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. They chose the booming Indian labor market and examined the talent management practices of 28 companies operating in India; the researchers surveyed 4,811 of those companies’ employees about their attitudes toward their employers, including their intentions to stay or leave. Jonathan P. Doh, Stephen A. Stumpf and Walter Tymon of the Villanova School of Business, along with Michael Haid, a global center of excellence leader at Right Management, describe the team’s findings in a July 2008 working paper, “How to Manage Talent in Fast-Moving Labor Markets: Some Findings from India.” At Villanova, Doh is the Herbert G. Rammrath Endowed Chair in International Business and an associate professor of management and operations, Stumpf is the Fred J. Springer Chair in Business Leadership and a professor of management and operations and Tymon is an associate professor of management and operations.
In India, despite salary increases averaging more than 15% annually in some industries, annual turnover rates among young professionals are averaging 15% to 30% and go as high as 50%. The explosive combination of ballooning salaries and rising attrition signals a tight market for talent that could constrain India’s growth in the future.