Browse > Article
http://dx.doi.org/10.13106/jafeb.2021.vol8.no4.0673

Laying Off Versus Training Workers: How Can Saudi Entrepreneurs Manage the COVID-19 Crisis?  

RAIES, Asma (College of Business, Umm Al-Qura University)
BEN MIMOUN, Mohamed (Economics Department, FSEG Sousse)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.4, 2021 , pp. 673-685 More about this Journal
Abstract
This study aims to determine theoretically the best workers layoff/training strategy that entrepreneurs should apply to manage the COVID-19 crisis successfully. It also examines the impacts of the Saudi government's emergency measures on firm performance. The paper develops a theoretical framework in which the optimal control technics is applied to model the entrepreneur's hiring, layoff, and training behaviors. The results show that, during the current COVID-19 pandemic, the entrepreneur should first lay off the less productive workers to reduce labor costs. As more and more inefficient workers quit and profit increases, the entrepreneur starts expanding his activity and training workers. In the long run, only the training activity allows the firm efficiency to grow at a constant rate. This finding suggests that the key to long-run economic recovery in Saudi Arabia will rely on training, innovation, and adaptability to the new digital environment. The paper also shows that the Saudi government initiative of covering 60% of salaries for the small- and medium-sized entrepreneurs during the COVID-19 pandemic will enhance training activities in small- and medium-sized enterprises and improve their efficiency in both the short and long run. This policy will also prevent Saudi entrepreneurs from laying off half of their staff.
Keywords
Layoff; Training; Firm's efficiency; Saudi entrepreneurs; COVID-19;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Mano, Y., AlHassan, I., Yutaka, Y., & Tetsushi, S. (2012). How Can Micro and Small Enterprises in Sub-Saharan Africa Become More Productive? The Impacts of Experimental Basic Managerial Training. World Development, 40(3), 458-468.   DOI
2 McKenzie, D., & Woodruff, C. (2013). What are we learning from business training and entrepreneurship evaluations around the developing world? In: Working paper series (No 116, pp 1-37). The University of Warwick.
3 McElroy, J. C., Morrow, P. C., & Rude, S. N. (2001). Turnover and organizational performance: A comparative analysis of the effect of voluntary, involuntary and reduction-in-force turnover. Journal of Applied Psychology, 86, 1294-1299.   DOI
4 McEvoy, G. M., & Cascio, W. F. (1987). Do good or poor performers leave? A meta-analysis of the relationship between performance and turnover. Academy of Management Journal, 30, 744-762.   DOI
5 Meier, K. J., & Hicklin, A. (2007). Employee turnover and organizational performance: Testing a hypothesis from classical public administration. Journal of Public Administration Research, 18(4), 573-590.   DOI
6 Mohan, P. , Strobl, E., & Watson, P. (2018). In-firm training, innovation and productivity: the case of Caribbean Small Island Developing States. Entrepreneurship and Regional Development, 30 (9-10), 987-1011.   DOI
7 Nguyen, T.L. (2020). Determinants of Talent Retention in Textile and Garment Companies in Binh Duong Province. Journal of Asian Finance, Economics and Business, 7(6) 475-484. https://doi.org/10.13106/jafeb.2020.vol7.no6.475   DOI
8 Nyberg, A. J., & Ployhart, R. E. (2013). Context-emergent turnover CET theory: A theory of collective turnover. Academy of Management Review, 38(1), 109-131.   DOI
9 Lucas, R. (1993). Making of a Miracle. Econometrica, 61(2), 251-272.   DOI
10 Sturman, M. C., Trevor, C. O., Boudreau, J., & Gerhart, B. (2003). Is it worth it to win the talent war? Using turnover research to evaluate the utility of performance-based pay. Personnel Psychology, 56, 997-1035.   DOI
11 Abelson, M. A., & Baysinger, B. D. (1984). Optimal and dysfunctional turnover: Toward an organizational level model. Academy of Management Review, 9, 331-341.   DOI
12 Alhawal, H.M., Nurunnabi, M., & Al-Yousef, N. (2020). The Impact of COVID-19 on SME in Saudi Arabia: A Large-Scale Survey, White Paper 02, | May 2020.
