The Effect of Staff Turnover on Financial Performance of Private Security Firms in Kenya

A Research Report Submitted to the Chandaria School of Business in Partial Fulfilment of the Requirement for the Degree of Masters in Business AdministrationThe purpose of the study was to assess the effect of employee turnover on the financial performance of private security firms in Kenya. The research questions were; What is the direct effect of staff turnover on the financial performance of private security firms in Kenya? What is the indirect effect of staff turnover on the financial performance of private security firms in Kenya? What mitigation strategies do security firms have in place to manage staff turnover risks? Descriptive research design was used for the study. The population was 30 members firms of Kenya Security Industry Association. A census study was done. Data was collected from 30 head of human resources and 30 head of finance departments of the member firms. Data was collected using a structured questionnaire. Statistical analysis was done using SPSS. Inferences were drawn using Carl Pearson Correlation Coefficient technique. The results were presented in figures and tables. The major findings showed that concerning the direct effect of staff turnover on the financial performance of private security firms in Kenya, there was a statistically significant inverse correlation between financial performance and turnover impact on recruitment costs (r=-.505, p<.05) and lost productivity (r=-.412, p<.05). With regards to the indirect effect of staff turnover on the financial performance of private security firms in Kenya, financial performance was significantly correlated to lost technical expertise (r=-.344, p<.05) and decline in service quality offered to customers (r=-.304, p<.05). The findings on mitigation strategies in place to manage staff turnover risks revealed that majority (52.1%) of the respondents disagreed that training programs were offered to existing employees; 45.9% of the respondents disagreed that their security firm benchmarked salary scales with the best company in the industry; and 75.0% of the respondents disagreed that their company carried out job enlargement programs.The study concluded that staff turnover negatively affected the financial performance of private security firms in Kenya through its impact on recruitment costs and lost productivity. Staff turnover also affected financial performance of private security firms in Kenya indirectly through lost technical expertise and decline in service quality offered to customers. Despite these negative effects, the private security firms did not have any strategies in place to mitigate negative effects of employee turnover on financial performance. It was recommended that private security firms should invest in staff development and retention of core talent in order to contain the high staff turnover and its negative impact on financial performance. In order to preserve technical expertise and maintain the standard of service quality offered by the private security firms, there is need to come up with internal internship programs aimed at the transfer of knowledge and skills from experienced staff to less experienced staff. As a mitigation strategy to minimize negative effects of employee turnover on financial performance, the private security firms need to begin a deliberate program of job enlargement to prepare staff to immediately assume the positions left vacant in order to minimize disruptions that lead to financial loss. In order to generalize the study findings, another study that expands the study scope to include non-members of KSIA could increase the reliability of statistical estimates