EMPLOYEE TURNOVER AND TACIT KNOWLEDGE

DIFFUSION
ABSTRACT:
The main aim of the study is to determine belief of the customers that they think diffusion of
tacit knowledge have the impact on the turnover rate of employees. As human capital is the
intellectual capital so, the organizations have to protect their employees and reduce the turnover
rate. The concept of tacit knowledge is widely used in the knowledge intensive organizations to
refer to all those knowledge that is difficult to codified and have to be transferred by personal
contacts. In order to determine the result and level of impact, the study will analyze the
customers thinking about the variables.
The reasons are derived from the literatures and interviews conducted with the customers of
banking organizations. . A set of 100 questionnaires were designed and distributed to the public.
In this paper diffusion of tacit knowledge and turnover of employees will be discussed.In
particular Pearson correlation has been, certain access-control techniques has been used to
determine the impact of variables and turnover rate of employees as well as importance and
spread of tacit knowledge will be explored.

Introduction:
Human capital management is an important challenge for organizations since their employees are
their most important asset.(GAO,2002;Pynes,2009;Selden,2009).An important part of human
resource management includes management of turnover. Mostly turnover considered to be a bad
thing for organizations thus, turnover rate of employees must be managed.(Cotton and
tuttle,1986;holtom et al.,2005;Mobley,1982).
Employee turnover has bad impact on the performance of organization.turnover of employees is
not all bad,it provides benefits to some organizations in some cases(Abelson and
basinger,1984).an organization is disrupts from turnover because it requires from manager to
divert the resources and takes away organization from its core goals,which affect the

effectiveness of an organization.turnover increases the cost of the organization and

therefore,managers should care about(Seldon,2009).
The late Peter Drucker said that knowledge has become the key economic resource and dominant
and even the only source of competitive advantage is tacit knowledge. tacit knowledge resides in
employees minds and its use relies upon decisions of individuals and relationships(Cross and
baird,2000;fahey and prusak,1998;hinds and pfeffer,2001;lucas,2005).organization can manage
their knowledge resources through diffusion of knowledge in the
organization(herrgard,1930).interest in tacit knowledge diffusion has been rare but it is
increasing(augier and vendelo,1999).use of tacit knowledge makes work smooth and increase the
quality of work.tacit knowledge makes the performance of tasks accurate.
Employees turnover sometimes benefit firms by reducing cost, improving innovation, reduce
poor performers, we focus our attention towards a potential loss of employee turnover and tacit
knowledge(Abelson and Baysinger,1984;Delton et al,1981).in many organizations behind the
turnover rate the reason is lack of interaction and diffusion of tacit knowledge.
Organizations understands the value of sharing and use of tacit knowledge and the disadvantages
of turnover.HRM practices are highly important ,provides managers steps they can take to lower
turnover.
Past research focuses on causes,but not on how knowledge sharing results in individual and
group performance and how it affects turnover rate(Haas and Hansen,2005).
Purpose of the research is to find out different ways to diffuse the tacit knowledge and lower the
turnover rate.There has been some interest in management of tacit knowledge and employee
turnover but the field is still unexplored and not fully understood(Zack,1999).

Literature review :
The term human capital defines that employees are the most important assets whose value can be
increased through investment,and as a result their value also increased the performance capacity
of the organization.(Gao,2000;Selden,2009).An important part of human capital management
includes the managing of the employee turnover rate.Turnover must be managed because it is

