See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/258127919

Compensation, Benefits and Employee Turnover HR Strategies for Retaining

Top Talent

Article  in  Compensation & Benefits Review · September 2013

DOI: 10.1177/0886368713494342

CITATIONS READS

60 21,967

2 authors:

Phil Bryant David Allen

Columbus State University The University of Memphis
22 PUBLICATIONS   695 CITATIONS    74 PUBLICATIONS   8,009 CITATIONS   

SEE PROFILE SEE PROFILE

All content following this page was uploaded by Phil Bryant on 15 August 2016.

The user has requested enhancement of the downloaded file.

 Compensation & Benefits Review
http://cbr.sagepub.com/

Compensation, Benefits and Employee Turnover: HR Strategies for Retaining Top Talent
Phil C. Bryant and David G. Allen
Compensation & Benefits Review 2013 45: 171
DOI: 10.1177/0886368713494342

The online version of this article can be found at:

http://cbr.sagepub.com/content/45/3/171

Published by:

http://www.sagepublications.com

Additional services and information for Compensation & Benefits Review can be found at:

Email Alerts: http://cbr.sagepub.com/cgi/alerts

Subscriptions: http://cbr.sagepub.com/subscriptions

Reprints: http://www.sagepub.com/journalsReprints.nav

Permissions: http://www.sagepub.com/journalsPermissions.nav

>> Version of Record - Sep 27, 2013

What is This?

Downloaded from cbr.sagepub.com at UNIV OF MEMPHIS on October 13, 2014

494342
research-article2013
CBRXXX10.1177/0886368713494342Compensation & Benefits ReviewBryant and Allen

Talent Management
Compensation & Benefits Review

Compensation, Benefits and Employee

45(3) 171­–175
© 2013 SAGE Publications
Reprints and permissions:
Turnover: HR Strategies for Retaining sagepub.com/journalsPermissions.nav
DOI: 10.1177/0886368713494342

Top Talent cbr.sagepub.com

Phil C. Bryant, Assistant Professor of Management and Marketing,

Columbus State University; and David G. Allen, Distinguished Professor of
Management, University of Memphis

Abstract
Employee turnover is recognized as costly and disruptive. The costs of employee turnover often exceed 100% of
the annual salary for the vacated position. Yet managers are often unaware of the full range of tools and tactics
available for effectively managing employee turnover. Based on award-winning research and professional experience,
the article offers managers several strategies for effectively managing employee turnover. Strategies offered include
both compensation and benefits–based solutions and solutions beyond compensation and benefits.

Keywords
turnover, retention, rewards, compensation, talent

Introduction
How can compensation and benefits managers and HR
professionals effectively and strategically manage
employee turnover and retention? That is the thrust of this
article. Retaining talent is important to managers in all
types of organizations. The costs associated with losing
employees and recruiting, selecting and training new
employees often exceed 100% of the annual compensa-
tion for the position.1 In addition to these direct financial
costs, losing employees can also lead to work disruptions,
loss of organizational memory along with tacit or strate-
gic knowledge, losses in productivity or customer ser-
vice, loss of mentors, diminished diversity and even
turnover contagion where other valued employees follow
the leavers out the door.2 Even when tough labor markets
prevent many employees from moving, there is the pos-
sibility of “pent-up” turnover. When job markets improve,
many employees may start looking for new alternatives.
Despite the importance of successfully managing turn-
over, many retention efforts are based on managerial gut
instinct rather than research evidence. In this article, we
synthesize the research on employee turnover into practi-
cal strategies for HR managers.
Compensation, Benefits and
Employee Retention
When we ask our clients why people quit jobs, pay is
almost always the first or second reason provided. Some
people do quit because they are unhappy with their pay.
Also true is that people often quit to take higher paying
jobs elsewhere. You already know that competing for top
talent on price alone (through compensation and benefits)
is a no-win proposition, and in the next section we will
provide several employee retention strategies beyond
compensation and benefits.
That said, however, there are ways to strategically
manage compensation and benefits that are consistent
with strategic employee retention management as well. In
this section, we discuss several aspects of compensation
and benefits in relation to their effects on employee turn-
over: (a) compensation structure, (b) compensation pro-
cedures, (c) types of compensation, (d) the perceived
fairness and equity in compensation and (e) linking com-
pensation and benefits vesting schedules to tenure
requirements.
•• Compensation structure, the amount of pay disper-
sion across organizational levels, matters in
employee turnover. Bloom and Michel3 have
shown that wide gaps between an organization’s
lowest paid and highest paid employees increase
the likelihood that managers and other employees
will voluntarily leave the organization.
Corresponding Author:
Phil C. Bryant, Department of Management and Marketing, Columbus
State University, 4225 University Avenue, Columbus, GA 31907, USA.
Email: bryant_phillip1@columbusstate.edu

