Employee turnover remains a critical organizational concern, and is likely to become increasingly important. Even with the down economy, retention among high performers has become more difficult due to budget constraints that limit bonus and incentive pay. The Corporate Leadership Council reported in 2010 that 27% of employees considered “high potential” intended to leave their current organization, up from 10% in 2006. This suggests that while the economic downturn may have temporarily abated the talent crunch, competition for top talent remains fierce. Furthermore, as soon as labor markets become more favorable for employees there is likely to be substantial “pent-up” turnover.
How can managers and HR professionals use data and evidence to effectively manage employee turnover and retention Despite the importance of successfully managing turnover, many retention efforts are based on misleading or incomplete data, generic best practices that don’t translate, or managerial gut instinct at odds with research evidence. In previous research and in a forthcoming book, I (along with my colleague Dr. Phil Bryant) take an evidencebased management approach in which we synthesize volumes of academic research on employee turnover into a practical guide to managing retention. Evidence-based management refers to translating knowledge and principles based on the best available scientific evidence into organization practice, enabling managers to make decisions informed by social science and organizational research. A key component of evidence-based management is the integration of research evidence (the science) with experience (the art). Applying research evidence without experience can lead to neglecting important practical realities or the context in which the evidence is being applied. Relying on experience without considering research evidence can lead to neglecting new developments and changing conditions while relying too heavily on a narrow set of experiences that may not apply in new and dynamic situations.
Most HR professionals get plenty of opportunities to develop experience. However, it is more challenging for busy professionals to stay current with research evidence. Employee turnover is one such challenge. There have been thousands of research studies conducted investigating how and why employees make voluntary turnover decisions. However, many managers do not have the time or inclination to read and digest all of this research evidence, and find themselves relying on conventional wisdom or mimicking practices from other organizations. To help busy HR professionals, we developed a systematic review of turnover research to dispel common turnover myths and aid in the development of evidence based retention strategies. One common turnover misconception is that most people quit because of pay.
Kernel of Truth
When we ask managers, executives, HR professionals, and students why people quit jobs, pay is almost invariably the first or second reason provided. It is true that some people quit because they are unhappy with their pay, and that people often quit in order to take higher paying jobs elsewhere. However, the bulk of the research evidence suggests that pay may not be nearly as important as many managers believe. Further, many employee who say they are leaving to take a higher paying job with another organization would never have been looking for that job in the first place unless something drove them to look for an alternative.
What the Research Says
We reviewed the most up-to-date research summarizing the results of hundreds of peer-reviewed studies of predictors of individual turnover decisions. Out of 41 predictors, level of pay was tied for the 30th strongest relationship with turnover. Maybe it is not the level of pay that matters. After all, some people might be quite happy and satisfied with relatively modest pay. Others might be very dissatisfied even with very high pay, especially if the person working near you doing the same job makes more. Evaluations of pay are probably relative. Surely, then, how satisfied or dissatisfied I am with my pay should be a better predictor of turnover? The research suggests otherwise. Out of 41 predictors, pay satisfaction showed the 35th strongest relationship with turnover. Conclusion: despite the widespread belief that pay is an important driver of turnover, pay level and pay satisfaction are relatively weak predictors of individual turnover decisions. So, what are stronger predictors of who is likely to quit? The studies cited above suggest three primary categories of predictors that are more strongly related to turnover: the withdrawal process, notably turnover intentions, individual mobility, and job search; key job attitudes, specifically job satisfaction and organizational commitment; and the work environment, particularly leadership, work design, and relationships with others.
Evidence-Based Management Implications
Extensive research evidence on individual turnover decisions suggests several key points for savvy managers to keep in mind.
- Pay level and pay satisfaction are relatively weak predictors of individual turnover decisions.
- Indicators of the withdrawal process are the strongest predictors of individual turnover decisions. Organizations should measure and manage employee mobility, job search, and turnover intentions.
- Job satisfaction and organizational commitment are key attitudes that are consistent predictors of individual turnover decisions. Organizations should measure and manage both satisfaction and commitment. There is extensive research evidence available for the savvy evidence-based manager on the drivers of these attitudes.
- When measuring attitudes and withdrawal, organizations should use well-developed measures with validation evidence, assess more frequently than annually, and link individual responses to individual behaviors and outcomes.
- The nature of the relationship with one’s immediate supervisor is a consistent predictor of individual turnover decisions. Organizations should provide leadership training to all supervisors and managers, and hold leaders accountable for retention.
- Individuals with clear role expectations, minimal role conflict, and opportunities for growth and advancement are less likely to quit. Organizations should train managers on the importance of providing clear role expectations, design organizational processes to minimize role conflict, and develop and communicate career paths, especially to highly valued employees.
- Individuals linked by positive relationships with others in the organization are less likely to quit. Organizations and managers should work to foster positive relationships among co-workers, provide opportunities for interaction, and help newcomers form and develop relationships.
Final Thought
It should be good news that pay is not the most important driver of turnover. Revamping compensation systems, paying considerably above market, and throwing money at valuable employees can be complicated and expensive. Many of the recommendations provided here are less expensive to implement, more likely to have a positive impact, and thus, likely to provide a greater return on investment.
If you’d like more information, check out our forthcoming book at www.businessexpertpress.com, or contact me at
dallen@memphis.edu.