13 Wolor, C.W., Solikhah, S., Fadillah, N., & Lestari, D. (2020). Effectiveness of E-Training, E-Leadership, and Work Life Balance on Employee Performance during COVID-19. Journal of Asian Finance, Economics and Business, 7(10), 443-450. https://doi.org/10.13106/jafeb.2020.vol7.no10.443   DOI
14 Watrous, K. M., Huffman, A. H., & Pritchard, R. D. (2006). When coworkers and managers quit: The effects of turnover and shared values on performance. Journal of Business and Psychology, 21, 103-126.   DOI
15 Weijie, W., & Rusi, S. (2020). Does organizational performance affect employee turnover? A re-examination of the turnover- performance relationship, Public Administration, 98, 210-225.   DOI
16 Wells, D. L., & Muchinsky, P. M. (1985). Performance antecedents of voluntary and involuntary managerial turnover. Journal of Applied Psychology, 70, 329-336.   DOI
17 Rodriguez-Moreno, J., & Rochina-Barrachina, M. (2019). ICT Use, Investments in R&D and Workers' Training, Firms' Productivity and Markups: The Case of Ecuadorian Manufacturing. European Journal of Development Research, 31(4), 1063-1106.   DOI
18 Schlesinger, L., & Heskett, J. (1991). Breaking the cycle of failure in services. Sloan Management Review, 32(Spring), 17-28.
19 Sepulveda, F. (2010). Training and Productivity: Evidence for US Manufacturing Industries. Oxford Economic Papers, 62(3), 504-528.   DOI
20 Shaw, J. D. (2011). Turnover rates and organizational performance. Review, critique, and research agenda. Organizational Psychology Review, 1(3), 187-213.   DOI
21 Shaw, J. D., Gupta, N., & Delery, J. E. (2005). Alternative conceptualizations of the relationship between voluntary turnover and organizational performance. Academy of Management Journal, 48, 50-68.   DOI
22 Baron, J. N., Burton, M. D., & Hannan, M. T. (1996). The road taken: The origins and evolution of employment systems in high-tech firms. Industrial and Corporate Change, 5, 239-275.   DOI
23 Alhawal, H.M., Nurunnabi, M., & Hoque, Z. (2020). Impact of COVID-19: How CEOs respond to SMEs recovery planning in Saudi Arabia, White Paper 03, June 2020.
24 Argote, L., & Epple, D. (1990). Learning curves in manufacturing. Science, 247, 920-924.   DOI
25 Audretsch, D., (Ed.). (1995). Innovation and Industry Evolution. Cambridge, MA: MIT Press.
26 Bartel, A. P. (2000). Measuring the Employer's Return on Investments in Training: Evidence from the literature. Industrial Relations, 39(3), 502-524.   DOI
27 Batt, R., Colvin, A. J. S., & Keefe, J. (2002). Employee voice, human resource practices, and quit rates: Evidence from the telecommunications industry. Industrial and Labor Relations Review, 55, 573-594.   DOI
28 Batt, R., & Colvin, A. J. (2011). An employment systems approach to turnover: Human resources practices, quits, dismissals, and performance. Academy of Management Journal, 54(4), 695-717.   DOI
29 Bishop, J. H. (1990). Job performance, turnover, and wage growth. Journal of Labor Economics, 8(3), 363-386.   DOI
30 Staw, B. M. (1980). The consequences of turnover. Journal of Occupational Behaviour, 1, 253-273.
31 Qing, L., Larry, Q., & Miaojie, Y. (2017). Worker Training, Firm Productivity, and Trade Liberalization: Evidence from Chinese Firms. Developing Economies, 55(3), 189-209.   DOI
32 Park, T. Y., & Shaw, J. D. (2013). Turnover rates and organizational performance: A meta‐analysis. Journal of Applied Psychology, 98(2), 268-309.   DOI
33 Price, J. L. (1977). The study of turnover. Ames: Iowa State University Press.
34 Qing, L., & Ruosi, L. (2016). On-the-job training and productivity: Firm-level evidence from a large developing country. China Economic Review, 40, 254-264.   DOI
35 Rahaman, Md. A., Julfikar Md. A., Wafik, Hm.A., Rahman, Z., Mamoon, Md., & Islam, M. (2020). What Factors Do Motivate Employees at the Workplace? Evidence from Service Organizations, Journal of Asian Finance, Economics and Business, 7(12), 515-521. https://doi.org/10.13106/jafeb.2020.vol7.no12.515   DOI
36 Da Rocha, P., Pero, V. L., & Corseuil, C. H. (2019). Turnover, learning by doing, and the dynamics of productivity in Brazil, EconomiA, 20, 191-210.   DOI
37 Chioma, J., & Nelson, A. (2019). Organizational performance of the staff of the ministry of labour and productivity Port Harcourt. IFE PsychologIA, 27(2), 235-266.
