Staff turnover and organizational performance: The case of a microfinance organization

Abstract

Aim/purpose – This study examines the relationship between staff turnover and perfor- mance in the microfinance industry in a dynamic perspective and investigates some contingency factors that moderate this relationship. Design/methodology/approach – We ran random-effects and GMM models based on a database of 2,814 branch-month observations from a specific microfinance organization. Findings – It takes three months to see a significant negative impact of turnover on the volume of a branch’s loan portfolio. Moreover, it takes four months after the turnover event for this negative impact to be counterbalanced. After four months, turnover stops having negative consequences and even becomes advantageous in terms of loan portfolio growth, but this positive effect lasts only one month. The effect of turnover thus appears to be particularly limited in time. Finally, we find that the negative relationship between turnover rate and performance is weakened by the seniority level of departing loan offic- ers and by the recruitment rate. Originality/value/contribution – First, this paper examines the duration of the conse- quences of turnover event, which is poorly studied in the literature. Second, it focuses on microfinance, an industry where relational capital is of high importance. Third, it ex- tends the theory on turnover by highlighting that the seniority level of departing employ- ees is a moderator in the relationship between turnover and organizational performance. Keywords: staff turnover, performance, context-emergent theory, microfinance, GMM. JEL Classification: J63, G21