High turnover rates in face-to-face marketing remain unaddressed, causing significant issues in companies that engage such type of marketing strategy as the main one in their business. The causes of turnover remain neglected, whereas the main focus of the research is placed on the engagement of social media in face-to-face marketing and its influence on customer satisfaction. At the same time, employees in face-to-face marketing have to face unacceptable behavior from individuals with higher positions, endure misunderstandings with executive managers, and find that their needs are neglected (Glassdoor 2017).
The Appco Group, a subsidiary of the Cobra Group of Companies, engages in face-to-face marketing and faces very high employee turnover. The objective of this business report is to understand what strategies and implementations can be taken into consideration to reduce turnover rates at Appco Group. It is important to comprehend what factors cause new employees to leave so soon and experienced employees to break the contract with the company. It appears that the firm is unable to address the issue adequately since the degree of dissatisfaction with Appco Group from former employees appears to be relatively high (Appco Group Scam n.d.). The company does not provide documents or statements about its organizational policies, which might indicate problems with transparency at Appco. Furthermore, employees at Appco Group have to suffer from stressful, unsuitable working conditions, a wage below minimum, and work-life misbalance (Appco Group Scam n.d.). Appco needs to review its organizational policies and leader-follower relationships to improve employees’ working conditions, thus decreasing high turnover rates and improving the company’s effectiveness and employee commitment. The report aims to address these issues by suggesting possible solutions that could reduce the high turnover rates at Appco and ensure that the right employees are recruited for face-to-face marketing. This study, therefore, proposes the following research questions:
- What are the causes of high employee turnover?
- What measures are needed to reduce high turnover rates?
To understand the context within which these questions are to be addressed, the next section provides background information about the company, its current human resource management approaches, and reasons for the high turnover rates.
Appco Group is a marketing agency that provides its customers with face-to-face customer acquisition and sales solutions; it is a subsidiary of the Cobra Group of Companies. The Cobra Group of Companies focuses on developing startups and transforming them into successful businesses. Although Appco positions itself as one of the most successful global field marketing agencies in operations, it continues to endure extremely high turnover rates, employee dissatisfaction, and even investigations conducted by governments of different countries (Appco Group n.d.; Jeong & Safi 2014). The company was accused of various unethical actions and decision-making that included inappropriate sales rituals, mockery, and demeaning punishments, as well as engagement in laundering money collected for charities (Ferguson, Christodoulou & Williams 2016). Viewed against this background, it appears that there is no established and maintained organizational culture at the company and no accepted guidelines for its senior management on how to deal with employees to ensure their commitment using reinforcement and other positive techniques and not based on bullying or punishment. The major reasons why employees leave Appco are presented in Figure 1:
The importance of a leader with strong values, the ability to translate the company’s vision, attention to employees, and understanding how to motivate employees is evident. Authentic leadership can positively influence employee engagement and motivation, as well as increase their trust in the leader. The social exchange approach emphasizes the importance of reciprocity; employees tend to reciprocate when they are treated fairly and with attention or concern by their leaders (Wang & Hsieh 2013). Especially important, in this case, is the employer’s or leader’s willingness, to tell the truth about the company. If an employer fails to translate it to employees, they feel as if they are maltreated, and their motivation to engage in the working process decreases. Therefore, a leader’s openness is crucial for active employee engagement. However, high turnover rates and employees’ opinions suggest that the company fails to be open to new employees about the type of work they will be performing (door-to-door sales). This way, new employees feel they are mistreated and leave the company as soon as they discover the real state of affairs.
Consistency and the ability to hold moral perceptions are also necessary for effective leadership. Consistency between words and actions is also stressed in research about authentic leadership, as well as the leader’s ability to be self-aware and a role model for their employees (Wang & Hsieh 2013). At best, one can describe the leadership style at Apcco Group as lacking, whereas reports from former employees indicate that the managers are unable to provide an effective leadership framework for employees, which results in a turnover (Glassdoor 2017).
