Is the way you promote workers within your organization having a negative impact on talent recruitment? If you’re leaning too heavily on performance-based goals and metrics, it may be.
According to a new study published in Management Accounting Research, companies that base pay increases and promotions solely on productivity targets may be missing out on top talent. In contrast, companies that empower managers to influence workers’ rewards and upward movement, the study found, are more likely to attract top-performing employees that will also connect with the organization’s culture and mission.
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“Our research shows that relying on managerial discretion to evaluate employees — compared to solely relying on objective performance measures — attracts employees who identify more strongly with the organization’s [mission],” Bart Dierynck, a professor in accounting at Tilburg University in the Netherlands and a co-author of the research, said in a release.
The researchers conducted an experiment that asked participants, role-playing as potential employees, to choose between a fixed-wage contract and a performance-based wage contract, with or without the possibility of discretionary input and adjustments by their manager. Then, participants were asked to indicate how much extra effort they’d be willing to put in to meet an organizational goal.
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Those who identified with the company’s mission — and as more likely to go above and beyond to help meet goals — more frequently selected a discretionary-based pay model that fused performance with input from management. Those who didn’t connect with the goals and culture of the organization were more likely to select a fixed-pay wage model.
For employees, the lesson is clear: use the recruiting process to highlight your workplace culture, and emphasize opportunities to make meaningful connections with managers, who will impact pay and promotions, in addition to providing mentorship.
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“Working for an organization with objectives that one identifies with has benefits for the organization, employee health, and society,” Victor van Pelt, an assistant professor in management at the WHU-Otto Beisheim School of Management in Germany, said in the release. “Our study shows that when employees expect managerial discretion to be used to evaluate them, they are more likely to sort themselves into organizations with objectives they identify with.”
