Internal Control System and the Employee Turnover in Small and Medium Enterprises in South West, Nigeria

Abstract

The study was on assessment of internal control on the employee turnover in Small and Medium Enterprises (SMEs) in Ekiti, Ogun and Osun states. Three sectors were selected for the study and they were, Food and Beverages, Bakery and Wood Processing. The study was carried out to determine the effect of internal control system on employee turnover and measures to make internal control effective on employee turnover in SMEs. Leadership style and training and development were used as indicators for employee turnover. The population for the study was Four Thousand, Five Hundred and Seventy Six (4,576) registered SMEs under CAMA (2004). The sample size was Three Hundred and Forty Six (346) SMEs in the study area using Krejie and Morgan sample formula, out of which Three Hundred (300) were received from the respondents. Both inferential and descriptive statistics methods were used to analyse the collected data for the study. Inferential statistics used were Ordinary Least Square (OLS) Regression method, while descriptive statistics used were Likert ratings, frequency count, percentage and Relative importance index. Questionnaire were administered to collect the data for the study. The result showed that all types of internal controls existed in most of the SMEs in the study area, though not very effective. The study revealed that personnel management and organisational controls have significant effect on the training and development of the SMEs in the study area having coefficients value of (0.689; = 0.007), (1.162; = 0.000) and (0.886; = 0.012) respectively. It was also revealed that the internal control which significantly has effect on leadership style of the SMEs in the study area includes personnel control (1.093; = 0.000), physical control (0.633; = 0.034), arithmetic and accounting control (0.915; = 0.024), organisational control (0.963; = 0.003), budget and budgetary control (1.132; = 0.008) and supervisory control (0.823; = 0.028). This is an indication that internal control has effect on employee turnover of SMEs in the study area. The conclusion drawn from the study was that moderate positive relationship exists between the internal control and the employee turnover in the SMEs. It was recommended that SMEs should ensure improvement on effectiveness of internal control on employee training and development on the leadership style in order to improve on retention of employee in their organisations. Keywords: Organisation, Leadership Style, Training and Development, Management, motivation DOI: 10.7176/EJBM/15-16-05 Publication date: September 30 th 2023