An Albatross By Another Name

Guess what? I may not have needed to coin the Golden Albatross metaphor! It’s sad but true. I cried (on the inside) when I discovered that business management academics had an entire theory that captured employees’ stay-or-go psychological condition long before I arrived on the scene with the Golden Albatross. It’s called ‘continuance commitment.’

While neither as catchy as the Golden Albatross nor limited to just pensionable workers, continuance commitment fits the Golden Albatross metaphor perfectly. The only difference is that the Golden Albatross describes the situation for pensionable workers. On the other hand, continuance commitment captures the stay or go feeling that any worker might face while working any type of job.

This post is all about continuance commitment and why I think it’s vital that pensionable workers know about it. The article starts small, with a definition of continuance commitment, and then moves on to the general theory. I then explain how continuance commitment fits into the study of voluntary employee turnover. I also link continuance commitment, voluntary turnover, and defined benefit pensions (DBPs) together. Afterward, I take a quick look at how continuance commitment ties into pension plan design, which I discussed in Pension Series Part 25. I do this to set up the discussion for Part 27 of the Pension Series. Finally, I end on a cautionary note about the types of employees continuance commitment produces.

What Is Continuance Commitment?

Officially, continuance commitment is defined as a psychological condition where members of an organization feel compelled to stay because the perceived costs of leaving are too high (Meyer & Allen, 1991). Thus, it’s important to note that continuance commitment is a feeling or a thought that workers develop. It’s created when a member of an organization perceives that a cost exists for leaving said organization (Meyer & Allen, 1991). So, without a perceived cost for departing, continuance commitment cannot exist.

A large majority of the academic information about continuance commitment appears focused on the economic costs that a worker perceives. However, as initially conceived by Meyer and Allen, continuance commitment wasn’t solely focused on economic costs (Meyer & Allen, 1991; Luchak & Gellatly, 2001). It focused on potential costs of any nature that might compel an employee to stay with their current employer (Meyer & Allen, 1991; Luchak & Gellatly, 2001). Such costs might include loss of stature by leaving a powerful job, seniority from losing tenure, or employee benefits like health insurance (Meyer & Alen, 1991). Thus, if an employee chooses to avoid departure costs, they effectively commit themselves to the organization (Meyer & Allen, 1991; Luchak et al., 2008). That commitment lasts as long as the perceived costs of leaving last. Once the perceived costs are gone, so too is continuance commitment.

Organizational Commitment

Continuance commitment didn’t develop in a vacuum. In fact, the theory was originally part of something called the Three Component Model of Organizational Commitment. Organizational commitment manifests as a psychological attachment for an organization (Bryant & Allen, 2013). Among other things, employees with higher organizational commitment are less likely to voluntarily quit, otherwise known as voluntary employee turnover (Sarkar, 2018; Soria, 2019). The Three Component Model is the gold standard for understanding organizational commitment and its impact on voluntary employee turnover (Gade, 2003; Jaros, 2017).

The three components are a mix of intrinsic and extrinsic behavioral forces. They include desire (affective commitment), need (continuance commitment), and obligation (normative commitment) (Meyer & Allen, 1991). Meyer and Allen described “affective commitment” as “affective attachment to the organization,” continuance commitment (CC) as the “perceived costs associated with leaving the organization,” and normative commitment as the “obligation to remain with the organization” (Meyer & Allen, 1991, pp. 63–64).

A Layman’s Perspective

I like to think of affective commitment as staying for the love of the job/organization. I consider normative commitment as feeling duty-bound to perform a job or serve with an organization, like firefighting. Finally, I think of continuance commitment as staying for the benefits offered by the job/organization.

Regardless of how you think of these components, each has repeatedly correlated negatively to voluntary employee turnover (Meyer et al., 2002). This means employees with a high affective, normative, or continuance commitment are less likely to voluntarily quit a job or leave an organization. However, while normative and affective commitment can exist side-by-side in the same employee, it appears that continuance commitment cannot (Meyer et al., 2002). Thus, workers with high continuance commitment have low affective and normative commitment. As discussed at the end of this article, continuance commitment impacts the types of employees organizations produce.

