Linkages between employee benefits and attitudinal and behavioral outcomes: A research review and agenda

LINKAGES BETWEEN EMPLOYEE BENEFITS AND A~~TUDINAL AND BEHAVIORAL OUTCOMES: A RESEARCH REVIEW AND AGENDA Margaret L. Williams Shelley M. MacDermid Purdue University

The purpose of this article is to set forth a research agenda for examination of the impact of benefit program features and levels on employee attitudes and behaviors important to the firm. We conducted a comprehensive search of the current research literature for references to the following benefit categories: medical and medically-related benefit payments; retirement and savings plan payments; payments for time not worked; life insurance and death benefits; and miscellaneous benefits, including benefits sometimes categorized as “family-friendly.” Empirical research examining the links between employee benefits and the following outcome variables is summarized: applicant attraction, employee benefit satisfaction, organizational commitment, employee performance, employee absenteeism and employee turnover. The closing sections of the article present general guidance for future research on employee benefit-outcome linkages.

Two conditions are noted almost every time benefits are mentioned in the management literature: (1) benefits have become a large part of total compensation for most employees, and (2) very little empirical research on the topic of employee benefits exists. The first statement indicates the practical importance of research in the area of employee benefits. The second statement may indicate the scope and complexity of undertaking research in this area. Because research in employee benefits has not been forthcoming, it is clear that research in the area of employee benefits can and should proceed in many directions. The purpose of this article is to present a review of the literature and set forth a research agenda in one of these areas: the impact of benefit

Direct all correspondence to: Margaret L. Williams, School of Management, 1310 Kranner Building, Purdue University, West Lafayette, IN 47907-1310.

Human Resource Management Review, Volume 4, Number 2,1994, pages 131-160 All rights of reproduction in any-form reserved.

Copyright 0 1994 by JAI Press, Inc. ISSN:1053-4822

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program features and levels on employee attitudes and behaviors important to the firm. The ultimate goal of this research would be to enable organizations to make strategic use of employee benefits to achieve desired outcomes. Gerhart and Milkovich (1992) have noted that “the state of knowledge about the influence of benefits on employee attitudes and behaviors is dismal. Beyond a handful of studies, employee benefits have been ignored by researchers. Studies examining the links between the forms and levels of coverage with valued outcomes offer potential contributions” (p. 541).

EMPLOYEE BENEFITS AND A-ITITUDINAL AND BEHAVIORAL OUTCOMES: THE RESEARCH REVIEW Since the purpose of this article is to establish a research agenda, we conducted a comprehensive search of the current research literature to find mention of linkages between employee benefits and employee attitudes and behaviors. Employee benefits typically are thought of as “that part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments” (Milkovich & Newman 1990, p. 366). We excluded legally-required payments (e.g., Social Security contributions, worker’s compensation) from consideration in this article because our interest is to suggest research that might help employers achieve valued outcomes (e.g., lower levels of absenteeism), and an employer clearly cannot vary or manipulate levels of legally-mandated benefits to achieve these outcomes. We examined the literature for references to the following U.S. Chamber of Commerce benefit categories: medical and medically-related benefit payments, retirement and savings plan payments, payments for time not worked, life insurance and death benefits, and miscellaneous benefits. Within the category of miscellaneous benefits, we looked for mention of benefits sometimes categorized as “family-friendly” such as paternal or maternal leave upon the birth or adoption of a child; sick leave for the care of dependent children, spouses, or elders; financial assistance for dependent child or elder care; and flexible scheduling (or flextime). Much of the evidence regarding the impact of family-friendly benefits comes from testimonials reported in newspapers, books, and magazine articles (Golf, Mount, & Jamison 19901, but we have included summaries of scholarly research where it exists. In addition, we examined the potential impact of flexible or cafeteria benefit programs on employee outcomes. We found mention of relationships between employee benefits and the following attitudinal and behavioral outcomes: applicant attraction, employee benefit satisfaction, organizational commitment, employee performance, employee absenteeism and employee turnover. In the following sections, empirical research examining the links between employee benefits and outcome variables is summarized and future research directions are proposed. The emphasis in our literature review is on those studies that used rigorous research designs such as experimental and quasi-experimental designs or, in survey research, devoted attention to issues of power and the psychometric properties

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of measurement instruments. The closing sections of the article present guidance for future research on employee benefit-outcome linkages in general. A wide variety of research designs have been used to study outcomes of employee benefits. Since one purpose of this paper is to establish an agenda for future research, we present an organizing framework to first summarize existing research studies in terms of experimental design, and then suggest appropriate designs for specific questions that might be addressed in future research. Table 1 classifies all of the studies summarized in this article according to their predominant experimental design. In the table, research strategies

A Categorization

of Reviewed

Laboratory

Cross-Sectional Designs:

Longitudinal Designs:

TABLE 1 Studies According

Research

Huseman, Hatfield, and Robinson (1978) Barber and Roehling (1993) Farrell and Rusbult (1981, Study 1)

to Their Research Design Field Research

__

Within a Single Organization

Across Multiple Organizations

Buchko (1993) Dalton and Mesch (1991) Goff, Mount, and Jamison (1990) Krausz and Freibach (1983)

Malos and Williams (1994) Dreher, Ash, and Bretz (1988) Williams (1993) Farrell and Rusbult (1981, Study 2) Klein (1987) Winkler (1980) Dalton and Perry (1981)

Brown (1985) Tannen (1987) Barber, Dunham, and Formisano (1992) Schein, Maurer, and Novak (1977) Orpen (1981) Kim and Campagna (1981) Dunham, Pierce, and Castaneda (1987) Milkovich and Gomez (1976) Narayanan and Nath (1982) Dalton and Mesch (1990)

Krueger (1988) Williams and Dreher (1992) Rusbult and Farrell (1983) Kruse (1992) Jones and Kato (1993) Mitchell (1982) Schiller and Weiss (1979) Allen, Clark, and MacDermed (1993) Gustman and Steinmeier (1993) Wilson and Peel (1991) Madrian (1993)

Note. Articles appear in the order in which they are mentioned in the manuscript; they are grouped within each research design category according to the outcome they address (e.g., absenteeism).