The design of the research is a qualitative cross-sectional study with purposive sampling. The cross-sectional study design allowed the researcher to examine the situation at a specific point in time, whereas purposive sampling was chosen to engage employees at specific positions (Managing Director and sales managers). The inclusion criteria for participants were these:
- Former or current employee at Appco
- Has worked at Appco for more than one year
- Worked on-site / in face-to-face marketing
The sample size of the interviewed employees consisted of four people, three of them at similar positions. All participants were former or current employees at Appco Australia and gave their oral and written consent to participate in the research. All interview participants were contacted personally, by phone, or via Skype during the interviews.
The researcher used semi-structured interviews during the research, which consisted of prepared questions relevant to the study objective; overall, 17 questions were prepared. The concepts and issues covered in the questionnaire were the following: human resource management, experience at Appco, motivation, relationship with colleagues/leader, personal characteristics, high turnover rates at Appco, etc. (see Appendix 1).
The data collection process was divided into several steps. During the first step, the author collected data from interviewees using an audio recording device and by taking notes to gather the most relevant information. During the second step, all interviewees were asked to review the notes in case they found any false/misinterpreted or personal information that could potentially expose them. Each of the interviews took approximately 30 to 45 minutes to conduct, whereas the third step, namely interviews analysis and preparation of transcription, took one hour or more to complete each of the interviews.
The author faced the following limitations: several employees recruited for interviewing did not attend the scheduled meeting. The author had to find and contact other employees at the same positions, which interfered with the planned schedule of the research.
Various theoretical approaches will be used in the research: the inductive approach, SWOT and PESTEL analyses, the concept of psychological profile, online and in-person interviews, and observations. The inductive approach aims to build a theory and find a specific pattern (or lack thereof) in the data collected during the research. The analytical tools chosen for the research will include Microsoft Academic Search and Google Scholar Citations to compare analytical data, as well as to conduct author comparisons (e.g. number of publications about HRM and employee turnover available at particular databases, their relevance, and validity).
PESTEL and SWOT analyses are to be used to evaluate the external and internal factors that directly influence the company and examine whether they can significantly affect the causes of high turnover rates at the company. The analyses can also indicate what recommendations and solutions might positively influence the situation.
Appco Group experiences difficulties in finding and maintaining a suitable leadership framework, organizational culture, and HRM strategies for recruitment. The detected identity issue results in discrepancies between managers’ and employees’ view of the company and their perception of the way it functions. As He and Brown (2013) point out, “OI is now recognized as key in efforts to understand strategic change, decision-making, internal conflicts, communication, issue interpretation and response” (p. 4). Organizational identity can determine various processes in the company, including employee-employee and employee-supervisor relationships, organizational climate, strategies chosen and implemented by human resource managers, etc. To evaluate external and internal factors that might influence the company, PESTEL and SWOT analyses will be used.
Political factors that directly influence the company include labor laws, possible trade restrictions (foreign and domestic), and product safety legislation. If face-to-face marketing and direct sales are transformed via labor laws (i.e. an increase or decrease in minimum wage, protection policies for employees engaged in direct sales), the company will need to review its organizational policies about the management of direct sales. As lawsuits were already filed against Appco for mistreatment of employees, the government of various countries where Appco operates might temporarily suspend the company or its branch offices for further investigations.
Economic factors that can influence the company include unemployment, currency rates, and increased competitive advantage in the market. While low unemployment rates will reduce the number of potential employees interested and skilled in face-to-face marketing, high unemployment rates can attract individuals unsuitable for direct sales, thus affecting the company’s effectiveness. Rapid changes in currency rates will directly influence The Cobra Group (Appco Group is a subsidiary of it) by creating additional losses when currencies of other countries are converted into Chinese Yuan.
Social factors that influence the company include population demographics, income distribution, and career attitudes. Young adults and teenagers are more likely to engage in face-to-face marketing, as it requires specific skills such as openness, physical endurance, and the ability to cope with work-related stress. Nevertheless, as employees indicate, the work provided by the company is often exhausting and performance-based, and employees engaged are working for wages significantly below the minimum level (Glassdoor 2017). Income inequality and discrepancies in income distribution might attract more potential employees, but, at the same time, negatively influence the rates of sold products due to customers’ inability to spend money on anything other than necessities.