considered a bad thing for organizations.(Cotton and Tuttle,1986).High turnover rate affects the
goodwill of the organization.(Rainey,2003;Whitehead,2006).
High turnover rate can also be a sign of poor hiring.(Moynihan and Pandey,2008;Selden,2009).
Employee turnover is an issue because it is costly for organizations to recruit,select,train and
replace the employees who leaved the organization.(Mobley,1982;Price,1977;Staw,1980).
Many researchers written that tacit knowledge is key ingredient in gaining a competitive
advantage.(Gnyawali et al,1997;Kogut and Zandar,1992).Knowledge is considered the most
significant resource of the firm.(Grant,1996b).Knowledge transfer allows members to obtain
more accurate information and reduces the turnover rate.(Gnyawali et al,1997).
Tacit knowledge is difficult to express and transfer.Due to its tacit quality knowledge can not be
easily shared with others.(Nonaka and Takeuchi,1995).Managers must address the processes and
structures that encourage the individuals to share the tacit knowledge.(Cross and Baird 2000).
This type of tacit knowledge play an important role in the strategic planning,performance and
also reduce the employee turnover rate.(Bennett,1998;Brockmann and Anthony,1998).
Key to transfer tacit knowledge is depends upon the willingness and capacity of individuals to
share what they know and what they learn.(Foos et al,2006;Szulanski,1995).One of the important
matter for organizations is managing diffusion of knowledge within the organization.
(Herrgard,2000). Interst in the diffusion of tacit knowledge has been rare but is increasing.
(Augier and Vendelo,1999).employees knows more than they can express. (Polanyi,1966).
Employee turnover may at times benefit firms by improving innovation,eliminating poor
performances and reducing costs,but focusing our attention on a potential disadvantage of
employee turnover and that is the loss of tacit knowledge.(Dalton et al,1981;Abelson and
Baysinger,1984).Organizations are increasingly finding the ways to learn how to share and
transfer tacit knowledge between their employees to reduce the loss of employee turnover.
(Nonaka and Von Krogh,2007).
Various theorists have identified that the knowledge of organizations as a valuable asset.
(e.g.,Floyd and Wooldridge,2000;Zack,1999).

Knowledge of organization is a resource that does not decrease with the usage,rather, the more it
will be used then more it will be created.(e.g.,Nonaka and Konna,1998).
Organizations use intangible resources such as tacit knowledge to combine tangible resources in
different ways to develop the competitive advantage.(Spender,1996).
The problem addressed in this research paper is that when the employees leave the organization
they take their tacit knowledge with them. Our focus on conditions necessary for organizations to
capture the employees tacit knowledge.
Our study offers practical implications for managers dealing with high employees
turnover.Certainly, managers may not be able to stop all employee departures ,but they may able
to control or decrease the negative effects of such departures.
Past researches focuses on causes and implementations but not on how knowledge sharing
effects in turnover rate and performance of the employees.(Hass and Hansen,2005).
The literature has also provided evidence that tacit knowledge sharing leads to lower the turnover
rate.(Gnyawali et al,1997).
In short this paper aimed to set a theoretical foundation for studies on the sharing of tacit
knowledge and lowering the employee turnover rate in the organization.To manage intangible
assets in the organization such as knowledge is considered to be an important capability for
competition.
The current research shows that there is an inverse relationship between the both variables. As
the more tacit knowledge will diffuse between the employees the lesser will be the employee
turnover rate in the organization and if lesser will be the diffusion of tacit knowledge the more
will be the turnover rate in the organization.
Therefore, there is a negative relationship between the variables.
The result of our study and research indicate the need for more research to identify other
characteristics that may potentially moderate the effects of employee turnover.

H0:Tacit knowledge diffusion has significant impact on employee turnover.

H1:Tacit knowledge diffusion has no impact of on employee turnover.

RESEARCH METHODOLOGY:
Research Instrument:
This research is conducted,In order to find out the impact of tacit knowledge diffusion on
employee turnover. Questionnaires were prepared for the findings, these questionnaires were
based on previous findings described in literature review. Questionnaires are high economy (cost
& time), high efficiency of data collection. It includes 18 questions on employee turnover and 5
questions on tacit knowledge diffusion. Questions of employee turnover rate consists of 3 parts
employee turnover rate, relationship between employee turn over and tacit knowledge diffusion
and impact of employee turnover on the performance of the business.Questions of tacit
knowledge include questions about the diffusion of tacit knowledge. A 5 point likert scale was
used in order to specify respondents level of agreement to questionnaires. There were three parts
mentioned as demographic,education level,working experience. For the purpose of research
questionnaire design was adopted. Items in questionnaire were designed to being simple, clear,
short, technical, accurate, and at an appropriate reading level.

Sampling and Data Collection:

The Banking industry is an appropriate business environment that is particularly suitable to test
for the research model and the determinations of the employee turnover and tacit knowledge
diffusion process.
Questionnaires were self administered to respondent employees currently working in the banking
companies. A simple random sampling method used, as it is the most convenient, and the most
applicable
in banking organization.
100 Quaternaries were sent to 100 employees of different banks out that 75 were returned. The
overall response rate for this research is 75%. However, it is found that sample is sufficient to
represent the regression analysis conducted.