Downloaded from cbr.sagepub.com at UNIV OF MEMPHIS on October 13, 2014

172 Compensation & Benefits Review 45(3)
•• Williams, Brower, Ford, Williams, and Carraher4
found that procedures such as determination and
administration of pay raises can affect employee
turnover through their perceptions of organiza-
tional support. Employees’ higher levels of satis-
faction with pay procedures are associated with
higher perceptions of organizational support, which
in turn reduces their likelihood to voluntarily leave.
•• Type of compensation also has an effect on
employee turnover. Beyond pay raises and cash
bonuses, Dunford, Oler, and Boudreau5 have
shown that stock options do have an effect on
executive turnover, and Sutton6 has shown that
companies with higher levels of insurance and
retirement benefits generally experience lower
levels of employee turnover.
•• Heshizer7 found that perceptions of pay fairness
and equity are significant in managing employee
commitment and turnover. Later research8 sup-
ported his findings in that reductions in turnover
were shown to be a result of compensation and
benefits systems that employees perceived as fair
in terms of equity theory.9
•• Finally, studies have shown that many different
vesting schedules for compensation and benefits
can be linked to tenure requirements to have a
positive effect on employee retention. Benefits
with relatively long-term vesting schedules such
as stock options, employee stock ownership plans
and retirement plans have been shown to effec-
tively manage employee turnover.10 The key is to
keep vesting schedules long enough to retain
employees for a reasonable period of time and
short enough to retain their motivational power.
Summary of Compensation, Benefits and
Employee Retention
Although competing on levels of compensation and
benefits alone may not be a strong strategic stance, there
are a few key takeaways regarding compensation and
benefits that can be managed to best retain top
employees.
•• Remember the importance of pay dispersion on
employee morale.
•• Clearly communicate standards and procedures
used for making pay decisions.
•• Go beyond pay raises and cash bonuses for a richer
retention management strategy.
•• Determine and administer compensation and ben-
efits fairly and equitably.
•• Provide benefits and compensation with reason-
ably long-term vesting schedules.
Downloaded from cbr.sagepub.com at UNIV OF MEMPHIS on October 13, 2014
Employee Retention Strategies
Beyond Compensation and Benefits
As suggested in the following scenario,11 the bulk of the
research evidence suggests that pay may not be nearly as
important in managing employee turnover as many man-
agers believe. Imagine the following:
Benjamin is troubled. Generally speaking, he likes his
job, but lately he’s been feeling like his boss doesn’t
appreciate him, and he is worried about his opportunities
for advancement. So, he decides to start looking for
another job. He currently earns $40,000 per year; so his
job search targets only opportunities that make $40,000
or more. He would have to be extremely unhappy to con-
sider taking a pay cut. After a few months of searching,
Benjamin finds another opportunity that pays $48,000
per year. After weighing the pros and cons of staying and
leaving, he decides to take the new job. In the exit inter-
view, Benjamin says it is because he has found a new job
paying 20% more. Benjamin’s boss approaches the HR
manager. She says that a valued employee is leaving
because of his compensation; is there anything the orga-
nization can do? Now the HR manager is troubled. He
would like to keep Benjamin, and the company could
probably counteroffer a few thousand dollars. However,
Benjamin is already near the top of his pay grade, and the
organization is hesitant about setting a precedent encour-
aging employees to seek outside offers to leverage a
counteroffer. Maybe it is time for a new compensation
system. Before jumping to this conclusion, the HR man-
ager asks an insightful question: Is Benjamin really leav-
ing because of his pay?
Benjamin likely would never have been searching for
that higher paying job if he had felt his boss was looking
out for his best interests. Results of hundreds of studies of
predictors of individual turnover decisions12 demonstrate
that out of 35 predictors of individual turnover, level of
pay was tied for the 24th strongest relationship with turn-
over. Is pay satisfaction or dissatisfaction a better predic-
tor of turnover than level of pay? The evidence suggests
not. Out of the 35 predictors, pay satisfaction showed the
27th strongest relationship with turnover.
Despite the widespread belief that pay is an important
driver of turnover, pay level and pay satisfaction are rela-
