[MUSIC] In this session, we're going to think about the role of pay in attracting and retaining staff. In the last session we looked at the necessary conditions for pay to motivate existing employees. But equally important, how significant is the role of pay in attracting new, high-performing staff and then retaining them? Researching this is, again, surprisingly complex and the results of academic studies have produced some very divergent results. But, I'm going to suggest here that the conclusion we should draw is simple. Pay is a very important factor in attracting new employees. In fact, there is consistent research, for example, Towers and Parin, that it is more important for attracting new staff than motivating existing staff. A classic study by Jorgensen in the 1970's illustrated the problems of researching this issue and why we should draw the conclusion that pay is important for jobs applicants. Jergenson's survey of 50,000 job applicants over ten years. And in those surveys, male applicants rated pay the fifth most important factor out of ten alternatives in determining their job choice. Interestingly, female applicants rated it just seventh. But managers would be very unwise to jump to the conclusion that pay was actually unimportant because Jorgensen went on to ask exactly the same applicants the question, how important do you think pay is to someone exactly like you? I.e., someone with the same age, gender, education, and so on. In answering this question, both male and female applicants, rated pay first. The explanation for this change, can be made in terms of social desirability. However, Sara Ryan's and her colleagues demonstrated the importance of pay in attracting staff will vary, depending on whether there's a wide variation in pay, in a given sector, or profession. Ryan's found the pay explained 65% of applicant's evaluations of job attractiveness when the pay range was great. But when the pay range was hard, that dropped to just 40%. Towers and Perrins found the importance of pay and benefits was not influenced by external economic factors, i.e., the collapse of the internet bubble in the early 2000's. Managers and employers, therefore; should conclude that if they want to attract the best of staff, pay should be at the high end of the band, but they should not ignore other motivating factors such as challenging work, career progression, etc. Looking specifically at retention, some good studies, e.g., again, the Towers and Perrins study, suggest that pay is more salient for attraction than for retention, essentially because the pay rate will be the one factor that will be absolutely certain for the new applicant. Advancement, talented coworkers, and overall work environment matter much more in the decisions of stay or go. But if pay and benefits drop as low as the competition or perceive to fail to reflect effort, pay will become a major factor in deciding to leave. So managers can safely conclude that pay is a very important factor in attracting new staff, and a somewhat important factor in retaining staff. In the latter case, it is critical pay is not below a level which will leave an employee feeling relatively underpaid, compared to people in comparable jobs elsewhere. That said, pay is not the only factor a prospective employee takes into account or, indeed, an existing employee considers in deciding whether to stay. Employees will look at this holistically, and so employees must and should do the same. Thank you. And the next time we will look at how individual and situational factors influence the impact of pay. [MUSIC]
