of the current chief and top level executives of the private commercial banks were recruited by the then nationalised commercial banks of the country. However, now most shifting takes place among private-to-private sector banks. This could be because of the availability and more similar working environments and technology level in the private sector banks of the country.
Over the years a big chunk of fresh graduates were recruited by the private commercial banks. During 2012 and 2013, nine new PCBs started operation mainly with the hired employees from the private commercial banks of the country. The expanded financial sector has brought greater competition and higher turnover tendency as expected.
A very recent BIBM (Bangladesh Institute of Bank Management) study identified 'compensation' package as the key reason for changing banks by employees. This is particularly true for first and second time change of banks by an employee. In case of third time change, comfortable work environment and relationship with the management are also found to be crucial to a bank employee. Employees also have obtained benefits in the form of obtaining car and housing facilities, and gaining better social status.
There are also several instances of cost incurred by the employees due to changing banks. Especially, compensation to the former banks is the most common cost associated with leaving a bank. In several instances, expectations of the bank employees were not fulfilled in the new banks and they suffered. In some instances, the employees believe they are not that reliable in the new bank, as observed in the BIBM study.
In the context of cost and benefits of employee turnover, business environment is a crucial determinant. In Bangladesh, availability of alternative jobs and growing number of banking and financial institutions are favourable factors for existing employees, especially for the good performers. In connection with availability of the work force, this may also be a matter of comfort to the banks.
However, banks have been facing turnover costs in the form of retaining good performers in their own banks and attracting good performers from other banks. With the setting up of nine new banks, the competition intensified and turnover costs increased for some banks that lost a good number of employees.
On the contrary, because of the availability of ready and experienced bankers, the new banks face less difficulty on the human resource front. Obviously, the new banks had to offer much higher positions and attractive compensation packages to attract the experienced and performing bankers from other established banks. In some instances, there are claims that a few new banks failed to offer the compensation packages that were committed at the time of joining. This caused dissatisfaction in a few instances.
There is no doubt that losing an employee means losing some valuable undocumented learning embedded in the moving out employee. From the employee point of view, a decision to move to another bank should not be based on short-term goals. One needs to be very careful in predicting all monetary and non-pecuniary dimensions of career before switching a bank.
Currently, banks generally do not have well-articulated retention strategy although major employee retention-oriented measures such as keeping salary and other benefits at a competitive level, following a suitable transfer and posting policy, arranging training is more or less regularly practised by the private commercial banks. A bank might face growing turnover difficulties unless the bank strengthens its preparedness to face this challenge. In such a circumstance, it is essential to manage the issue effectively and prudently by the bank management as well as by the other stakeholders.
Dr Shah Md Ahsan Habib is Professor and Director [Training], BIBM. He was the research team leader of the BIBM study on 'Employee Turnover'. ahsan@bibm.org.bd
© 2026 - All Rights with The Financial Express