tively weak predictors of individual turnover decisions.
Our research suggests three primary categories of predic-
tors that are more strongly related to turnover: (a) the
withdrawal process, (b) key job attitudes, and (c) the
work environment.
The predictors with the strongest relationships to turn-
over are those related to the withdrawal process, notably
turnover intentions and job search. Although some indi-
viduals may quit jobs quickly and impulsively, most go
through one or more steps of psychological or behavioral
Bryant and Allen 173
withdrawal first.13 For example, individuals may experi-
ence thoughts of quitting, search for alternatives, evaluate
possible alternatives against their current job, develop
intentions to quit and definitely plan to quit as soon as a
preferable opportunity presents itself.
Being aware of the significance of the withdrawal pro-
cess is important for managing retention for two reasons.
First, it allows managers to intervene in the withdrawal
process before it is too late. Discovering that a valued
employee is leaving after he or she has already decided to
leave is often too late. There are methods of measuring
withdrawal process variables that would enable managers
to take action before employees decide to quit. Second,
there is considerable research evidence about the drivers of
turnover intentions and job search, and this research is con-
sistent with the ultimate drivers of employee turnover.
Key job attitudes, notably job satisfaction and organi-
zational commitment, are also strong predictors of turn-
over and the withdrawal process. Job satisfaction is a
positive emotional state resulting from the subjective
appraisal of one’s job or job experiences.14 Organizational
commitment is the employee’s psychological attachment
to the organization.15 There are two key improvements
many organizations can make in how they assess job sat-
isfaction and organizational commitment: (a) be sure to
use well-developed measures with substantial validation
evidence and (b) measure more frequently and link indi-
vidual responses to important outcomes. Many organiza-
tions assess attitudes only once a year on anonymous
surveys with results analyzed only at the department or
business unit level. Although linkage research of this
nature has some value, more frequent assessment at the
individual level allows for more timely and targeted
interventions. This methodology requires building up
substantial trust in the workforce or working with outside
consultants to collect, analyze and interpret the data.
The next strongest class of turnover predictors includes
key variables related to the work environment, notably
aspects of leadership, work design and relationships with
others. There is considerable evidence to back the state-
ment that “people don’t leave companies; people leave
bosses.” The strength of the relationship an employee has
with his or her immediate supervisor is one of the most
consistent predictors of turnover. Research on leader–
member exchange16 notes that leaders often treat some
subordinates as part of their “in-group” with extensive trust
and access to resources and others as part of an “out-group”
with a more transactional relationship. Those in the in-
group are substantially less likely to leave. When leaders
are made aware of these important distinctions, they can
better manage their relationships with employees.
In terms of work design, role clarity and role conflict
are two of the most consistent predictors of turnover.
Role theory17 notes that individuals hold multiple roles
Downloaded from cbr.sagepub.com at UNIV OF MEMPHIS on October 13, 2014
with expectations that influence behavior. When there is
a lack of clarity concerning role expectations or when
role expectations are in conflict with each other, individu-
als can experience stress, burnout and dissatisfaction and
are more likely to quit. Leaders need to ensure that expec-
tations are clearly communicated and supported. Another
element of work design that is directly relevant to manag-
ing employee turnover is the opportunity for advance-
ment.18 Individuals who believe that there are future
opportunities for growth and advancement are more
likely to stay—even if they are not completely satisfied
with their present circumstances. Organizations would
benefit from proactively managing career paths and
opportunities, and leaders need to communicate with
their employees about these opportunities.
Relationships with others in the workplace, beyond
supervisors, are also important for employee retention.19
Satisfaction with coworkers and work group cohesion are
two of the more consistent predictors of individual turn-
over decisions. Employees can become embedded in a