A technological factor that influences Appco Group is technological advancement. With its development, the company will face significant rivalry from other corporations focused on the development of start-ups and businesses. Appco Group needs to engage technological advancement in its working process, facilitating and making employees work more effectively to cope with the rising competitive advantage of its rivalries.
Environmental factors that influence the company are environmental pressure, industrial activities, and pollutions. The company owns hundreds of branch offices across the world and cooperates with organizations that focus on environmental sustainability and protection. Any industrial activities that might be perceived as harmful to the environment will lead to further deterioration of the company’s image.
Legal factors that influence the company include changes in labor laws and the constitution. If the company continues to provide its employees with wages below the minimum level, it will result in even higher turnover rates and possible legal prosecutions.
In sum, legislations and labor laws that influence face-to-face marketing, any economic crises or inequalities in income distribution, and changes in population demographics can either interfere with or support Appco’s operations. Additional attention should be paid to the inclusion of relevant technology into business, industrial activities that can cause environmental damage, and the possibility of legal prosecutions.
Strengths: the company is an experienced and recognized player in face-to-face marketing, as well as the business operations industry. It owns wide distribution and sales networks located in multiple countries and on different continents. Third-world countries provide the company with a cheap workforce, thus reducing its labor costs. The company’s financial base guarantees support for the development of other projects.
Weaknesses: Lack of organizational culture and leadership framework, potential illegal operations about employees and money laundering, inability to address issues about organizational culture in branch offices, and poorly constructed organizational identity lead to severe distrust from potential employees and stakeholders, resulting in ineffective recruitment and functioning.
Opportunities: If Appco can address HRM issues, its profitability from direct sales will increase significantly. Attention to legal practices and employee ethics will also positively influence the relationships between Appco Group and stakeholders. Once HRM issues are addressed and solved, Appco Group can expand its presence in global markets, including first-world countries.
Threats: Major financial crises, official lawsuits from governments for unethical management, and competitive rivalries can decrease the company’s financial capacity and lead to additional expenditures or losses.
To conclude, the company owns wide distribution networks and can use cheap labor force in third world countries, but illegal operations related to money laundering and unethical behavior of leaders adversely affect the firm’s image. Improved HRM will result in better profitability, but any major financial crises or multiple lawsuits can cause severe losses.
During my interviews with Appco employees that included sales representatives and a Managing Director (MD), I observed that there was a contradiction in the way the MD and representatives’ viewed the company. While the management sees Appco as a supplier, employees tend to perceive that they are working under Apcco directly since offices and branches use the same strategies and policies developed and engaged by the Appco Group. It is impossible to be an effective leader or employer if employees do not share their views on the managerial processes and issues at the company. However, the company’s managers are unable to recognize the problem because they perceive Appco as a supplier separated from their business. At the same time, employees do not view such relationships as a separation of businesses; instead, they believe they are working under Appco directly, despite the different views of their managers. Appco Group does not address this incongruity, which eventually leads to inappropriate decision-making and other demeaning behaviors that were discussed in the previous paragraph.
It appears that Appco Group and its branch offices do not have strict guidelines and frameworks about human resource management and, more importantly, the process of recruitment. Thus, employees recruited for the company find themselves unsuitable for this type of work either due to personal characteristics or because they are misdirected by the company about the duties and responsibilities they will have once they are employed at Appco. The company needs to accept a specific leadership style and promote it to managers and other leaders. The leader with a particular leadership style will be able to translate the company’s mission and vision effectively to new and experienced employees, as well as avoid misunderstandings related to their duties, responsibilities, and rights.
Nevertheless, interviewed employees pointed out that the organizational climate at Appco was positive, and teamwork was effective due to successful communication. However, one of the employees claimed that they did not find enough support; the leader was either not able or not willing to help them, which eventually made them leave the company. As it can be seen, even though the teams within the company can create a suitable organizational climate, the lack of an effective leader, support, and engagement can result in an employee’s decision to leave.
Additional attention should also be paid to the reasons why employees leave Appco. Interviews conducted with employees indicated that the interviewees believe employees might leave Appco due to low or insufficient material reward (i.e. low wages). One of the interviewed persons said that “some of them leave because they want quick money”; thus, employees either view material rewards at Appco as insufficient or believe that they can find better wages in other places of employment.
