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It’s Not All About a Fat Paycheck
Posted By Vanderbilt Magazine On October 30, 2008 @ 3:11 pm In Bright Ideas, Fall 2008 | No Comments
Let’s say you’re the owner of a widget factory who’s worried about maintaining your talent pool as baby boomers begin retiring from the workforce in droves. In making your business attractive to employees, is your best bet to focus on (a) motivation-enhancing practices such as incentive pay plans, performance bonuses and performance-management systems; (b) skill-enhancing practices like recruiting, training, selection and socialization; or (c) empowerment-enhancing practices that allow employees to participate in substantive decision-making through means such as quality circles, the granting of discretion and authority on the job, and the sharing of information with employees and managers in other work groups?
To find out, Timothy Gardner, associate professor of management (organizational studies) at the Owen Graduate School of Management, looked at 30 years of studies and literature about employee turnover, collaborating with Lisa Moynihan of the London Business School and Patrick Wright of Cornell University.
The researchers also collected data from human resources managers at a leading U.S. food-service distributor with more than 1,700 employees in five core organizations: sales, warehouse, delivery, front-line supervision and merchandising. Their findings, detailed in a study called “The Influence of Human Resource Practices and Collective Affective Organizational Commitment on Aggregate Voluntary Turnover,” were dramatic.
Motivation-enhancing practices had minimal impact on collective employee commitment or turnover. Skill-enhancing practices actually increased voluntary turnover at the aggregate level—a finding Gardner says is not all that surprising. “When you hire better people and train them,” he notes, “they’re more likely to turn over as their value and marketability outside the company increases.”
Empowerment-enhancing practices, by contrast, tended to reduce turnover. HR practices that give employees some level of autonomy and the ability to participate actively in the work group and in the decision-making dynamic proved to enhance the overall level of commitment and link HR practice to organizational outcome, making turnover less likely.
The study suggests that a more sophisticated, balanced approach to human-capital management, focused on achieving collective commitment, is required to tackle the turnover challenge.
“We were able to document that work groups have a common feeling of commitment among members, and that the level of shared commitment predicted whether the work group would have high or low turnover in the subsequent 12 months,” reports Gardner.
“Companies certainly need to hire good people and train them, but it’s simplistic to think that talent alone will provide the key to organizational success,” he adds. “To optimize the return on their investment, companies must also manage their people effectively by ensuring they have the right balance of programs in place to both empower and motivate them.”
What are the practical implications for managers?
“Managers who work to improve the overall collective commitment of their work groups will be rewarded with lower voluntary turnover,” the study asserts. To accomplish that goal, it suggests that managers focus on such empowerment-enhancing practices as grievance procedures, information sharing, and employee input into decision-making.
The study also advises that while the data suggests skill-enhancing practices increase voluntary turnover, significant possibilities to reduce turnover exist by selecting employees based on their propensity to commit to an organization.
The most effective strategy for curbing aggregate turnover, says Gardner, actually lies in a sensible mix of all three areas of HR practice. “Once you have the very best people, you must empower them, which means providing information, authority and opportunity, and then properly motivate them to achieve the desired outcome,” he says. “In other words, it’s the way these talented people are managed that determines whether or not they will remain part of your organization over the longer term.”
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