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have first been categorized as either laboratory or field research. The term laboratory, in this case, refers to situations in which participants would be asked to rate or judge stimulus materials presented in a simulated setting (e.g., deciding among job offers from fictitious employers). Field research, or research using actual applicants or employees of existing organizations as participants, is further divided into single organizational or multiorganizational strategies. Research that examines the impact of benefits on organizationally relevant outcomes requires variation in benefit coverage (Dreher, Ash, & Bretz 1988). As can be seen from Table 1, there are a few field studies that have been able to examine variation in benefits within a single organization. However, in many cases, especially in cross-sectional designs, this variation can be obtained only by using employees from multiple organizations that have different levels of benefit coverage or different policies regarding benefits such as sick leave. We classified studies that examined different policies (such as flextime provisions) across units or departments within a company or agency as studies conducted within a single organization. Multiorganizational studies include both studies that used an individual level of analysis with a sample of employees obtained from different organizations (e.g., Dreher et al. 1988) and studies that adopted an organizational level of analysis (e.g., Dalton & Perry 1981; Winkler 1980). Research strategies have also been categorized into cross-sectional and longitudinal designs. Studies classified as longitudinal include only those in which data were collected at two different points in time (e.g., a pretestposttest or time series design). We classified studies in which some variables were obtained from archival records or aggregated over time (e.g., frequency of absence over a one year period) as cross sectional. In a concluding section of the paper, we suggest appropriate research strategies for future research questions (see Table 2). We now turn to a review of the existing literature. Applicant Attraction Although applicant recruitment is often the primary reason given by employers for offering both standard and new types of benefits (Ferber & O’Farrell 19911, very little evidence is available concerning the impact of benefits on recruitment. One body of research that concerns the relationship between employee benefits and applicant attraction is the job choice literature. Early research in the area of job choice would seem to indicate that employee benefits are not particularly relevant to individual’s job choice decisions. For example, Huseman, Hatfield, and Robinson (1978) tested the utility of benefits as recruiting devices for MBA students. Students were asked to rate the importance of benefits in job selection against five other factors: opportunity for advancement, salary, geographic location, job responsibilities, and prestige of the job, In the total sample and across all demographic groupings, benefits were always ranked last. However, more recently, Barber and Roehhng (1993) examined the impact of job postings on the decision to interview using verbal protocol analysis. They found that of 10 characteristics, subjects paid most attention

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to location, salary, and benefits. Significantly more attention was paid to benefits when the benefits level described in the job posting was unusually generous (i.e., competitive benefits plus three weeks vacation). As noted by Williams and Dreher (1992), several recent trends such as the increasing number of women in the labor force, the proliferation of flexible benefits programs, and sharp rises in medical costs may indicate a renewed interest among employees and applicants in benefit packages. Research in labor economics also has addressed the role of benefits in applicant attraction. Two studies have examined the impact of educational benefits on military recruits. First, Brown (1985) found that educational benefits had a much larger effect on the number of military enlistments than the military wage did. In addition, Tannen (1987) demonstrated that an increase in the educational benefits offered to recruits was associated with a dramatic increase in the number of high-quality Army enlistments. Thus, benefits apparently can influence applicant attraction, especially under conditions in which benefits are highly visible. Alternatively, Krueger (1988) found that an increase in the level of benefits in the federal government relative to those in the private sector had no significant effect on the federal job application rate. Krueger noted that this finding might be the result of using an imprecise measure of the value of employee benefits. More recently, Williams and Dreher (1992) examined the relationships between compensation system attributes and the number of teller applicants attracted to a sample of U.S. banks. They used measures of the level of benefits provided that were more precise than those used by Krueger, and found that the percentage of total payroll expenditures devoted to benefits was significantly and positively related to the number of teller applicants attracted. Williams and Dreher (1992) also investigated benefit flexibility. Counter to their hypothesis, the relationship between benefit flexibility and the number of applicants attracted was negative. They suggested that the banks in their sample may have used benefit flexibility as an applicant attraction strategy, i.e., some banks that might have had difficulty attracting applicants or hiring tellers in the past may have recently adopted flexible benefit plans (or increased the flexibility of their plans) to boost the sizes of their applicant pools. Longitudinal data supported this explanation. Thus, although initial investigations in the job choice literature judging the value of benefits in attracting applicants were not supportive, there is some recent evidence to suggest that benefits can play a role in applicant attraction. Because recent research indicates that a decision to offer high levels of benefits may pay off in terms of attracting more applicants (Williams & Dreher 1992), the relationships between aspects of benefit programs and sizes of applicant pools deserve attention in future research, especially given the large financial investment organizations make in benefits programs. The research summarized here focuses on the size of the applicant pool attracted (Brown 1985; Krueger 1988; Williams & Dreher 1992) and to some extent the quality of the applicants attracted (Tannen 1987). We urge researchers to pursue additional study of the relationship between benefits and applicant quality and other measures of applicant attraction, such as the time it takes to fill positions.

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Benefit Satisfaction Although the outcome perhaps most directly related to benefit coverage is benefit satisfaction (Milkovich & Newman 19901, a relatively small body of research has addressed the linkage between benefit program features and benefit satisfaction.1 In fact, questions still exist concerning the measurement and dimensionality of benefit satisfaction. Miceli and Lane (1991) have suggested that multiple dimensions of benefit satisfaction exist; namely, benefit level satisfaction and benefit system satisfaction. Their discussion suggests that just as individuals may be differentially satisfied with the amount of pay they receive (outcomes) and the system that is used to deliver that pay (performance appraisal methods, raise allocation processes, job evaluation methods), individuals may be differentially satisfied with the level of benefits they receive and the system that is used to administer those benefits. For example, an employee may be satisfied with the level of medical coverage (i.e., low deductible, low copayments) he or she receives, but very dissatisfied with the delivery of medical coverage, if excessive paperwork is required or if reimbursements are delayed. Most studies that have focused on relationships between benefit program features and benefit satisfaction have used the benefit dimension of the Pay Satisfaction Questionnaire (PSQ; Heneman & Schwab 19851, or a very similar measure (Barber, Dunham, & Formisano 1992), as the dependent variable. Miceli and Lane (1991) have suggested that the PSQ benefit items appear to measure satisfaction with benefit level, or the amount of benefits received: “benefit system satisfaction clearly is not . . . represented in the PSQ measure” (p. 243). Interestingly, even though Barber et al. (1992) examined the impact of a change in benefit administration (the addition of flexible benefits) as opposed to benefit level, their dependent measure consisted of items designed to measure satisfaction with benefit level and/or benefit type (e.g., “I wish the benefits I receive from (xxx) would be changed”). Barber et al. (1992) report a correlation between their benefit satisfaction measure and the benefit subscale of the PSQ of 35. Malos and Williams (1994) are the first to measure benefit system satisfaction. Their confirmatory factor analysis of the PSQ items with an additional four items designed to measure benefit system satisfaction (e.g., “what I am told about my benefits, ” “my involvement in benefit planning”) indicated that a five factor solution was a good fit to the data, with the benefit system satisfaction items loading on a separate factor. This initial evidence suggests that employees do make a conceptual distinction between satisfaction with the level of benefits they receive and the system by which those benefits are delivered. Future research should continue measurement development in the area of benefit system satisfaction, and should examine potential determinants of this construct as suggested by Miceli and Lane (1991). We now turn to a review of the studies that have examined benefit level satisfaction. We focus our review on the three studies that have incorporated research designs which allow for benefit variability-either longitudinal or multi-organizational designs. We