Evaluation and Application of Appropriate Theories
The conducted analyses and interviews indicate that the firm’s main focus should be on the safety and labor standards, economic environment of the countries where it operates, reasonable and appropriate HRM strategies, and suitable leadership framework. Despite the firm’s wide distribution of networks and branch offices, recognisability, many years of experience in face-to-face marketing and startup business, and solid financial base, it should be aware that any inability to train and work with employees appropriately will not only lead to adverse influence on its reputation but also repel potential employees from face-to-face marketing. Furthermore, Managing Directors and other employees have significantly different views of Appco and its relevance to instructions provided by branch offices of the company. This results in the misinterpretation of the company’s vision and mission, which eventually leads to turnover because employees are unable to understand what the company pursues and what role they play in the company. Appco needs to re-evaluate its leadership frameworks, HRM strategies, and code of business conduct (or create one if it does not exist yet) to address the problem of high turnover. Specific safety and health standards are also necessary to prevent burnout. Recruitment strategies appear to be ineffective; a new recruitment process, possibly based on personality tests and direct HR manager-employee interaction, is needed.
The firm should also investigate all incidents of unethical behavior exposed by leaders and managers to understand the reasons behind it; it is possible that the lacking organizational identity and clear rules of organizational ethics might directly contribute to this problem (Appco Group Scam n.d.).
The theories applicable for the analyzed situation are the following: the psychological profile theory, the theory of the relationship between employee satisfaction and leadership style, the organizational identity theory, and the theory of employee engagement (related to HRM mismanagement).
The psychological profile theory is understood in management as a set of behaviors, traits, and characteristics typical for a person that can define their role in a team or indicate whether they can perform a particular task/job (Carver & Scheier 2016). To evaluate the person’s suitability for a team or a task, human resource managers use psychological profiling or specific tests (e.g. the Locus of Control, Learning Style, Career Aptitude, etc.). Psychological profiling will help Appco understand whether recruited individuals are suitable for face-to-face marketing during the interview with the potential candidate, thus reducing time and capital spent on the recruitment.
The theory of the relationship between leadership style and employee satisfaction emphasizes the influence of such a relationship on organizational performance (Kalshoven & Boon 2012). In particular, ethical leadership can significantly improve employee well-being, which is caused by two-way communication and reinforcement. If the leader is unable to be ethical (trustworthy, caring, fair), their behavior results in the poor well-being of employees, thus affecting the performance of the team(s), and, on a greater scale, the company. When ethical leaders provide job resources such as role clarification or emotional support, employees’ well-being is more likely to remain positive. At the same time, if the organization is unable to provide an ethical leader or if ethical leadership levels are low, HRM can provide the necessary recourses to employees to maintain their well-being (Kalshoven & Boon 2012).
Employee feedback indicates that levels of ethical leadership are low at Appco (Glassdoor 2017). Therefore, it is suggested that HRM should play its role in maintaining employee well-being. HRM at Appco needs to focus on reducing psychological stress (and the following costs) created by working conditions, provide resources for employee commitment, and stimulate personal growth by establishing coaching sessions and workshops for new and experienced employees. As it can be seen from the interviewees’ replies, HRM practices at Appco focus on increasing organizational performance, whereas little attention is paid to employee commitment and loyalty. HRM at Appco needs to become a substitute for ethical leadership that is currently unavailable for employees.
According to He and Brown (2013), organizational identity can be defined as self-referential meaning or identity’s attempt to define itself. OI is formed in part within the dialogue with external stakeholders and can change significantly in time. However, as can be seen from the interviews, Appco suffers from an organizational identity crisis. While managing directors perceive it as a supplier, employees tend to view it as a direct employer.
The theory of employee engagement identifies employee engagement as the feeling of a strong emotional bond to their employer and commitment of time and effort to help the organization perform effectively and successfully (Mishra, Boynton & Mishra 2014). It is important to develop organizational initiatives that will increase employee engagement. Even though employee engagement can be extremely high at their entry into the organization, it can drop drastically after one to five years. It is possible to increase employee engagement by emphasizing internal communication at the organization, asking the leader to be involved in the orientation of employees, the development of their skills, and ensuring their ability to provide/gather feedback.