Why Is Voluntary Employee Turnover A Big Deal?

Voluntary employee turnover is officially defined as the “voluntary cessation of membership in an organization, by an individual who receives monetary compensation for participation in that organization” (Lee et al., 2006). However, voluntary employee turnover is just a fancy term for an employee quitting. That’s important to note because voluntary employee turnover should not be confused with layoffs or retirement. In the case of voluntary turnover, it’s the employee who drives the decision to quit, not the employer (like with layoffs) or age (like with retirement).

Voluntary employee turnover poses several problems for employers. The first is cost because replacing an employee is expensive (Balsam et al., 2007; Lee et al., 2018). In 2018, an estimated 41.4 million US workers voluntarily left their jobs at a total estimated cost to organizations of US $617 billion (Work Institute, 2019). These costs typically manifest as advertising, recruiting, and training expenses (Hur & Hawley, 2020; Pitts et al., 2011). Voluntary turnover also causes organizational loss of knowledge and experience (Lee et al., 2018; Soria, 2019).

Organizational loss of knowledge causes disruptions for remaining employees as they train new hires, pass on their knowledge, and assume duties for the departed (Ertas, 2015; Hur & Hawley, 2020). Disruptions decrease organizational productivity, service delivery, and customer service (Bryant & Allen, 2013; Hur & Hawley, 2020; Pitts et al., 2011). For these reasons, employers invest heavily in programs, benefits, and incentives to keep employees from quitting, some of which are deferred, like a defined benefit pension (DBP).

Defined Benefit Pensions And Voluntary Turnover

The deterrence effect of retirement benefits on voluntary turnover is typically explained through continuance commitment since it encompasses the employee’s recognition of the economic costs of voluntary departure before retirement (Smith et al., 2011; Swiggard, 2011). As discussed throughout the Pension Series, but most recently in Part 25, a DBP is a retirement benefit that defers compensation all the way until retirement. Thus, by leaving early, employees incur costs by losing some or all of their pension’s value.

So, it should come as no surprise that numerous studies have shown that DBPs play a direct role in increasing tenure and limiting voluntary employee turnover. One of the most cited and seminal works is Ippolito’s 1991 study of over 6400 workers at 109 firms which found DBPs reduced turnover and increased worker tenure by 20%. In another seminal study, Lazear and Moore (1988) showed that pensionable workers in six different pension plans were half as likely to turnover than their non-pensionable counterparts.

Several other studies have shown mostly similar results to include Allen et al. (1993), Ippolito (1994, 2002), Haverstick et al. (2010), and Schuck and Rabe-Hemp (2018). Haverstick et al.’s (2010) study is noteworthy because it showed a DBP’s retention effect grows over time. Whereas the average annual turnover rate for a pensionable worker with 0 to 5 years of service (YOS) was 22% a year, it was only 5.7% by the 10 to 15-year mark and 3% beyond 20 YOS (Haverstick et al., 2010).

DBPs, Voluntary Turnover, And Continuance Commitment

Numerous theories exist as to how and why DBPs lead to less voluntary employee turnover. Such theories include employee self-selection (discussed in Pension Series Part 24), job satisfaction theory, psychological contract theory, and Transaction Cost Economics (de Thierry et al., 2014; Ippolito, 1991; Joo, 2017; Luchak & Gellatly, 2002). However, Luchak and Gellatly (2001) and Luchak et al. (2008) established a direct link between DBPs, voluntary turnover, and continuance commitment. This evidence led me to conclude that the Golden Albatross is really just an excellent metaphor for the continuance commitment pensionable workers feel.

Luchak and Gellatly’s 2001 study found that workers with higher pension value had longer tenure, lower turnover, lower affective commitment, and higher continuance commitment (Luchak & Gellatly, 2001; de Thierry et al., 2014). As de Thierry et al. (2014) noted about the study, “workers were staying … not because they loved the organization… but because the pension costs of leaving were too great” (p. 662). The 2008 study showed that once the employees who stayed for the pension qualified for unreduced benefits, their continuance commitment significantly weakened, and they either retired or left voluntarily (Luchak et al., 2008).