network of relationships at work that make it less likely
they will leave. Managers can create opportunities for
interaction and design work to foster cohesion. For exam-
ple, designing socialization tactics so that newcomers
interact with other new hires and have positive interac-
tions with experienced organizational members increases
the sense of being embedded in the organization, which,
in turn, increases retention.20
Summary of Employee Retention Strategies
Beyond Compensation and Benefits
In summary, extensive research evidence on individual
turnover decisions suggests several strategic insights
beyond compensation and benefits that can be instrumen-
tal in any organization’s employee retention management
efforts.
•• Pay level and pay satisfaction are relatively weak
predictors of individual turnover.
•• Indicators of the withdrawal process are the stron-
gest predictors of individual turnover decisions.
To manage employee turnover effectively, organi-
zations should consider assessing and managing
employee mobility, job search and turnover
intentions.
•• Job satisfaction and organizational commitment
are key attitudes and consistent predictors of indi-
vidual turnover decisions. Organizations should
consider assessing and managing both job satisfac-
tion and job commitment.
•• When assessing attitudes and withdrawal, organi-
zations should consider using well-developed
measures, measure more frequently than annually
174 Compensation & Benefits Review 45(3)
and link individual responses to individual behav-
iors and outcomes.
•• The nature of the relationship with one’s immedi-
ate supervisor is a consistent predictor of individ-
ual turnover decisions. Organizations should
consider providing leadership training to all super-
visors and managers and should hold leaders
accountable for retention.
•• Employees with clear role expectations, minimal
role conflict, and opportunities for growth and
advancement are less likely to quit. Organizations
should consider training managers on the impor-
tance of providing clear role expectations, design
organizational processes to minimize role conflict
and develop and communicate career paths, espe-
cially to highly valued employees.
•• Employees linked by positive relationships with
others in the organization are less likely to quit.
Organizations and managers should consider
working to foster positive relationships among
coworkers, provide opportunities for interac-
tion and help newcomers form and develop
relationships.
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 risky and expensive. Many
of the recommendations provided in this section are less
expensive to implement, more likely to have an impact
and thus likely to provide a greater return on investment.
Returning to the case of Benjamin at the start of this sec-
tion, it might have been more effective and less costly to
proactively communicate with Benjamin about future
opportunities than to try to come up with a counteroffer
or risk losing a valued employee.
Conclusion
Unmanaged employee turnover is costly to organiza-
tions, and smart managers know that competing to retain
top talent on price alone (higher pay and more benefits)
is a losing strategy. Fortunately, there are several
approaches managers can take to retain their top talent
that do not entail additional costs. Compensation and
benefits–related approaches include managing pay dis-
persion, using and communicating fair and equitable
standards and procedures for making compensation and
benefits decisions and having reasonably long vesting
periods for some benefits. Approaches to retaining top
talent that go beyond compensation and benefits include
knowing and assessing the indicators of the withdrawal
process, job satisfaction and organizational commit-
ment; managing employees’ relationships with their
Downloaded from cbr.sagepub.com at UNIV OF MEMPHIS on October 13, 2014
immediate supervisors and others in the organization;
managing role expectations and role conflict and manag-
ing and clearly communicating opportunities for growth
and advancement with the organization.
Authors’ Note
Significant portions of this article are drawn with permission
from Allen, D. G., & Bryant, P. C. (2012). Managing employee
turnover: Dispelling myths and fostering evidence-based reten-
tion strategies. New York, NY: Business Expert Press.
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with
respect to the research, authorship, and/or publication of this
article.
Funding
The authors received no financial support for the research,
authorship, and/or publication of this article.
Notes
 1. Cascio, W. F. (2006). Managing human resources:
Productivity, quality of work life, profits (7th ed.). Burr
