Question

You have been recently hired by a major transnational company. One of your main objectives is to reduce costly employee turnover. Describe your course of action that includes a description of the asymmetric information, signaling, and screening. Can the uncertainty regarding hiring new employees and turnover be completely eliminated? Explain.

Answer 1

Every organization should create a policy that, on a departmental basis, defines a targeted goal for attrition and outlines action steps if the goal is not achieved. The purpose of such a policy isn’t punitive; it’s meant to help managers who are experiencing high turnover find out why and work with them to correct the problem.

With a policy in place that covers all staff and all departments targeting a numerical goal only, the approach is easy. The numbers don’t lie. If a group underperforms, it’s time to examine and assist. And the policy should outline that analysis will result in coaching, training and development, or whatever is needed, to help the manager succeed. If they know that help, not punishment, is available, they may be more likely to seek assistance – even before their numbers soar. Have plans ready to help managers use anonymous surveys, interviews and other tools to determine the cause; then offer coaching, training, and even coursework to turn the problem around.

For the floundering manager, it could be a lifeline. In my experience most bad managers know they’re failing, but their terrified of making that admission. If their turnover numbers trigger intervention, rather than punishment, they’ll be more amenable to assistance. For the new manager, intervention could be the way to transition from “one of the gang” to one who is respected.

For that truly awful manager you’ve had difficulty getting rid of, a turnover policy could be the key to either developing their people skills, moving them away from daily supervisory duties, or showing them the door. If coaching and training just don’t work, you have a clear path to make a change.

When management makes the commitment to reduce employee turnover, the ripple effect is great. Correcting poor management should be looked at as an endeavor in development, not punishment. In the process of targeting and reducing turnover to reduce avoidable expenses, you could end up improving the skill set of your management team and resolving problems that have plagued your company for years. In the end, everybody wins.

I revisited the two common games used to model markets with asymmetric information: the signaling game and the screening game. I compared the set of equilibrium allocations of these two games and I highlighted the differences. Then, I examined a game that combines signaling and screening. I showed that in such a game, the set of pure-strategy equilibrium allocations is not empty, in contrast to that in the pure screening game, and every equilibrium allocation is efficient, in contrast to that in the signaling game.

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