38 Cohen, W. M., & Levinthal, D. A. (1989). Innovation and Learning: The Two Faces of R&D. Economic Journal, 99(397), 569-596.   DOI
39 Dalton, D. R., Krackhardt, D. M., & Porter, L. W. (1981). Functional turnover: An empirical assessment. Journal of Applied Psychology, 66, 716-721.   DOI
40 Dess, G. G., & Shaw, J. D. (2001). Voluntary turnover, social capital, and organizational performance. Academy of Management Review, 26, 446-456.   DOI
41 De Winne, S., Marescaux, E., Sels, L., Van Beveren, I., & Vanormelingen, S., (2019) , The impact of employee turnover and turnover volatility on labor productivity: a flexible nonlinear approach, The International Journal of Human Resource Management, 30(21), 3049-3079.   DOI
42 Elvira, M., & Zatzick, C. D. (2002). Who's displaced first? The role of race in layoff decisions. Industrial Relations, 41(2), 329-362.   DOI
43 Glebbeek, A. C., & Bax, E. H. (2004). Is high employee turnover really harmful? An empirical test using company records. Academy of Management Journal, 47, 277-286.   DOI
44 Hancock, J. I., Allen, D. G., Bosco, F. A., McDaniel, K. R., & Pierce, C. A. (2013). Meta-analytic review of employee turnover as a predictor of firm performance. Journal of Management, 39(3), 573-603.   DOI
45 Jadhav, V., Seetharaman, A., & Rai, S. (2017). Employee Expectation to Demonstrate Innovative Work Behaviour in Asia. Journal of Asian Finance, Economics and Business, 4(1), 67-78. doi:10.13106/jafeb.2017.vol4.no1.67   DOI
46 Hausknecht, J. P., Trevor, C. O., & Howard, M. J. (2009). Unit level voluntary turnover rates and customer service quality: Implications of group cohesiveness, newcomer concentration, and size. Journal of Applied Psychology, 94(4), 1068-1075.   DOI
47 Heavey, A. L., Holwerda, J. A., & Hausknecht, J. P. (2013). Causes and consequences of collective turnover: A meta-analytic review. Journal of Applied Psychology, 98(3), 412-453.   DOI
48 Hewitt, T., & Wield, D. (1992). Technology and Industrialization. In Hewitt T., Johnson H., & Wield D. (eds.), Industrialization and Development (201-221). Oxford: Oxford University Press.
49 Hom, P. W., Lee, T. W., Shaw, J. D., & Hausknecht, J. P. (2017). One hundred years of employee turnover theory and research. Journal of Applied Psychology, 102, 530-545.   DOI
50 Jacofsky, E. F. (1984). Turnover and job performance: An integrated process model. Academy of Management Review, 9, 74-83.   DOI
51 Kacmar, K. M., Andrews, M. C., Van Rooy, D. L., Steilberg, R. C., & Cerrone, S. (2006). Sure, everyone can be replaced . . . but at what cost? Turnover as a predictor of unit-level performance. Academy of Management Journal, 49, 133-144.   DOI
52 Trevor, C. O., & Nyberg, A. J. (2008). Keeping your headcount when all about you are losing theirs: Downsizing, voluntary turnover rates, and the moderating role of HR practices. Academy of Management Journal, 51(2), 259-276.   DOI
53 Koys, D. J. (2001). The effects of employee satisfaction, organizational citizenship behavior, and turnover on organizational effectiveness: A unit-level, longitudinal study. Personnel Psychology, 54(1), 101-114.   DOI
54 Krackhardt, D., & Porter, L. W. (1986). The snowball effect: Turnover embedded in communication networks. Journal of Applied Psychology, 71(1), 50.   DOI
55 Kusumaningrum, G., Haryono, S., & Handari, S. R. (2020). Employee Performance Optimization Through Transformational Leadership, Procedural Justice, and Training: The Role of Self-Efficacy. Journal of Asian Finance, Economics and Business, 7(12), 995-1004. https://doi.org/10.13106/jafeb.2020.vol7.no12.995   DOI
56 Tang, T. L., & Frost, A. G. (1999). Employee turnover revisited: Differences among involuntary turnover, voluntary turnover, and current employees. Journal of Compensation and Benefits, 1, 41-46.