Topic: Compensation, Culture, Organizational Commitment
Article: When do committed employees retire? The effects of organizational commitment on retirement plans under a defined benefit pension plan.
Publication: Human Resource Management
Blogger: Benjamin Granger
Organizations commonly use defined-benefit pension plans in an effort to attract and retain good
employees. After all, turnover is expensive! These plans usually allow employees to accrue retirement income security which should encourage employee retention. However, the monetary values of such plans diminish greatly once employees pass the optimal age for retirement. But do employees just care about the money? (Yes, if they live in California and drive a Hummer. Yikes!).
Although many employees plan their retirement around the optimal point to maximize their retirement
benefits, others stay with the organization and see the monetary value of their retirement benefits drop substantially. So who are these crazy people?
Luchak, Pohler, and Gellatly (2008) investigated the role that organizational commitment plays when
considering the age that employees plan to retire. By definition, employees that are highly committed to their organization are less likely to quit. But, are highly committed employees also willing to stay in the face of the depreciation of their pension plans?
The results of Luchak et al.’s study suggest that it depends on the type of commitment you consider. That is, employees can be committed to their organizations for different reasons. The authors studied two important commitment types: affective commitment and continuance commitment. Employees high in affective commitment feel emotionally connected to the organizations while those high in continuance commitment stay with the organization because they will incur unfavorable losses if they leave. Clearly, these
commitments are very different. Affectively committed employees want to stay because they connect with the organization, but employees high in continuance commitment stay because they basically have to.
Luchak and colleagues found that employees high in affective commitment do indeed plan to remain with their organizations past the optimal retirement age. Thus, it appears that to these employees, the emotional connection they have with their organization is more important than money. Interestingly though, compared to employees with very high and low levels of continuance commitment, those with moderate levels of continuance commitment were the most likely to plan their retirement at the optimal age. But what if we consider both types of commitment simultaneously? Employees who are high in affective and low in continuance commitment were the most likely to plan their retirement long after the optimal age, while those low in affective and high in continuance commitment were most likely
to plan retirement near the optimal age.
Luchak et al’s findings are interesting because they suggest that employees who are emotionally connected to their organization (i.e., high affective commitment) are likely to remain with the organization past the age that would benefit them the most by retiring. So it seems that to some employees (minus the Hummer drivers of course) it’s not just about the bucks!
Luchak, A. A., Pohler, D. M., & Gellatly, I. R. (2008). When do committed employees retire? The effects of organizational commitment on retirement plans under a defined-benefit pension plan. Human Resource Management, 47(3), 581-599.