The impact of executive compensation management on turnover rates

by on June 30, 2009 · 0 Comment POSTED IN: HR Info Center

Turnover is not governed totally by compensation management decisions

If you look back historically, turnover was primarily driven by compensation management decisions. Today, it’s driven primarily by your perceived value in the organization. And that’s for voluntary as well as involuntary turnover.

Now, as we go forward and we have different generations, what we see in the millennium generation, the Gen Y, is that turnover is actually a function of the group dynamics. This group tends to hang out in groups. And if one person leaves, you have a high risk of the rest of that group leaving.

Compensation management and turnover
Turnover, it may be directly related to compensation management . It might be related to management. It might be related to some of these generational issues whether it’s value or group dynamics.

You know, we were at a situation the other day where it was solely driven because the company’s location wound up being in a bad part of town. And so, who knows? It could be any one of those factors certainly. Compensation of benefits below market contributes to it.

Compensation management can contribute to turnover. But it’s not necessarily the primary driver. It can be however the primary driver of managing turnover. In other words, defining where that turnover occurs. So if you are – it gets back to the retention of your A players.

If you are adequately rewarding your top performers at the expense of your poor performers, you may not increase or reduce your absolute turnover. You know, if you were at 20% before, you may still be at 20%. But you may make sure that that 20% turnover that you have occurs among your C players which is where it’s less detrimental to the business and can even in some cases be beneficial to the ongoing operations. Good question.

Edited remarks from the Rapid Learning Institute webinar “Executive Compensation Trends: New Benchmarks & Changing Regulations” by Edward Rataj and Kevin Nussbaum

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