 Regardless
of the amount of their salary, a majority of employees feel they
are compensated unfairly. That’s important for managers, because how
your employees perceive the fairness of their compensation has a
strong effect on employee turnover.
Kathryn Bartol, Robert H. Smith Professor of
Management and
Organization, studied pay raises and pay levels and the effects both
had on voluntary turnover. Her research shows a strong correlation
between low pay raise satisfaction and employee turnover. Employees
use pay raises to gauge the fairness of how they’re being treated
and a perceived lack of fairness appears to make turnover more
likely. Pay raises also seem to convey to employees some information
about their current worth within the organization.
 Bartol
believes that turnover is heavily influenced by the perceived
fairness of pay allocation within an organization. “A lot of times
we hear that people leave because they’ll receive more pay somewhere
else, but this research indicates that people really leave an
organization because of concerns about the fairness of the way they
have been treated based on their pay raises,” says Bartol.
Pay raises seem to indicate to employees how their quickly their
career is progressing within an organization, especially as compared
to others—a phenomenon Bartol calls “velocity.” Employees benchmark
their pay raises in respect to those of others within their
organizations and also with respect to their own previous raises. An
employee who is dissatisfied with pay raises may use the pattern as
a signal that velocity is insufficient, which may drive the employee
to look elsewhere.
The results of this study suggest that organizations and managers
need to pay more attention to pay raise procedures and outcomes. As
raises depend more on performance, which usually involves some
subjective assessment by supervisors, procedural issues become more
complex and are more likely to result in perceptions of inequity and
unfairness. Ultimately, satisfaction with pay depends less on the
dollar value of a raise than on the employee’s perception of
fairness, velocity and his or her own worth to the organization.
But how do you motivate and keep your best employees when your
organization doesn’t have a lot of extra cash? Bartol recommends
employers consider other types of rewards in addition to pay raises
in order to retain their employees. “There are other types of
rewards than pay, and managers need to get away from the notion that
everyone needs the same exact set of rewards,” says Bartol. “One
employee may value a certain training opportunity, while another
wants flex time and a third wants a particular office location. As
long as they are comparable and done in an upfront manner, such
reward combinations can help managers creatively meet workers’ needs
to feel their contributions are valued and the organization is
concerned about their well-being.” |
Remember
the Y2K virus? As the clocks ticked over to January 1, 2000, all
the world’s computers would suddenly reset their internal calendars
to January 1, 1900. Power generators would cease spinning and
communication networks would collapse. It didn’t work out that way,
of course, but on the strength of those fears people stocked up on
cases of
canned
food and bottled water and built shelters in their basements.