Natural experiments appear to confirm the links between changes in a worker’s DBP status, lessening continuance commitment, and voluntary turnover. In 2005, when the US state of Rhode Island cut some benefits for yet-to-vest workers that reduced plan value by 43%, the average baseline voluntary employee turnover rate rose by 12%, and nearly 4% of non-teachers and 1.7% of teachers immediately quit (Quinby & Wettstein, 2019). For the leavers, the benefit cuts drastically reduced the cost of departing, which is crucial for continuance commitment, and so they did.

Continuance Commitment And Pension Design Elements

Basically, as viewed through continuance commitment, DBPs deter voluntary employee turnover by increasing the monetary cost of departure (Smith et al., 2011; Swiggard, 2011). Thus, with the links between DBPs, continuance commitment, and voluntary turnover established, the question turns to what should or would those relationships look like at the design element level as discussed in Pension Series Part 25?

Previous research is not much help. Outside the inherent trait of deferred compensation that defines all DBPs, the only design elements Luchak and colleagues mention were non-portability and backloading (Luchak & Gellatly, 2001; Luchak et al., 2008). However, they did not study those elements in detail, just simply noted them as present in the pension plans they studied (Luchak & Gellatly, 2001; Luchak et al., 2008).

Design Elements, Stay Pension Value, And Pension Quit Costs

Fortunately, continuance commitment’s emphasis on the perceived costs hints towards what type of DBP design elements should specifically deter voluntary turnover, especially when those costs are measurable. Measuring pension quit costs is one technique pensionable employees use to determine the personal expenses of voluntary departure (Ippolito, 2002; Nyce, 2007). They do this by determining the difference between the reduced pension they’d receive by quitting early (aka the quit pension) and the full pension they’d earn at normal retirement age (aka the stay pension) (Ippolito, 1991; Ippolito, 2002).

The mental math here is simple. More significant differences between the two values mean more significant capital costs for quitting, making the employee more likely to stay (Allen et al., 1993; Ippolito, 2002; Luchak et al., 2008; Nyce, 2007). Therefore, if continuance commitment explains a DBP’s moderating effect on voluntary turnover, then the DBP design elements that create the highest pension quit costs should play the most significant role in an employee’s decision to stay or go! Of course, that all depends on which DBP design elements are present in an employee’s pension plan. Because, as we already know from parts 3 and 25 of the Pension Series, pension plans typically contain a different combination of design elements from one another.

This Should Feel Familiar

Measuring the difference between a pension’s quit cost and stay value may seem familiar. I say that because it’s the intuitive arithmetic that many of us use when determining if we should stay at or leave our pensionable job. As I wrote on this blog, stated in my book, and discussed on various podcasts, it’s the method I used when trying to determine if I should leave the US military before my cliff vesting point.

However, the math for me was painfully simple. If I quit before 20 years, I got nothing. If I stayed to 20, I got 50% of the average of my highest three paid years annually. In the end, I calculated those payments would total over a million US dollars throughout my ‘retired’ life, and that didn’t include healthcare. So, I stayed.

With that in mind, hopefully, you now see how this article relates to Part 25 of the Pension Series. In Part 25, I painstakingly listed out 13(ish) pension plan design elements that could either be an incentive to stay at or a penalty for leaving a pensionable job. Taken together, the combination of those incentives and penalties creates a pension plan’s generosity level. However, by using the stay pension vs. quit pension math under a continuance commitment framework, those design elements can also be judged for how much they create ‘stay pension’ value or ‘quit pension’ costs. In either case, if they create perceived value or costs for an employee contemplating leaving a pensionable job, then they contribute to continuance commitment.

How This Is Useful

The few readers left at this point of the article may be thinking, “This is great background knowledge, Grumpus, but how does this help me?” That’s a fair question, especially considering how deep I went on some niche topics. In response, I’d say this newfound knowledge provides you yet another way to analyze the value of your pension when making a Golden Albatross decision.

If you’re in the middle of your Golden Albatross moment, then make sure your level of continuance commitment is warranted by the value, or lack thereof, of your pension plan’s design elements. Remember, not all design elements are created equally, nor all pensionable workers’ circumstances. For example, the survivorship design element may prove valuable to someone who’s married and suffers from chronic health conditions, but not for a single person with no offspring.

