Workforce churning, human capital disruption, and organisational performance in different technological contexts

• Author: Edoardo Della Torre,Luca Solari,David Sikora,Christopher D. Zatzick
• Date: 01 January 2018
• Published date: 01 January 2018
• DOI: http://doi.org/10.1111/1748-8583.12167

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ORIGINAL ARTICLE

Workforce churning, human capital disruption, and

organisational performance in different

technological contexts

Edoardo Della Torre

1

|Christopher D. Zatzick

2

|David Sikora

3

|

Luca Solari

4

1

Department of Management, Economics and

Quantitative Methods, University of Bergamo,

Bergamo, Italy

2

Beedie School of Business, Simon Fraser

University, Vancouver, Canada

3

College of Business Administration,

Department of Management, Georgia

Southern University, Statesboro, Georgia,

United States

4

Department of Social and Political Sciences,

University of Milan, Milan, Italy

Correspondence

Edoardo Della Torre, University of Bergamo,

Department of Management, Economics and

Quantitative Methods, Via dei Caniana 2,

24127 Bergamo, Italy.

Email: edoardo.dellatorre@unibg.it

Abstract

We assess the influence of workforce churning on the relationship

between organisational human capital and labour productivity.

Building on collective turnover research and human capital theory,

we examine how the components of workforce churning (i.e., volun-

tary turnover, involuntary turnover, and new hires) influence the

relationship between existing human capital and labour productiv-

ity. Further, we examine how this influence varies according to a

firm’s technological intensity. Our data come from 1,911 Italian

manufacturing firms and reveals that collective voluntary turnover

negatively affects the relationship between organisational human

capital and labour productivity regardless of an organisation’s level

of technological intensity. In contrast, collective involuntary turn-

over enhances the relationship between human capital and labour

productivity, and its effect is even stronger for organisations with

more technologically intensive operations. Finally, our results sug-

gest that the integration of new hires disrupts the relationship

between human capital and productivity, particularly for firms with

technologically intensive operations.

KEYWORDS

human capital, Italy, labour productivity, technological intensity,

workforce churning

1|INTRODUCTION

In this period of global competition and technological change, human capital is viewed by organisations as a potential

source of sustained competitive advantage (Nyberg, Moliterno, Hale, & Lepak, 2014). However, the rise in the impor-

tance of human capital has coincided with an increase in workforce churning in terms of greater volatility, diminished

job security, and a greater frequency of job‐hopping (Cappelli, 2000). Workforce churning refers to the inflow and

outflow of employees in an organisation and involves various mechanisms that expand or contract a workforce

Received: 21 July 2016 Revised: 22 May 2017 Accepted: 18 July 2017

DOI: 10.1111/1748-8583.12167

112 © 2017 John Wiley & Sons Ltd Hum Resour Manag J. 2018;28:112–127.wileyonlinelibrary.com/journal/hrmj

including involuntary turnover (i.e., dismissals and layoffs), voluntary turnover (i.e., quits and retirements), and hiring.

As organisations hire and fire employees during a year, there is organisational disruption even if the net employment

change is zero.

Although significant attention has been paid to some of the components of workforce churning(e.g., Mohr, Young,

& Burgess, 2012), few studies have examined them together. For example, several recent meta‐analyses have exam-

ined the relationship between collective turnover (mostly voluntary) and organisational performance (Hancock, Allen,

Bosco, McDaniel, & Pierce, 2013; Heavey, Holwerda, & Hausknecht, 2013; Park & Shaw, 2013). These empirical

reviews demonstrated a significant, negative relationship between collective voluntary turnover and organisational

performance and highlight three important factors needing more research. First, few studies measure what the starting

point is in terms of an organisation’s human capital. We argue that firms with more initial human capital will be harmed

more from workforce churning. Second, these meta‐analyses highlight the absence of information about how new hires

may (or may not) offset the damage caused by voluntary or involuntary turnover. Hence, further investigation is needed

to understand how each component of workforce churning is related to organisational productivity when controlling

for the other components. Third, few studies compared how turnover effects (and other churning components) vary

according to contextual factors, such as the technological intensity of firms’activities.

Building on collective turnover research and human capital theory, this study focuses on how the main compo-

nents of workforce churning (i.e., voluntary and involuntary turnover and new hires) affect the value generated from

having a more educated workforce in different technological contexts. Often, prior research has commingled the

effects of the components of workforce churning on organisational outcomes. For example, researchers posited

that voluntary turnover adds replacement costs in the recruitment and selection of new employees (Allen, Bryant,

& Vardaman, 2010), but few studies accounted for hiring when linking turnover to productivity. In addition, most stud-

ies examined either collective voluntary or involuntary turnover but not both together (Heavey et al., 2013). In order

to better understand how workforce churning influences the relationship between human capital and labour produc-

tivity, we examine the components of workforce churning together. Moreover, given that human capital investments

are greater in companies with higher technological intensity (Boxall, 2011), we also examine how the influence of

workforce churning varies according to the technological intensity of a firm’s activities.

Overall, our findings make several important contributions to the literature. First, by examining the moderating

effects of workforce churning on the relationship between human capital and organisational productivity, we place

a greater emphasis on how employee inflows and outflows influence existing human capital, rather than solely on

the direct relationship of these changes with productivity. Second, we explore how the moderating effect of work-

force churning depends on the level of a firm’s technological intensity. Though high‐tech companies are expected

to rely more on human capital, empirical evidence of the influence of workforce churning in high versus low‐tech com-

panies is lacking. Third, we conducted our study with a sample of Italian manufacturing firms, a context where worker

education is a particularly pertinent source of human capital given that college graduates still comprise a relatively

small share of the Italian workforce (Schivardi & Torrini, 2011). Finally, although labour market flexibility is generally

accepted in the United States, the push for increased labour flexibility continues to gain momentum in many European

countries. By examining the components of workforce churning, we provide insights about thepotential benefits and

costs associated with increased labour market flexibility.

2|THEORETICAL APPROACH AND HYPOTHESIS DEVELOPMENT

Human capital theory proposes that a firm’s productivity lies in the knowledge, skills, and abilities of its employees

(Becker, 1964). Formal education and job experience establish an organisation’s human capital level, as they allow

employees to acquire abilities, intelligence, and skills (Smith, Collins, & Clark, 2005). Human capital can be categorised

as general or firm‐specific, with the latter more closely tied to productivity gains (Becker, 1964). However, researchers

recently argued that there is a tendency to overestimate the positive effects of firm‐specific human capital and to

DELLA TORRE ET AL.113

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