First, the company needs to address the causes of high turnover rates directly. These include inadequate relationships between the leader and employees, poor organizational policies with regards to employee engagement and encouragement. The company needs to establish clear, ethical, and transparent organizational policies and code of business conduct to regulate any possible inappropriate behavior, displayed by employees, including team leaders and managing directors. To decrease the turnover, Appco can choose and apply a specific type of leadership (ethical leadership or transformational leadership) that will focus on building effective two-way communication between employees and leaders, encouraging support, feedback, and adequate coaching (without any diminishing or humiliating practices). It is possible to conduct surveys among current employees to understand what needs to be changed in the organizational culture at Appco and what unethical behaviors are detected by employees but not addressed. The company’s inability to translate clear organizational identity results in a vague company mission and employees’ inability to understand what they are to do, how they need to do it, and what message they need to send to other potential employees and customers.
To resolve the problem of lacking organizational identity, Appco needs to review its organizational structure and relationships with branch offices. Since employees tend to believe that instructions and corporate behaviors at branch offices are directly related to Appco, the company needs to investigate how employees are mistreated and whether there is any way to stop the mistreatment. As it was suggested, the company needs to choose one leadership framework and integrate it into branch offices to reduce the possibility of reoccurring unethical behavior. Offices that are unable to maintain the preferred leadership style and fail to provide employees with two-way communication and feedback should be considered as unsuitable business partners for Appco since their actions directly influence the company image and lead to losses due to filed lawsuits and hearings.
It appears that current recruitment techniques are not tailored specifically for face-to-face marketing, and, therefore, attract job seekers not suitable for the position. The app needs to create specific recruitment tests that will be based, for example, on multiple personality tests (Locus of Control, MBTI, etc.). Resource managers need to be honest with employees and explain in detail how face-to-face marketing operates and what character traits (openness, persistence, stress resistance, etc.) are crucial for effective and successful performance. If such actions are taken, the company will reduce high turnover rates by recruiting people who know exactly what they are going to do and how they are going to do it. Furthermore, such a recruitment technique will help HR managers reduce the amount of time spent on recruitment and training.
HR mismanagement or inability to recruit competent employees results in confidentiality breaks; the company’s marketing strategy is presented as ineffective by former employees, who find themselves unsuitable for the job (Glassdoor 2017). Since Appco is not an educational facility but a marketing business organization, it needs to ensure that its marketing strategy is available for and presented to those employees effectively in face-to-face marketing.
To improve organizational culture, the company needs to adhere to health and safety standards, i.e. ensure that the working process does not cause adverse effects in employees, such as extreme exhaustion, stress, fatigue, burnout, etc. Furthermore, any abuse, including bullying, sexual harassment, humiliation, etc. needs to be prohibited. If any employee, including executive leaders and managers, is observed abusing other employees, they need to be terminated. The company can establish a particular office that will investigate inappropriate behavior at Appco and branch offices to show employees that their workplace will empower, not diminish them.
Providing work-life balance and flexibility is also crucial when building healthy organizational culture and environment. As some of the employees have complained about lengthy and exhausting work schedules (more than 12 hours per day), the company needs to provide more flexibility in scheduling, allowing employees to regulate their working days so that their work-life balance is restored. Furthermore, the findings also indicate that the company does not provide paid days off, which can also contribute to high turnover rates. If the company’s rivals provide similar working conditions with higher wages and improved safety standards (as some of the employees indicated in their interviews), it is obvious that potential employees will choose other companies over Appco. Therefore, Appco needs to provide such working conditions that will be equal or better than those of their rivals. Paid time off, flexible working schedule, healthy work environment, ethical leaders, and effective HRM practices are adequate and efficient measures that directly address the causes of the high turnover rates and can reduce them. If Appco is unable to provide better working conditions for its employees, it will have to cope with a significant waste of time on ineffective recruitment, as well as losses and legal proceedings resulting from it.
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