I can’t get no satisfaction : The power of perceived differences in employee intended retention and turnover

Purpose The purpose of this paper is to explore the role of salary raises and employees’ perception of these salary raises on their intended retention and turnover. By using a survey data set from a representative American public university, this study investigates a novel hypothesis that faculty perceptions of salary raises, relative to their perceptions of other faculty members’ assessments of the raises, influence their intended labor supply. Design/methodology/approach Using both ordered probit and OLS modeling frameworks, the authors focus on the impact of salary raises and the relative perception of these raises on intended labor supply behavior. They explore a hypothesis that a mismatch between one’s ranking of the salary raise and the perception of others’ rankings causes dissatisfaction. Findings The results provide evidence that salary raises themselves are effective monetary tools to reduce intended turnover; however, the results also suggest that relative deprivation as a comparison of one’s own perceptions of a salary raise with others affects employee intended retention. The authors find that employees who have less favorable perceptions of salary adjustments, compared to what they believe their colleagues think, are more likely to consider another employer, holding their own perception of raises constant. Conversely, more favorable views of salary raises, compared to how faculty members think other’s perceived the salary raises, does not have a statistically significant impact on intended retention. Originality/value This is the first study that explores an employee’s satisfaction with salary raises relative to perceptions of other employees’ satisfaction with their own salary raises, and the resulting intended labor supply in an American university. The results indicate that monetary rewards in the form of salary raises do impact faculty intended retention; however, perception of fairness of these salary raises is more important than the actual raises. Given the high cost of job turnover, these findings suggest that employers may benefit from devoting resources toward ensuring that salary- and raise-determining procedures are generally perceived by the vast majority of employees as being fair.