MIT Sloan Management Review

Over the years, researchers have proven that when it comes to retaining employees, money does not buy happiness. Most human resources professionals know that while workers welcome pay raises, the boost in satisfaction that comes with extra money typically does not last, nor do raises alone keep employees loyal. So it is too with recruitment: Competitors can lure employees away from other companies by offering better compensation, but the glow of more money wears off quickly without other rewards. Yet if research shows that attention to pay and benefits is necessary but not sufficient to retain talent, why do many corporate leaders continue to use compensation as their primary retention tool? And what should they really do to keep their best people?This is a particularly urgent question in emerging markets such as India, where both local and global employers are clawing for talent. In 2007, a team of researchers from Villanova School of Business and from Right Management, a human resources consulting subsidiary of Manpower Inc. that is based in Philadelphia, Pennsylvania, embarked on a project to learn more about the nonpecuniary rewards that drive employees to stay with a company or to flee.