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believe that including benefit coverage variables as independent variables is essential in benefit satisfaction research. In the first of these studies, Dreher et al. (1988) examined the roles of benefit coverage and benefit cost in predicting the benefit level satisfaction of employees in eight law enforcement agencies. The overall correlation between benefit coverage and benefit satisfaction was not significant (r = .02); however, the partial correlation between benefit coverage and benefit satisfaction controlling for demographic variables and employee benefit cost was .21 (p < .01X Using subgroup analysis, Dreher et al. also concluded that benefit coverage was more strongly related to benefit satisfaction for those individuals who had accurate perceptions of the benefits they received (partial r = .32,p < .Ol> than those who had inaccurate perceptions (partial r = .02, not significant). Due to the high multicollinearity in their sample among the seven individual benefit coverage variables (i.e., life insurance, holidays, vacation, retirement benefits, disability protection, sick leave, and health insurance) it was not possible for them to examine the contribution of specific aspects of benefit coverage to employees’ satisfaction with their overall level of benefit coverage; however, they did examine the relationship between employee benefit cost and benefit satisfaction. Employee benefit cost was negatively related to benefit satisfaction across all analyses (r = -.26, p < .Ol and partial r = - .33, p < .Ol>. In the second study, Barber et al. (1992) examined the impact of the implementation of flexible benefits on employees’ satisfaction with benefits in a professional management organization serving financial institutions. They found a large, statistically significant increase in benefit satisfaction from pretest to posttest. Their analyses suggest that increased understanding of benefits was a key factor in enhancing benefit satisfaction, and that communication and training should be viewed as important parts of the process by which flexible benefits increase satisfaction. Thus, their study provides evidence to suggest that benefit plan features contribute to benefit satisfaction. In the final benefit satisfaction study, Williams (1993) tested a theoretical model of the determinants of benefit level satisfaction suggested by Miceli and Lane (1991) using a sample of employees from 13 libraries. The results of multiple regression analyses indicated that factors related to the administration of benefits (e.g., benefit communication, employee input in benefit determination) were most highly related to benefit level satisfaction. In addition, benefit comparisons (ratings on a &point scale with 1 being “much less” and 5 being “much more” between the overall level of benefits the employee currently receives and standards such as “others doing my job in other libraries in the area”) were significantly and positively related to benefit level satisfaction. Consistent with the findings of Dreher et al., the employee’s cost for medical insurance was significantly and negatively related to benefit level satisfaction. The variables representing the perceived level of benefits received by employees, and the level of benefits actually provided by employers were not significantly related to benefit level satisfaction in this sample. Thus, despite the intuitive appeal of the suggestion that benefit coverage levels are related to benefit level satisfaction, what evidence exists is contra-

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dictory. Dreher et al., found support for a positive relationship between benefit coverage and benefit level satisfaction in their multivariate analyses, but Williams did not find support for this relationship. More consistent findings are that benefit costs are negatively related to benefit level satisfaction (Dreher et al. 1988; Williams 1993), and that features related to the administration of benefits such as flexibility (Barber et al. 1992) and communication and employee input (Williams 1993) are positively related to benefit level satisfaction. While benefit satisfaction itself is an important focus of research, others have indicated a need for more research linking compensation satisfaction and its dimensions to organizationally relevant outcomes (Harris & Fink 1994; Heneman 1985; Judge 1993; Lane 1993). We suggest research that might examine the linkages between benefit satisfaction and other attitudinal and behavioral outcomes addressed in this article (e.g., commitment, absenteeism, turnover). Harris (1993) and Lane (1993) have begun work in this area, and Harris and Fink (1994) suggest additional linkages that might be examined.

Organizational

Commitment

Another outcome variable that has been linked to benefit features is organizational commitment. Farrell and Rusbult (1981) used an investment model based on social exchange (Homans 1961) and interdependence theories (Thibaut & Kelly 1959) to predict the causes of and interrelationships among job satisfaction, commitment, and turnover. They defined commitment as “the binding of the individual to behavioral acts,” and stated that “commitment . . . involves feelings of psychological attachment; it reflects behavioral intention, primarily (but not solely) degree of intention to stay with a job” (Farrell & Rusbult 1981, p. 79). In their model, satisfaction is determined by the combination of rewards and costs experienced in a particular work situation and the comparison level (the average quality of outcomes that the individual has come to expect from employment). In order to predict commitment, they add two components to the model: the alternative value (the quality of the best available alternative to the current job), and, most important for the current discussion, investment size. “Investments refer to the resources that are ‘put into’ an association, usually, but not necessarily, with the intent to improve the long-term value of the relationship. Length of service, acquisition of non-portable skills, and retirement programs (emphasis added) are common job investments. Such investments serve to increase commitment by increasing the costs of leaving the association” (pp. 81-82). Investments have also been described as “resources inextricably connected to the job” (Rusbult & Farrell 1983). The idea that commitment is positively related to investments in the employing system is not limited to Farrell and Rusbult’s (1981) model, but is firmly rooted in traditional psychological and sociological literature (e.g., Becker 1960; Blau 1964; Hrebiniak & Alutto 1972). Farrell and Rusbult (1981) report the results of an experiment demonstrating that commitment increases with increases in job investments. In the same article, they report the results of a cross-sectional survey in which investment

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size was positively related to job commitment, and accounted for a significant amount of unique variance in commitment. In a second study, Rusbult and Farrell (1983) found support for the hypothesis that, since investments tend to accumulate over time, the impact of investments on job commitment should similarly increase over time. With a sample of 88 professional technical workers studied over a 12-month period, they found that the impact of investment size on commitment was initially weak, but as time passed, investments became a more important determinant of job commitment. The research described above provides strong support for a positive relationship between investments and commitment; however, in each study, a number of items (two of which were vested and non vested retirement programs) were aggregated to form the investment variable. Thus, it is not possible to examine the independent impact of retirement programs on commitment, nor is it possible to examine the impact on commitment of non vested versus vested retirement benefits. Recently, another body of research has focused specifically on the relationship between employee stock ownership plans (ESOPs) and organizational commitment. ESOPs are deferred employee benefit plans through which employees acquire company stock. Usually, an ESOP company annually donates stock, or cash to buy stock, to an ESOP trust. Stock in the trust is allocated to employees’ individual accounts, usually based on employee salary. Employees’ ESOP accounts vest over time, and they receive the vested portion of their ESOP accounts when they leave the company, or in some companies, only when they reach retirement age (Klein 1987). Klein (1987) found that, across 37 ESOP companies, the size of the annual company contribution to the ESOP trust in the three years preceding the employee survey was positively related to the average organizational commitment level among employees (r = .41, p < .05). However, in multiple regression analyses in which the combined effects of size of contribution and a composite variable of management’s employee ownership philosophy and ESOP communications on organizational commitment were examined, the regression coefficient for size of contribution was not significant. Buchko (1993) examined the impact of the financial value of individual employees’ ESOP accounts on organizational commitment among 181 employees of a single ESOP firm. The financial value of ownership was not significantly related to organizational commitment. Thus, existing multivariate analyses do not support a direct relationship between measures of the size of a firm’s contribution to the ESOP or the size of individuals’ ESOP accounts and organizational commitment. Findings such as these have led researchers to conclude that employee ownership (of which ESOPs are one type) “is unlikely to operate directly. . . on employee attitudes, motivation, and behaviors. Instead, there appear to be a number of intervening and moderating stages between formal ownership and employee attitudes/behaviors” (Pierce, Rubenfeld, & Morgan 1991, p. 124). We would encourage more research on ESOPs that test existing theoretical models, including research that uses employee pay level as a control variable. Since contributions to individual ESOP accounts are often based upon employees’ salary levels, and pay level has been

