Tag Archives: Employee Retention

Do Public Salaries Increase Performance?

With the recent news regarding Jill Abramson and the New York Times, I wanted to take a closer look at the academic literature to see if I could find something about public salaries. There’s certainly been a lot written about whether she was fired or she quit or whether it had to do with secretive salaries or her gender. I’m not writing this post to debate any of that because I consider myself grossly uninformed on what may or may not have happened, but I am writing this post to talk about pay secrecy.

The research showed that pay secrecy adversely affected individual task performance. Meaning, the absence of public salaries led to a worse performance. Why? Pay for performance. That is, because the salaries weren’t public, workers didn’t have a perception that an increase in performance would lead to better pay.

There were a couple other important pieces that I wanted to highlight.

1. The best workers were more sensitive when it came to the perception of link between pay and performance.

This certainly makes sense as those folks who are working the ‘hardest’ would want to know that they’re being appropriately compensated for their hard work. An implication from this point is that organizations that don’t have public salaries might have a harder time retaining their top talent. We can tie this back to the situation between the New York Times and Abramson. Again, I wouldn’t say I’m informed of the situation, but from what I understand, Abramson was rather high up in the NYT hierarchy, which indicates to me that it was fair to consider her “top talent.”

2. If public salaries isn’t an option, partial pay openness could mitigate the negative effects of pay secrecy.

It might be that a firm or organization isn’t yet comfortable with releasing all data about salaries, so an intermediary step could see them gently open up the salaries by talking about ranges. This point reminded me about government salaries that often have ranges for each level that an employee reaches. One may not know exactly what their co-worker makes, but if one knows that their co-worker has reached a certain level, one would know that one’s co-worker’s salary is in a certain range.

Just before ending this post, I wanted to circle back to the point about pay for performance. In this study, the task that participants completed was a “computer matching game.” Based on what’s been written about pay for performance, this is the right kind of task to test these sorts of hypotheses. However, when it comes to more creative tasks, the pay for performance model doesn’t always fit the best. Tying this back to the situation with Abramson and the NYT — it’s not clear to me whether the “pay for performance” model fits best. Having never worked at a newspaper or publishing outlet, I don’t exactly know the role of an Executive Editor, but from what I’ve been able to read through Google searches, it sounds more like creative tasks.

ResearchBlogging.orgBelogolovsky, E., & Bamberger, P. (2014). Signaling in secret: Pay for performance and the incentive and sorting effects of pay secrecy Academy of Management Journal DOI: 10.5465/amj.2012.0937

Labor is the Superior of Capital, and Deserves Much the Higher Consideration

Do you recognize those words? Scholars (and/or) American history buffs just might. They were spoken by one Abraham Lincoln on December 3rd, 1861, as part of his first State of the Union address. The quote comes from very near to the end of the speech; the beginning of the third last paragraph. The sentence on its own is worth pondering, but let’s put it in context:

Now there is no such relation between capital and labor as assumed, nor is there any such thing as a free man being fixed for life in the condition of a hired laborer. Both these assumptions are false, and all inferences from them are groundless.

Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights. Nor is it denied that there is, and probably always will be, a relation between labor and capital producing mutual benefits. The error is in assuming that the whole labor of community exists within that relation. A few men own capital, and that few avoid labor themselves, and with their capital hire or buy another few to labor for them.

As is clear, Lincoln is referring to what was a major problem at the time — slavery. While those words were initially spoken with regard to slavery, I think that they have a broader application. That is, labor really is the superior of capital and not just in the context of slavery. Without labor, there’d be no capital. Labor is the backbone of any economy — local or global. As a result, it’s frustrating to see how poorly mismanaged the workforce can be.

From a business standpoint, I can understand why managers would want to crimp on labor, both in the number of employees and their However, I see this as extremely short-sighted. Whatever short-term gains are made from this strategy, they’re lost in the longer term when one has to replace the employee because they’ve either quit or because they’re overworked (and needed time off because of stress and/or fatigue).

I wonder if treating labor as if it’s another “expense” or “liability” is endemic to the culture of work in America. If we revisit the chart about vacation from this past summer, we see that just about every country on that list is in Europe and from what we know about the culture of many European countries, there’s an air of slowness that you just don’t find in America. Maybe it’s that European businesses have already learned this lesson of treating the workforce like an expense and realizing that it’s just easier to pay up front. How different would business look like in the US if the workweek went from 40 to 30 and the number of mandatory paid vacation days went from 0 to 20? Even if the US workweek went from 40 to 37.5 as is the case in Canada, how different would things be, then?

This focus on the short-term seems to be in more places than one. It’s even present in the way public companies are structured — they have to report their earnings every quarter. That is, every 90 days — 90! — a company gives a report to their shareholders (and the public) about their earnings. Predominantly, people are looking to see whether a company “beat” estimates. If (when?) a company doesn’t meet estimates, the stock price usually takes a tumble. But what if this incessant push to meet estimates and focus on these 90-day windows doesn’t allow for an appropriate longer term strategy? What if this 90-day crunch is preventing a company from pursuing a strategy that would make it far more sustainable in the long run and if they attempted to pursue that strategy, their stock price would plummet?

I don’t have all the answers to these questions, but I believe the beginning of the answer starts with labor. Companies that honor and respect their workforce tend to perform better.

Is There Really Less Turnover in Fun Workplaces?

In first considering this question, my reflexive response is — of course! But do you know why fun contributes to less turnover? Hold onto that thought and see if it turns out to be the same answer that researchers came up with earlier this year.

Three researchers took a closer look at fun and the workplace. Specifically, they looked at how three forms of fun affected turnover: fun activities, coworker socializing, and manager support for fun. They looked at almost 300 servers (from 20 restaurants) at national restaurant chains in the US. So right away, we need to be careful generalizing these results outside of the service industry and in particular, servers at restaurants in the service industry. The results:

First, this research demonstrated that fun is significantly related to employee turnover, serving to further validate claims in the popular management press that fun has a beneficial impact on individuals and organizations. Second, this research highlighted that only some forms of fun relate directly to employee turnover. These results signal the importance of focusing on the component parts of workplace fun, rather than treating fun as a single construct, as has been done in other research (Fluegge, 2008; McDowell, 2004). Third, this research demonstrated that constituent attachment is a key mediator in the fun−turnover relationship. In doing so, this research has helped to answer how and why fun impacts the turnover process.

That third and final point is the key: constituent attachment is a key mediator in the fun-turnover relationship. Meaning, relationships/friendships at work help to mitigate one’s likelihood of quitting. And one way of enhancing relationships/friendships at work? Fun. That is, fun can facilitate the opportunities by which co-workers can get to know each other and develop relationships. By doing so, employees are less likely to quit.

So, while the research helped to confirm previously held thoughts about fun having an impact on employee turnover, the important discovery here is that fun isn’t the “end,” but merely the means to an end. By promoting and facilitating fun in a workplace environment, a manager can create the opportunity for employees to develop relationships.

As the researchers mention in the discussion section, I wonder how generalizable these results can be across industries. Of course, there’d need to be more research to validate it’s reliability in other industries, but my guess is that the results are going to hold across certain industries. For instance, I’d imagine that many office cultures that are similar to the restaurant industry might show a similar effect. That is, office cultures that have ups and downs in workloads, like you would find in the restaurant industry.

ResearchBlogging.orgM. J. Tews, J. W. Michel, & D. G. Allen (2014). Fun and friends: The impact of workplace fun and constituent attachment on turnover in a hospitality context Human Relations DOI: 10.1177/0018726713508143