Addressing labour turnover in the New Zealand construction sector: A system dynamics model

Abstract

The construction sector in New Zealand contributes substantially to the country’s national gross domestic product (GDP). However, low labour productivity, workforce instability and high labour turnover among construction organisations have taken a toll on the sector’s performance. This study aims to develop a system dynamics model of labour turnover by investigating the root causes of the labour turnover phenomenon and how they correlate to affect labour turnover in construction companies in New Zealand. A mixed-method approach was used, including a systematic review, questionnaire survey and follow-up interviews, combined with factor analysis, structural equation modelling, and system dynamics modelling techniques. The results revealed 11 critical factors affecting construction labour turnover at an organisational level, namely level of pay, employment relationships, employee welfare, opportunities for career development, commuting distance to work and domestic relationships, fulfilling job profile, physical requirements, training investment, work environment, opportunities for early retirement and workplace ethics. Factor analysis further categorised the critical factors into three categories, namely 1) the nature of the job, 2) employee satisfaction and 3) employer commitment to staff retention and development. The structural equation model identified the interrelationships among these critical factors. The developed structural model describes the interactions among construction stakeholders (e.g., construction workers, construction organisations, industry bodies and, government agencies), latent causes of labour turnover and possible strategies (e.g., long-term labour market programs, workforce retention and development and skills training) for decision making in the sector. The system dynamics model further shows that a high labour turnover rate among construction companies will cause a subsequent decrease in employment growth and low labour productivity over time. While high labour turnover rates take a toll on many construction businesses, the findings from this research will hopefully provide guidance on improvements, which will create a sustainable construction workforce at both organisational and sectoral levels. Overall, the thesis contributes to the body of knowledge and offers practical advice in addressing the critical factors affecting labour turnover. It provides a framework to address labour turnover for workforce retention and development, and a structural model to serve as a guide for development of prescriptive and decision tools for labour turnover in the construction sector. More so a system dynamics model will also provide construction organisations with directions on how to predict their operations and human resource management strategies, influence labour turnover, identify the areas to be improved, and introduce interventions to reduce labour turnover in their individual organisations.