base-pay matters

Effective Supervisors, Good Base Pay Keep Millennials with Employers

What do we really know about millennials?  Do they really care most about the pursuit of mission, varied experience, continuous learning, entrepreneurial opportunity, and work relationships — and less about traditional rewards of pay and hierarchical positions? 

Mercer’s Haig Nalbantian, co-leader of Mercer’s Workforce Sciences Institute and Tauseef Rahman and principal at Merger, attempted to separate fact from fiction about millennials at work by tailoring their employee value propositions (EVPs) to the supposed unique needs and values of this generation.

They also tested the millennial values and the proposition that differ millennials from older workers using a multivariate, logistic regression model that controls for individual characteristics (e.g., generation, age, tenure with the company, performance, pay and job histories), organization and job characteristics (e.g., supervisor status and relationships, supervisor spans of control, job type and function, team characteristics), and external market characteristics (e.g., work location, industry, local unemployment rates). This model was applied to a data set of over two million records of employees in multiple companies from different industries, covering multiple years. 

For Mercer, the data set allowed it to capture not only the effects of individual characteristics and outcomes, but also those reflective of an employee’s work environment and working conditions.

It statistically estimated the model to determine relative turnover probabilities, identify significant drivers of turnover probability, and measure their relative impact. It also ran separate models — by generation —  to statistically estimate and measure the factors that drive the stay/quit decision for millennials (born 1980-1995) as compared to Generation X (born 1965 to 1995), baby boomers (born 1945-1964), and traditionalists (1925-1944). Generation  Z was born between 1996 and 2010. 

Some key findings from the Mercer study: 

Base pay matters. Millennials are more base-pay oriented than their older counterparts. Their turnover probability is responsive to pay levels and growth as well as receipt of a bonus, but less so compared to older employees. However, the higher that base pay is as a percentage of total compensation, the stronger the retention effect on millennials. 

Up and out. It turns out that hierarchical advancement does matter to millennials. However, millennials may value mobility and learning across employers, rather than within their current organization.

Ambivalence toward performance ratings. Ratings—both performance and potential—don’t seem to hold any special currency for millennials. If anything, they are less sensitive to ratings than older peers. Under some model specifications, high ratings are actually associated with higher turnover probability for millennials

Relative importance of flexibility is unclear. Offering flexible employment, such as part-time status does less to retain millennials than older workers.

Supervisor characteristics do matter. Millennials are far less likely to turn over when they report to highly rated supervisors or to female supervisors. And they are substantially more likely to quit if their supervisor quits. None of these relationships are detected among other generations.

Implications for employers. Mercer’s research carries a number of hiring and workforce implications: What people say they value may not actually motivate their behavior, so relying only on surveys alone can be misleading. 

In the age of analytics and big data, Mercer’s study points to how organizations have the opportunity and resources to understand their employees as well as their customers–millennials or not. 

For now, hard dollars (predictable over variable pay) and effective supervisors may be what it takes to secure and motivate the millennial workforce.