Model Construction:.
Two construct were formed on research. First determinant is employee turnover which is
dependant variable, determines the turnover rate of employees in the organizations. Second
determinant is tacit knowledge diffusion which is independent variable that represent that how
diffusion of tacit knowledge influences on the employee turnover rate in the organizations.
Descriptive statistics such as means frequencies was use to identify the major characteristics of
respondents in terms of their gender, age, education level, working experience and working
position.

RESULTS AND DISCUSSIONS:

This section of the paper includes the statistical results of the data and the interpretation on the
basis of correlation and regression analysis of the independent and dependent variables.

Regression Analysis :
Regression is used as a tool to test hypotheses of the study. Regression analysis was performed to
test research objectives on the basis of normality and independence of observation.

Table 1:
SUMMARY
OUTPUT

Regression Statistics
Multiple R

0.750607441

R Square

0.563411531

Adjusted R Square 0.557590351

Standard Error
Observations

0.479808621
77

Multiple R : It is the co efficient of correlation which shows the strength of relationship. Here the
value of multiple R is 0.75 which shows a very high relationship between observed and expected
values.
R Square: It is the co efficient of determination that determines the dependence of dependent
variable on independent variable which is 0.5634 which means 56.34% shows the role of IV to
predict the value of DV. It shows that the variables are strong enough and fit to measure the
concept.
Adjusted R: Adjusted r square in which sample size is adjusted,here values 0.557 explains the
variation of dependent variable due to the variation in independent variable.
Standard Error: It shows the dispersion of Dv around its mean and which is 0.4798.

Table 2:
As per table 2 This table includes the co efficient of the independent variable and their
significant values.
ANOVA
df
Regression

SS
1

MS

Significance F

22.28182849 22.28182849 96.78648839

Residual

75

17.26622346 0.230216313

Total

76

39.54805195

3.8547E-15

Residual SS: The value 17.66 shows number of errors/residual from the regression line.
Total SS: The value 39.54 shows errors/residuals/deviation from its mean.
Regression SS: the value of 22.28 shows number of errors that can be removed or minimized
from regression equation.
MS: regression SS /regression df.it gives the estimates of variance.
F Value: (regression SS/regression df)/(esidual SS/residual df). F value shows the overall model
fitness. Here F value is 96.78 which is greater than 5 so, it means model is fit to explain the
predicting power of Iv over Dv.
Df total: it shows the total number of observations.
Df regression: no.of independent variables.

Table 3:

Coefficient
s

Standard
Error

t Stat

P-value

Lower 95%

Upper
95%

Lower
95.0%

Intercept

0.69489994 0.308624345 2.251604422 0.027275158 0.080088727 1.309711 0.080089

X Variable 1

0.79358409 0.080665083 9.838012421

3.8547E-15 0.632891006 0.954277 0.632891

Co efficient: it shows the slope 0.694 is the Y intercept and 0.793 is the contribution of Ivs,beta
tell each variables contribution.
P value : As P values are less than alpha so,it means we accept H1.

CORRELATION :
The association between dependent variable and in dependent variables is measured via
correlation analysis with a confidence interval of 76% so,the results are highly significant and
generalized.
Correlation between employee turnover and tacit knowledge diffusion:
The correlation between Iv and Dv is 0.76 . so, 0.76 > 0.50 it means there is a positive
correlation between independent and dependent variable. Significant correlation was found
between tacit knowledge diffusion and employee turnover from the result of pearson correlation.

CONCLUSION :
The primary purpose to conduct this research is to compile a preliminary attempt at gaining an
understanding of impact and importance of employee turnover and tacit knowledge diffusion.
Overall, the results of the survey conducted among 77 potential customers reveal that a large
majority of customers perceptions states that:

Tacit knowledge diffusion is helpful for knowledge creation and sharing.

Diffusion of tacit knowledge has strong impact on employee turnover.

The result shows that most people are in favor and believe that diffusion of tacit knowledge has
positive impact. It shows a strong potential for organization to share the knowledge and reduce
turnover rate.
Finally, greater cooperation among the managers and employees is necessary to insure that the
knowledge in the minds of employees is being shared.Organizations should arrange such
activities where collaboration between employees takes place.In this regard,sharing of
information is very important especially in globalized environment where the competition is too
much intense.Therefore,there is a greater need for organizations to continuously exchange and
spread the tacit knowledge and information among the employees.

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