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hypothesized to be significantly related to organizational commitment, a model that does not include pay level is likely to be misspecified. To date, existing research has focused exclusively on retirement or savings plans as “investments.” Future research should also examine other benefits such as employer-provided medical insurance which may represent an investment, especially for individuals with preexisting medical conditions who may not be able to find alternative insurance coverage (Madrian 1993). Future research might also examine specifically the impact of a variety of benefits on different forms of organizational commitment. Meyer and Allen (1991) have identified three distinct forms of organizational commitment; affective, continuance, and normative commitment; each associated with different psychological states. Employees with strong affective commitment remain with the organization because they want to, those with strong continuance commitment remain because they need to, and those with strong normative commitment remain because they feel they ought to do so. Research investigating the antecedents of the different forms of commitment has indicated that affective commitment develops in response to work experiences that are consistent with expectations and satisfy employees’ basic needs. Continuance commitment presumably develops as employees recognize that they have accumulated “side bets” that would be lost if they were to leave the organization, or as they recognize that the availability of comparable alternatives is limited. Meyer, Allen, and Smith (1993) suggest that normative commitment may develop through the receipt of benefits (e.g., tuition payments or skills training) that create within the employee a sense of obligation to reciprocate. Although much of the research that has linked employee benefits with organizational commitment was conducted before the distinctions between these three forms of commitment were presented in the literature, existing research findings seem to be most directly applicable to continuance and normative commitment rather than affective commitment. Future research might examine these specific linkages. Employee

Performance

Motivation theory suggests, and research on reward systems supports, the notion that in order for rewards to enhance productivity they must be performance-contingent. Due to the fact that benefits typically are contingent upon organizational membership rather than individual, work-group, or organizational performance, a link between benefit coverage and productivity has not been widely suggested. Three exceptions are labor economics research in the areas of pensions and ESOPs, and the study of alternative work schedules, discussed below. However, just as the wage compensation mix has shifted in recent years to include a larger percentage of contingent compensation in many cases, the same may happen with benefits. As benefit costs continue to increase, and employers look for methods to reduce benefit costs and share costs with employees, performance-contingent benefits are not out of the question. Research in this area should be encouraged. Pensions. Allen and Clark (1987) suggest that pensions, as a form of deferred compensation, can be used to discourage workers from shirking. Lazear (1979,

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1981) has shown how deferred compensation results in workers being paid less than their marginal product during their initial years with the firm and more than their marginal product in their final years. Thus, workers covered by pensions will be less likely to shirk, for fear of getting fired and losing some of the pension wealth they would have received if they had not lost their job. Allen and Clark (1987) note, however, that the risk of getting fired is about the only linkage between pension compensation and worker performance. Employee Stock Ownership Plans (ESOPs). As ESOPs grew in popularity during the 1970’s and 1980’s, a number of labor economists turned their attention to evaluating the impact of ESOPs on organizational productivity. In a summary of the early work done in this area, Conte and Svejnar (1990) concluded that the findings regarding the effect of ownership per se were contradictory-some studies found large and significant ownership effects and others found negligible effects, especially when controlling for the level of employee participation found in ESOP companies. This pattern of contradictory research results continues with two more recent studies. First, Kruse (1992) examined the impact of ESOPs on productivity in 2,976 public-traded companies using data obtained from CompuStat and Form 5500 pension plan data from the federal government. Across a number of different tests (specifications) and sub-group analyses (e.g., manufacturing vs. non manufacturing) the productivity effects of ESOPs were not consistently significant. Second, Jones and Kato (1993) report on the productivity effects of ESOPs in 320 leading Japanese manufacturing firms. Since 90% of Japanese firms had ESOPs at the time of this study, Jones and Kato (1993) examined the impact of the participation rate (percentage of employees participating) in ESOPs and the proportion of total stock owned by employees through ESOPs on firm productivity. The relationship between ESOP participation rate and productivity was positive and significant for 5 of 7 industries studied. The relationship between proportion of stock owned and productivity was negative and significantly related to productivity in 3 of 7 industries. Jones and Kato (1993) explain this latter finding by noting that the existence of an ESOP “may reduce the power and authority of executives, undermining managerial incentives and, in turn, tending to impair firm performance” (p. 364). They conclude, however, that the adverse effects on managerial incentives are almost always outweighed by the positive effects on productivity. So, despite some positive findings concerning the impact of ESOPs on organizational performance, the conclusion of Conte and Svejnar (1990) still seems appropriate: “the final word on the productivity effect of ESOPs is not yet in-it awaits somewhat better data and more sophisticated research designs than have been implemented” (p. 167). Alternative Work Schedules. There are a variety of alternative work schedules that have been developed over recent years including part time schedules, job sharing, telecommuting, flextime and a compressed work week. The relationship between two of these alternative work schedules, flextime and a compressed work week, and employee performance and productivity have been examined within the management literature. Pierce and Newstrom (1980) used the work adjustment model to suggest that flextime can bring about a

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more efficient application of the employee’s abilities by allowing employees to take their circadian or diurnal rhythms into account in planning their work schedules and by decreasing the amount of stress experienced by some employees. Although anecdotal evidence suggests that flextime does lead to increased productivity (e.g., Shellenbarger 19941, very few rigorous empirical investigations of this relationship exist. In an early study, Schein, Maurer, and Novak (1977) investigated the impact of flextime on the performance of 246 clerical employees in five production units within a large financial institution. For the two production units in which both an experimentally designated control group and pre- and post-measures were employed, there was no significant difference in performance between the experimental and control groups. In one unit, there was a significant improvement in productivity from the same period the previous year (when flextime was not in effect); however, Kim and Campagna (1981) point out that the potential increase in total work hours (due to less leave being taken under flextime) was not taken into account when measuring productivity, so the favorable results may have been attributable to the confounding of the criterion measure with the changes in total hours worked from pre- to post-test. In a field experiment of 64 clerical employees, flextime had no impact on employee performance or productivity (Orpen 1981). Kim and Campagna (1981) examined the impact of flextime on performance efficiency in four divisions of a county welfare agency. Using analysis of covariante to control for initial differences in efficiency between the experimental and control groups, performance efficiency was significantly higher for the experimental group in one of four divisions. Finally, Dunham, Pierce, and Castaneda (1987) examined the impact of flextime on work coordination for two groups of utility employees. Work coordination declined following the introduction of the flextime schedule, although not at a significant level. Thus, the general conclusion reached based upon this research is that flextime appears, in most cases, to have no adverse impact on performance, and there is limited evidence of performance improvement under flextime. A stronger impact on performance has been demonstrated for a compressed work week schedule. A group of utility employees working a 5-day, 40-hour (5/40) schedule were placed on a compressed work week (4/40) schedule for four months, then returned to a 5/40 arrangement. Six of the seven organizational effectiveness measures showed improvement following the introduction of the 4140 schedule: performance quality, quantity, reliability, reactions to problems, and overall performance; and client service (Dunham et al. 1987). Six of the seven measures also showed a decline after the return to a 5140 schedule (quality did not decline). Dunham et al. (1987) concluded that these results are realistic: “alternative schedules that addressed a subset of organizational and member needs, preferences, and constraints were offered. Results indicated that improvements in . . . organizational effectiveness were realized in these areas but not in others. In other words, the schedules produced benefits where there was a reason to expect benefits” (p. 239). To be useful, future work in this area should focus on characteristics of the organizations and their members, and situations in which alternative schedules appear to be appropriate remedies for specific organizational and personal needs.

