|M.Sc Student||Chen-Hirschfield Pazit|
|Subject||The Interactive Effects of Performance Evaluation and Pay|
Grade Promotion on Voluntary Turnover
|Department||Department of Industrial Engineering and Management||Supervisor||Mr. Peter Bamberger|
|Full Thesis text|
This study examines voluntary turnover of employees in a high-tech company in order to provide a model for predicting when employees are likely to quit their job. The current study is unique in that the model it presents is based on actual facts deriving from managerial decisions: pay grade promotions and performance evaluations. These measurements were examined over a period of time -- three years per employee.
The results of the analysis support our hypothesis that pay grade promotions and performance evaluations have a significant effect on decisions by the employee to stay or leave the company. The interactive affects of pay grade promotions and performance evaluations on VTO were tested using employees' demographic profiles, mean performance evaluations for the last three years, and the time spent in their current pay grade. The results indicate that 11.1% of the total variance in voluntary turnover can be explained due to variables in the model. Our findings indicate also, that each year of age increases the odds that an employee will resign by 8%.
The demographic variables of gender, ethnicity and marital status were found to have no significant effect on VTO. The only demographic variable that was found significant in predicting VTO was age. Our analysis of the interaction effect, aimed at clarifying how pay grade promotion relates to voluntary turnover at different levels of performance, offers significant support for our predictions. Those who were promoted had reduced tendency to leave the organization. However, for those who were not promoted, the effect on voluntary turnover was attenuated as a function of higher average performance evaluation ratings. For employees with low average performance evaluations, the voluntary turnover probability was higher than for those with higher average performance evaluations. In contrast, for those who were promoted, the level of average performance evaluation did not affect voluntary turnover probability. We may explain this attenuated linkage between higher performance evaluations and no promotion as a positive message from the organization/manager. While research results on the connection between promotions and VTO is inconclusive, this study clearly shows a strong negative association between pay grade promotions, good performance evaluations and resignation.
Our model indicates clearly that managers and HR professional are able to control VTO to some extent, using organizational mechanisms like pay grade promotions and performance evaluations. With a labor market where firms must fight to retain valuable employees, it is essential to understand and use these tools wisely.