The Pension Series Tie-in

I’d also say to take Pension Series Part 25’s lessons and combine them with this article’s to determine if your pension has high or small pension quit costs. If the quit costs are high but your continuance commitment is small (or vice versa), then you know you have a problem that you need to untangle. Alternatively, if they’re in line with each other, then walking away or staying proves easier.

By the way, Part 27 of the Pension Series discusses the results from the survey I ran for my master’s thesis. I mention this here because I attempted to measure the pension design elements that create the most considerable continuance commitment effects among pensionable employees. Moreover, I used the same continuance commitment framework and the same pension quit costs methods I just described to formulate my thesis’ hypotheses. As a result, that article may help you determine which pension design elements you should consider more heavily than others during your Golden Albatross decision.

A Final Cautionary Tale

Do you remember how I mentioned that continuance commitment was part of the Three-Component Model? Do you also remember how continuance commitment appears to be exclusive from normative (duty-bound) and affective (love of job) commitment? Well, it turns out that the behavioral traits exhibited by employees with those types of commitment are also exclusive.

Unsurprisingly, high affective commitment is linked to better job performance and positive corporate citizenship behavior (Graczyk, 2001; Meyer et al., 2002; Peart, 2006). While job performance is self-explanatory, corporate citizenship is described as all the things an employee does outside of their job description to improve the organization (Peart, 2006). Examples include mentoring or volunteering on the weekend. High normative commitment also links to these behaviors, but less strongly than affective commitment (Graczyk, 2001; Meyer et al., 2002; Peart, 2006). Continuance commitment, on the other hand, does not link to these behaviors. In fact, it’s often linked to the opposite behaviors, poor job performance, and lack of corporate citizenship behavior (Luchak & Gellatly, 2001; Meyer et al., 2002; Peart, 2006).

You see, high continuance commitment employees are not the best types of employees within the organization. In fact, they’re often the crabby and moody type. Sometimes they don’t show up for work on time or at all (Peart, 2006). Nor are they typically in the best of health (Meyer et al., 2002).

Some studies show that employees with high continuance commitment also suffer from stress and family conflict. In contrast, high affective commitment employees don’t (Meyer et al., 2002). Whether these findings indicate causation or correlation is up for debate. The outcome, however, is not. Employees with high continuance commitment often do not make for pleasant workmates or family members.

Wait, Does This Mean I’m A Jerk For Gutting It Out?

Now look, I’m not saying that you’re bound to turn into a twisted and bitter employee or family member should you choose (or if you chose) to stay for your pension. Much like I did, I hope you can make (or have made) partial peace with your decision. I also hope you can take pleasure in daily interactions with your work colleagues and successfully accomplishing the tasks assigned to you while knowing it will not last forever. I’d like to think that I did this for my final three years, but ask my former workmates, and they may have a different story.

That said, forewarned is forearmed. Suppose you decided to stay for the pension. In that case, you need to be honest with yourself because you are now a high continuance commitment employee. On the other hand, suppose you’re thinking of staying for the pension. In that case, you need to be ready for the switch in your psychological condition.

Epilogue

During my last few years in the military, I knew my organization was not getting my best. Even though I didn’t know the correct terms, I knew I had transitioned from high normative commitment to high continuance commitment. I knew this because I had started my career wanting to serve and be part of something greater, but I ultimately stayed just so I could earn my pension. I even wrote blog posts about how that transformation didn’t sit well with me from time to time.

However, recognizing and learning to accept those feelings actually helped me realize it was time to retire at 20 and not push on further. Thus, in many ways, accepting my high continuance commitment status gave me the mental permission I needed to retire at my earliest possible moment without reservations. This is classic continuance commitment behavior, the type that the textbooks and journal articles listed in this blog post’s reference list describe. And, much like those references helped me understand continuance commitment, I hope this blog post helps you during your Golden Albatross decision.

References

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Bryant, P. C., & Allen, D. G. (2013). Compensation, benefits and employee turnover: HR strategies for retaining top talent. Compensation & Benefits Review, 45(3), 171–175. https://doi.org/10.1177/0886368713494342

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