Ridge, IL: Irwin/McGraw-Hill.
 2. Allen, D. G., Bryant, P. C., & Vardaman, J. M. (2010).
Retaining talent: Replacing misconceptions with evidence-
based strategies. Academy of Management Perspectives,
24, 48-64.
 3. Bloom, M., & Michel, J. G. (2002). The relationships
among organizational context, pay dispersion, and mana-
gerial turnover. Academy of Management Journal, 45,
33-42.
 4. Williams, M. L., Brower, H. H., Ford, L. R., Williams,
L. J., & Carraher, S. M. (2008). A comprehensive model
and measure of compensation satisfaction. Journal
of Occupational and Organizational Psychology, 81,
639-668.
  5. Dunford, B. B., Oler, D. K., & Boudreau, J. W. (2008).
Underwater stock options and voluntary executive turn-
over: A multidisciplinary perspective integrating behav-
ioral and economic theories. Personnel Psychology, 61,
687-726.
  6. Sutton, N. (1985). Do employee benefits reduce labor turn-
over? Benefits Quarterly, 1, 16-22.
  7. Heshizer, B. (1994). The impact of flexible benefits plans
on job satisfaction, organizational commitment, and turn-
over intentions. Benefits Quarterly, 10, 84-90.
  8. Fay, C. H., & Thompson, M. A. (2001). Contextual deter-
minants of reward systems’ success: An exploratory study.
Human Resource Management, 40, 213-226.
  9. Adams, J. S. (1966). Inequity in social exchange. Advances
in Experimental Social Psychology, 2, 267-299.
10. Heneman, R. L. (2007). Implementing total rewards
strategies: A guide to successfully planning and imple-
menting a total rewards system. Alexandria, VA: SHRM
Foundation.
 Bryant and Allen 175
11. Allen, D. G., & Bryant, P. C. (2012). Managing employee
turnover: Dispelling myths and fostering evidence-based
retention strategies. New York, NY: Business Expert
Press.
12. Allen et al. (2010).
13. Mobley, W. H. (1977). Intermediate linkages in the rela-
tionship between job satisfaction and employee turnover.
Journal of Applied Psychology, 62, 237-240.
14. Locke, E. A. (1976). The nature and causes of job satisfac-
tion. In M. D. Dunnette (Ed.), Handbook of industrial and
organizational psychology (pp. 1297-1349). Chicago, IL:
Rand-McNally.
15. Meyer, J. P., & Allen, N. J. (1991). A three-component con-
ceptualization of organizational commitment: Some meth-
odological considerations. Human Resource Management
Review, 1, 61-98.
16. Graen, G. B., & Uhl-Bien, M. (1995). The relationship-
based approach to leadership: Development of LMX
theory of leadership over 25 years: Applying a multi-
level, multi-domain perspective. Leadership Quarterly, 6,
219-247.
17. Biddle, B. J. (1986). Recent developments in role theory.
Annual Review of Sociology, 12, 67-92.
18. Allen, D. G., Shore, L. M., & Griffeth, R. W. (2003). The
role of perceived organizational support and supportive
human resource practices in the turnover process. Journal
of Management, 29, 99-118.
19. Mossholder, K. W., Settoon, R. P., & Henagan, S. C.
(2005). A relational perspective on turnover: Examining
structural, attitudinal, and behavioral predictors. Academy
of Management Journal, 48, 607-618.
Downloaded from cbr.sagepub.com at UNIV OF MEMPHIS on October 13, 2014
View publication stats
20. Allen, D. G. (2006). Do organizational socialization tactics
influence newcomer embeddedness and turnover? Journal
of Management, 32, 237-256.
Author Biographies
Phil C. Bryant (PhD, University of Memphis) is an assistant
professor of management at Columbus State University. His
primary research, teaching and consulting activities are concen-
trated in Talent Management and Entrepreneurship. His award-
winning writings have been published in the Academy of
Management Perspectives (2010) and the Academy of Strategic
Management Journal (2012). Bryant is coauthor of the 2012
book titled Managing Employee Turnover: Dispelling Myths
and Fostering Evidence-Based Retention Strategies, which is
based on the 2010 Academy of Management Perspectives article
“Retaining Talent.”
David G. Allen (PhD, Georgia State University) is Distinguished
Professor of Management in the Fogelman College of Business
and Economics at the University of Memphis. His primary
research interests include the flow of people into and out of
organizations (e.g., retention/turnover, recruitment and talent
management). His research on these topics has been published
in Academy of Management Journal, Academy of Management
Perspectives, Human Relations, Human Resource Management,
Human Resource Management Review, Journal of Applied
Psychology, Journal of Management, Journal of Organizational
Behavior, Organizational Research Methods, Personnel
Psychology and other outlets. He is coauthor of the 2012 book
titled Managing Employee Turnover: Dispelling Myths and
Fostering Evidence-Based Retention Strategies.