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Employee Absenteeism Employee absenteeism is an acknowledged problem in any organization that uses fixed work schedules, and the cost and disruptiveness of absenteeism have been frequently noted (e.g., Dalton & Mesch 1991; Dalton & Todor 1993). Within the past several decades, organizational researchers have devoted considerable attention to absenteeism; Folger and Belew (1985) counted over 750 studies that had been conducted at the time of their review. Early research that focused largely on individual characteristics (e.g., demographic information) and attitudes as predictors of absenteeism proved largely unfruitful, and various authors have referred to this early research as “bewildering” (Dilts, Deitsch, & Paul 19851, “not designed to be very informative” (Fichman 1984) and “of little, if any, practical value to the manager” (Dalton & Enz 19871. In Brooke’s (1986) model of employee absenteeism which modifies and extends the Steers and Rhodes (1978) process model of employee attendance, Brooke suggested a direct, positive link between organizational permissiveness and absenteeism. Brooke (1986) defines organizational permissiveness as “frequent absence without consequence” (p. 3531, and suggests that an organization or subunit in which members are able to take unscheduled days off easily, or in which numerous casual absences result in little or no apparent adverse consequences would be viewed as highly permissive toward absenteeism. Since sick leave programs (which are considered to be an employee benefit) allow for absences with pay in many cases, we might expect a relationship between sick leave provisions and employee absence. Recent research in the area of absenteeism suggests that organizational absence policies are associated with absence behavior, and that certain policies tend to encourage absenteeism by making absenteeism easier or more profitable for the employee. Winkler (1980) found that public school teachers were more likely to be absent when they were covered by an income protection plan (insurance against the loss of salary if the length of illness exceeds accumulated sick leave days), when they did not have to provide proof of their illness, and when they did not have to report their absence directly to the principal. The effects of these policy variables on absenteeism were greater for MondayFriday absences than for other short-term absences; Winkler (1980) suggests that Monday-Friday absences are less likely to be illness related. Dalton and Perry (1981) examined the relationships between absenteeism policy provisions of 29 urban mass transit collective bargaining agreements and absence rates. They found that organizations that allow sick leave benefits to accumulate at a faster rate, and that do not remunerate earned, but unused sick leave have higher absence rates. Thus, research has demonstrated that sick leave provisions are related to organizational absence rates. Recently, Dalton and Mesch (1991) extended the sick leave policy-absenteeism research by examining the impact of an organizations absence policy on “avoidable absence”-that portion of total absenteeism that is largely discretionary (situations in which employees could have attended if they had so chosen [Chadwick-Jones, Brown, & Nicholson 19731)-rather than total absence. They conducted a field study of 1,292 employees of a public utility com-

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pany whose sick leave (absence) policy included a waiting-time provision. If an employee had 90 or more days of accumulated sick leave, he or she had zero waiting time before being paid for an absence; an employee in this category who elects to take a day off for illness will be paid beginning the day of the absence. An employee with less than 90 days sick leave had a 2-day waiting time which meant he or she would not be paid for the first two days of any absence. Dalton and Mesch (1991) found that avoidable absenteeism accounted for almost 60% of all absenteeism during the period of study, and that, eontrolIing for demographic and attitudinal predictors, the waiting-time provision variable (whether or not an employee had accumulated 90 days of sick leave) accounted for 22.7% of the variance in the avoidable-absence dependent variable. Research has addressed the relationships between absenteeism and two other benefits: the provision of an employer-provided child care center and flexible scheduling opportunities. First, Milkovich and Gomez (1976) evaluated the effects on absenteeism and turnover among parts assemblers of an employer-sponsored on-site day care center. They concluded that lower employee absenteeism and turnover rates were related to enrollment in the day care program. Alternatively, Goff, Mount, and Jamison (1990) studied the impact of an on-site child care center on employee absenteeism in a large midwestern electronics and communications firm. Their results provided no evidence that on-site child care reduces absenteeism among employed parents. We reach the same conclusion as did Miller (1984) 10 years ago: due to a lack of wellcontrolled research in this area, firm conclusions about the relationships between employer-sponsored child care and absenteeism cannot be reached. Rim and Campagna (1981) used a quasi-experimental design to examine the impact of flextime on absences within four divisions of a county welfare agency. They found that short-term unpaid absences decreased by approximately 35% in the experimental group and increased 28% among employees in the control group. Paid absences were not affected by the flextime intervention. Narayanan and Nath (1982) studied the impact of flextime on total absenteeism among two groups of nonexempt employees in one unit of a large corporation. Total absenteeism was reduced to about one-third of its pre-intervention rate in the experimental group (a significant change); there was no significant change in the control group. In addition, Krausz and Freibach (1983) demonstrated that unpaid absences were significantly lower under flextime than under rigid scheduling for 277 women employed in a large insurance company. More recently, Dalton and Mesch (1990) examined the impact of flexible scheduling on absenteeism within a large public utility company. Their study is particularly notable because data were available over a six year period in which flexible scheduling was introduced and then removed. Both the flexiblescheduling intervention and its removal had a significant impact on the rate of unexcused employee absenteeism within the experimental group in the hypothesized directions: i.e., absenteeism decreased when flexible scheduling was implemented and increased when flexible scheduling was removed. For the control group, neither the flexible-scheduling program nor its removal had a marked effect on absenteeism.

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Existing research has begun to demonstrate that at least certain forms of absenteeism (e.g., avoidable or discretionary) can be impacted by the organization’s policy concerning sick leave and flexible scheduling. This represents an area in which employer-provided benefits can be used to influence an outcome of importance to the organization. However, Dalton and Mesch (1991) caution that absenteeism may not be entirely dysfunctional. They suggest that some levels of employee absenteeism may be beneficial for the organization, perhaps under circumst~ces when employees who are able to absent themselves temporarily from the workplace do not do so permanently through turnover, The importance of considering trade-offs among these outcomes is discussed later in this article.

Turnover Research within organizational behavior and human resources management provides little evidence of a link between benefit coverage and turnover. Although meta-analytic studies indicate a significant, negative relationship between pay and turnover (Cotton & Tuttle 19861, no evidence links turnover to benefit coverage in general, or any specific benefits. Existing research within labor economics, however, has examined the link between benefit program features and various forms of turnover (e.g., lay-offs and employee’s decisions to quit or retire). The benefit that has received the most research attention within this literature is pension coverage. Pensibns. Pension benefits represent a form of deferred compensation that a worker receives after he or she retires from a firm, provided he or she has met certain age and service requirements (Allen & Clark 1987). Pension plans are of two basic types: defined contribution and defined benefit. In a defined contribution plan, the firm promises to contribute a fixed amount of money to an individual’s pension account; the funds are invested by the plan and accumulate t~oughout the worker’s life; then, the benefit at retirement is dete~ined by the size of the individual’s pension fund at that time. In this type of plan the worker bears all of the risk related to the rate of return on the invested funds; however, he or she does not risk losing pension benefits if he or she leaves the firm prior to retirement or if the company goes out of business, terminates the pension, or fires the worker. The funds in defined contribution plans belong to the worker. Defined benefit plans are much more common among large employers, and almost 80 percent of pension participants are covered by defined benefit plan (Allen & Clark 1987). In a defined benefit plan, the worker is promised a benefit upon retirement based on plan generosity, years of service, and, in some cases, earnings. The research reviewed in the rest of this section will focus on defined benefit pension plans, unless otherwise noted. Labor economics research conducted within the past two decades has shown that turnover is much lower in jobs covered by pensions (Allen, Clark, & McDermed 1993: Mitchell 1982; Schiller & Weiss 1979). A summary of this research indicates that pension coverage has a larger impact on turnover (or length of service) than a dollar of additional hourly compensation, a year of

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additional tenure, or union membership (Allen et al. 1993). We present a summary of selected studies that address the pension-turnover relationship. Mitchell (1982) analyzed the Quality of Employment Survey data from 1973 and 1977 using two dependent variables: whether or not the employee quit his or her job (voluntary turnover) and whether or not the employee left his or her job for any reason (total turnover). Results indicated that voluntary turnover is lower for workers with pensions, but that this relationship is due to a significant negative relationship between pensions and voluntary turnover for men. (Subsequent research has indicated that workers estimate the cost of losing pension coverage to be about 80 percent of annual earnings [Mitchell 19831.) For women, pensions were not significantly related to voluntary turnover. For total turnover (quits plus lay-offs and discharges), the presence of a pension plan was negatively related to turnover for both men and women. Mitchell (1982) concludes that employer-sponsored pensions deter the probability of job change for both men and women. Subsequent research has investigated theoretical explanations for these relationships. According to Ippolito (19871, developments in the pension literature support a concise model based upon an “implicit contract”: “Workers must forgo wages in exchange for pensions . . . Workers and the firm agree that workers will pay for a real pension, one indexed to the final wage. Workers are put on notice that departure too early or too late breaks the contract and therefore triggers pension penalties. The pension bonds the worker’s promise to stay with the firm. Hence only workers who anticipate staying for the long term join” (p. 449). Allen et al. (1993) provide evidence that supports the implicit contract theory. They found that the large capital loss in pension wealth associated with leaving a job was the main factor responsible for lower turnover in jobs covered by pensions. Interestingly, however, capital losses had a greater impact on lay-offs than voluntary turnover (i.e., quits), supporting the proposition drawn from implicit contract theory that reputational concerns prevent employers from saving pension dollars by firing their workers. Allen et al. (1993) suggest that the lower levels of voluntary turnover (i.e., lower quit rates) among workers covered by pensions seems to come from self-selection. Allen et al. (1993) also examined a third explanation for the reduced turnover among pension covered employees: the higher overall compensation levels (compensation premium) associated with pension covered jobs. Allen et al. (1993) found that this compensation premium was significantly related to turnover, although it was not as highly related as the capital loss variable; the compensation premium accounted for 17% of the turnover difference between the group that had pensions and those that did not. Stronger support for the compensation premium explanation has recently been provided. Gustman and Steinmeier (1993) examined the impact on turnover of the compensation premium versus pension “backloading” (the accrual of value disproportionately in the later years of employment typical of defined benefit pension plans). Gustman and Steinmeier (1993) found that the impact of the compensation premium was greater than that of pension backloading: backloading accounted for about 5% of the difference in mobility rates between pension covered and non-

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pension covered workers, and the remaining compensation premium accounted for about 60%. An additional piece of evidence provided by Gustman and Steinmeier (1993) to support the impact of the compensation premium is that the effect of defined contribution plans on job mobility, which are not backloaded, was about equal to the effect of backloaded defined benefit plans. This suggests that the apparent negative relationship between plan pension coverage and turnover may reflect the effects of omitted variable bias, with the pension measure taking the credit for the effects of an unmeasured wage premium (Gustman & Mitchell 1992). This recent work has a number of implications for both research and practice. First, the relationship between pensions and turnover is one of the few areas considered in this article where the research has supported a strong link between benefits and an important behavioral outcome. If, as shown by Gustman and Steinmeier (19931, this relationship is due to the compensation premium associated with pension-covered jobs, pensions would no longer, themselves, be viewed by employers as an effective mechanism for managing turnover and its associated costs as has been suggested by Schiller and Weiss (1979). Second, findings of earlier research (e.g., Mitchell 1982; Schiller & Weiss 1979) have led researchers to question whether generous pension plans reduce turnover too much. Pension plans may create incentives for employees to remain in jobs that they do not like and for which they are not well suited. The term “golden handcuffs” has been used to describe the situation in which employees are staying because of the “locked-in” features of their benefit programs (Flowers & Hughes 1973). The results of the most recent research indicate that this does not seem to be the case. Pensions actually are associated with decreases in Euy-ofi rather than voluntary turnover (Allen, Clark, & MacDermed 1993), and the compensation premium associated with pensioncovered jobs may provide a greater incentive for employees to stay than the presence of either a defined benefit or defined contribution pension plan (Gustman & Steinmeier 1993). Finally, it should be clear from this research, that benefits should always be studied within the context of other aspects of the compensation system, most notably pay. Research that examines multiple aspects of compensation simultaneously is important not only to alleviate important omitted variable problems, but to provide direct evidence of relationships between benefits and pay (such as the positive relationship between wages and pensions) that might inform future research. Other Benefits. Mitchell (1982) expanded the focus of turnover research by examining the effect of a variety of benefits on job change by workers, Since benefits are not usually portable across jobs, Mitchell argued that, in addition to pensions, benefits such as medical, life, and disability insurance; profit-sharing and stock option plans; and other benefits that increase with tenure (such as vacation time and sick leave) are deterrents to mobility. Mitchell (1982) used dummy-coded variables to assess the impact of five benefits (pension, medical insurance, life insurance, stock options, and profit sharing) on both voluntary and total turnover. Results indicated that no benefits other than pensions were

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related to voluntary turnover. For total turnover, having a stock-ownership plan significantly reduced the probability of job change for men. Subsequent research has taken a closer look at two of these relationships: the relationship between stock-ownership plans and turnover and the relationship between employer-provided medical insurance and turnover. First, Wilson and Peel (1991) examined the relationship between the presence of profit-sharing or employee stock (share) ownership plans and voluntary turnover among 52 engineering and metal working firms in the United Kingdom. They found that firms with profit-sharing or employee stock ownership schemes had significantly lower quit rates than other firms. Second, Madrian (1993) assessed the impact of employer-provided health insurance on job mobility by exploring the extent to which workers are “locked” into their jobs because preexisting conditions exclusions make it expensive for individuals with medical problems to relinquish their current health insurance. Using data from the 1987 National Medical Expenditure Survey, Madrian (1993) examined the mobility difference between those with high and low expected medical expenses, and those with and without employer-provided health insurance. As expected, job lock only affected turnover for those who actually had group employment health insurance: job lock reduced the voluntary turnover rate of those with employer-provided health insurance by 25 percent, from 16 percent to 12 percent per year. The attention that labor economists have given the benefit-turnover relationship has generated the largest body of research relating benefits to important behavioral outcomes. Within this literature, attention has been given to questions of optimal rates of turnover (e.g., Allen & Clark 1987; Madrian 1993); and, in some cases, the demographic characteristics of those whose mobility might be affected by benefits (e.g., gender, age). However, little mention has been made of an aspect of turnover that has gained importance within the organizational literature-the focus, not on how many are leaving, but the performance levels of those who are leaving (cf. Boudreau & Berger 1985; Campion 1991; Dalton, Krackhardt, & Porter 1981; Dalton & Todor 1993; Dalton, Todor, & Krackhardt 1982; Hollenbeck & Williams 1986). This literature on the functionality of turnover suggests that the consequences of turnover may depend in large part on the quality and/or replaceability of those departing (Dalton et al. 1981,1982). Empirical research has suggested that the percentage of total turnover viewed as functional, may be large. In one study, more than half of all turnover was functional or beneficial to the organization in that it provided an opportunity to replace below-average performers (Hollenbeck & Williams 1986). Clearly, including measures of the functionality of turnover would require a database that is not currently available to researchers. To study the relationships between benefits, such as pensions and medical insurance, and turnover in a way that would allow an assessment of the functionality of turnover would require longitudinal data collected across employers, as well as supervisors’ reports of the levels of performance of the individuals who left the organization and, possibly, those who replaced them (Campion 1991). Gustman and Mitchell (1992) acknowledge that poor or nonexistent data have seriously hampered

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researchers from developing the type of detailed understanding required for evaluating pensions and their impacts. Although Gustman and Mitchell (1992) develop a set of recommendations for new data in the pension area, they do not explicitly discuss the importance of collecting measures of workers’ performance levels. This may represent an area where organizational researchers can contribute to the study of benefit-turnover relationships.

THE RESEARCH AGENDA As indicated throughout this review, much research on links between benefits and employee behavior adopts fairly coarse indices of benefits, such as their presence or absence. Such severe restrictions on the range of an independent variable can have serious consequences including attenuating the strength of observed relationships. More importantly, dichotomous indicators may not be valid representations of real differences among benefits programs. Future research must adopt more complex ways of understanding benefits and their impacts. In the following sections we consider several ways in which such complexity may be acknowledged. Consider a Broader Range of Benefits There are some benefits that have not received rigorous empirical attention. An example is employee assistance programs (EAPs). While EAPs have been widely adopted (over 10,000 in place in the U.S.), very few objective attempts at EAP evaluation exist (Weiss 1987): “the bulk of the literature consists of anecdotal, poorly operationalized, poorly executed, and/or poorly designed studies” (Luthans & Waldersee 1989, p. 397). This conclusion would seem to apply to organizationally sponsored health and wellness programs in general. In addition, very few studies have examined insurance programs provided by organizations. Some research has focused on medical insurance, but few other forms of insurance (e.g., life, disability, dental, vision) have been investigated. Much has been made of the cost to employers of providing medical insurance to employees, but the total cost of providing other forms of insurance are not negligible and would seem to warrant research attention. Finally, there are a variety of alternative work schedule arrangements that have arisen in recent years including part time schedules, job sharing, telecommuting, flextime and a compressed work week. Only the final two have received research attention. Consider Benefits in the Context of Systems Each particular benefit offered is not independent of every other benefit, and employees’ perceptions also will not be independent. There may be hierarchical arrangements among benefits that will improve our ability to understand them when taken into consideration. For example, leave policies may be important only when health insurance is already included in the benefit pack-

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age; when health insurance is not included it may be the most salient feature for employees. Considering benefits in the context of systems also suggests the importance of including other aspects of the compensation system when studying the impact of benefits. For example, recent research has indicated that the compensation (wage) premium associated with pensions is important for understanding relationships between pensions and turnover (Gustman 8-c Steinmeier 1993). Gustman and Mitchell (19921, Williams and Dreher (19921, and Ehrenberg and Milkovich (1987) have discussed other situations in which it is important to consider compensation practices as systems rather than study specific practices in isolation. Focusing on benefit systems also allows for examination of the systems used to administer benefits rather than simply the level of benefits provided. One property of benefit administration is the flexibility of the benefits system. Others are the amount of employee input considered in making decisions about benefit plan characteristics and the amount of help and assistance employees receive in understanding and using their benefits. While scales have been developed to measure some of these components (Harris 19931, little substantive research has been conducted. Consider Interactions

among Outcomes

In this article, research related to linkages between benefits and attitudinal and behavioral outcomes has been summarized separately by outcome. This was done for ease of presentation, but also because many, if not most, of the studies reviewed here have considered only one outcome. Dalton and Todor (1993) remind us that, in some cases at least, this is an artificial separation. For example, Gupta and Jenkins (1991) suggest that absenteeism and turnover are sometimes alternatives to each other, and they recommend a “metaconstruct” approach to research that would include the simultaneous study of several behaviors, such as absenteeism and turnover. Until more of this type of research can be conducted, to the extent that there are theoretical or practical reasons for expecting relationships among these outcomes, research that examines only one outcome should not be relied upon exclusively to inform practice. For example, changes in absenteeism policies should not be made without a consideration of the potential impact on those changes on the organization’s turnover rate (Dalton & Todor 1993). Recognize

Both Formal and Informal Benefits

Benefits programs exist in organizations at several levels of formality. At the most formal level they take the form of written policies and regulations. For example, a firm’s written policies concerning sick leave and hours of work. At more informal levels, however, unwritten policies and practices may amend or supersede the formal ones. For example, in the absence of a written policy allowing flexible work hours, a supervisor may allow his or her employees to

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arrive or leave work at different times if convenient for the work unit. Or some employees may be allowed to telecommute or work at home in the absence of a specific policy supporting such a practice. Although such informal policies are difficult to study across work units, they nonetheless are important. For example, informal policies which negate formal ones may explain the surprisingly weak evidence for links between benefits programs and employee benefit level satisfaction found in some studies (e.g., Williams 1993). In addition, formal and informal benefits are differentially important at different kinds of fnms. Small firms typically rely much more heavily on informal benefits than larger firms. Excluding consideration of informal benefits is thus likely to exaggerate differences in benefits between small and large organizations or lead to the exclusion of small firms from benefit research entirely. Consider Barriers to Benefits

Because communication of benefit programs must occur across multiple hierarchical levels of organizations, employees develop inaccurate perceptions of their benefit coverage (e.g., Williams 8z Newman 1993). For example, when employees’ major source of explanations about benefits is their supervisor and the supervisor’s understanding of benefits policies is imperfect, employees will receive incomplete information. Supervisors also may actively impede employees’ access to benefits because they fear negative implications for the work unit if an employee uses a benefit (e.g., long maternity leave), or because they fail to understand or accept the employee’s desire to use the benefit (Kossek 1990). Finally, the organizational climate of the firm may lead employees to feel that using particular benefits will have negative implications for their careers or will result in other negative sanctions (Ferber & O’Farrell1991). Unless factors which impede employees’ use of benefits are taken into consideration, it is unlikely that the links between benefit programs and employee attitudes and behaviors will be fully understood. Consider Employees in the Context of Systems

Finally, it has become increasingly clear in recent years that employees must be considered in the context of family and community systems. The current century has seen a steady and striking increase of women’s participation in the labor force with concomitant increases in the percentage of employees with young children and with working spouses. High rates of divorce and non-marital pregnancy have increased the percentage of employees who are single parents. All of these demographic changes exert pressure on organizations to adapt their benefits policies in order to retain employees and ensure productive behavior. A large body of literature has emerged which addresses the impact of work conditions on dependent variables related to employees’ family functioning. Some aspects of work have been reliably associated with perceived difficulty in managing work and family roles; and somewhat less reliably associated with di~culties in family life. The connections between

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work and family have been shown to vary as a function of organizational size (MacDermid, Williams, Marks, & Heilbrun in press). Further, the links are bidirectional: family life also affects behavior at work (Ferber & O’Farrell 1991; Voydanoff 1987). Researchers interested in assessing the impact of benefits on organizationally relevant outcomes would profit from examining these literatures to inform their own research. Two problematic issues must be carefully considered when studying employee benefits in the context of employees’ families. First, flexibility is often seen as an important positive characteristic of benefits. Employees often value the opportunity to allocate benefit dollars in ways which maximize fulfillment of their needs and minimize double coverage in dual career households. However, flexible benefit plans “are of limited utility if they include only benefits urgently needed by almost everyone. Employees are confronted with an unhappy choice, particularly difficult for those with low incomes who cannot afford to purchase substitutes on their own” (Ferber & O’Farrelll991, p. 194) and those who cannot “share” coverage with a partner’s benefit plan. Therefore, the National Research Council recommends that employers consider adopting flexible benefit packages, while carefully balancing the need for core benefits against the advantages of more choice (Ferber & O’Farrel11991). Second, while equitable consideration of issues specific to family configuration is desirable, employers can be criticized for stepping too far into the lives of their employees and becoming “big-brotherish” in the their influence. Consideration must always be given to the wide range of individual choice that impacts how employees manage the interface of their work and private lives. Kossek (1990) suggests that employers should foster a climate that combats stereotyping of employees (e.g., making assumptions regarding the work/family needs of female versus male employees) and consider ways in which benefit coverage and policies may be revamped to meet growing work force diversity.

Consider an Array of Research Strategies We have encouraged additional research on most of the benefit-outcome linkages presented in this article, and it is clear from the variety of topics mentioned that an array of research strategies will be needed to address these research needs. Not all research strategies will be useful for all questions, however, and in Table 2 we use our organizing framework to categorize research topics we have suggested in this article according to the design characteristics that we believe will be most useful for investigating these issues. This listing is not meant to be exhaustive, but includes the research questions that we believe are most deserving of immediate research attention. As shown in the cell in the upper-left-hand corner of Table 2, cross-sectional laboratory research may examine the role of benefits at a single stage in the job choice process (e.g., willingness to go on a plant trip). Much of this research has been done using student subjects who are currently on the job market. While the use of students in this situation is appropriate, we suggest that this research could be expanded from student subjects to include employees who may

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TABLE 2 A Matching of Selected Benefit Research Topics With Appropriate Research Designs Laboratory

Research

Role of benefits in the job choice process (focus on a single stage; individual level of analysis).

Cross-Sectional Designs:

Role of benefits in the job choice process (focus on multiple stages; individual level of analysis).

Longitudinal Designs:

Field Research -._._ Within a Single Organization

Across Multiple Organizations

Measurement and dimensionality of benefit level and system satisfaction. Employees’s perceptual groupings of benefits or benefit taxonomies Employees’ valuation of benefits (direct pay and benefit trade-offs). Employees’ perceptions of barriers to the use of benefits. Examining responses to performancecontingent benefits.

Role of benefits in applicant attraction (-). Antecedents of benefit level and system satisfaction

Role of benefits in applicant attraction. Impact of pet-formancecontingent benefits on performance and satisfaction. Impact of flexible scheduling on performance, absenteeism, and turnover.

Role of benefits in applicant attraction. Antecedents of benefit level and system satisfaction. Relationships between level and system satisfaction and other organizationaliy relevant outcomes Impact of ESOPs and other benefit “investments” on performance and different forms of commitment. Impact of benefits on turnover and the functionality of turnover.

(-). Relationships between benefit level and system satisfaction and other organizationally relevant outcomes (-). Impact of ESOPs and other benefit “investments” on pe~ormance and different forms of commitment (-).

Note. A minus (-) sign indicates that causal inferences about these relationships cannot be made with this type of research design.

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be considering job change or who have recently changed jobs. This would enhance the generalizability of research on the role of benefits in applicant attraction by including samples with a wider range of ages, education, and experience levels. Moving to the right, cross-sectional field research within a single organization might be useful for examining employee perceptions of benefits. Research topics here might include: the measurement and dimensionality of benefit level and system satisfaction, employees’ perceptual groupings of benefits or benefit taxonomies, employees’ perceptions of barriers to the use of benefits, and relationships between benefit satisfaction and other attitudinal and behavioral outcomes. While these research questions may be appropriately examined within a single organization, restriction of range may pose a problem in some situations. The far right cell in the top of Table 2 indicates that cross-sectional research examining substantive benefit-outcome relationships would require the participation of employees from multiple organizations. While many of the benefitoutcome relationships discussed in this review could be examined with multiorganizational cross-sectional research, the limitations of cross-sectional research still apply. A minus (-) is shown next to the topics in this cell because causal inferences about these relationships could not be made with this type of research design. The bottom of Table 2 presents longitudinal research designs. First, similar to cross-sectional laboratory designs, longitudinal laboratory designs could be useful for studying the role of benefits in the job search process; however longitudinal designs could be used to examine multiple stages of the process (e.g., the differential impact of benefits on the decision to apply, to accept an interview, and/or to accept a job offer). Longitudinal research designs conducted within a single organization (the bottom middle section of Table 2) refer to experimental or quasi-experimental research designs in which a naturallyoccurring change in benefit coverage or in the system used to administer benefits could be examined. In most cases, the presence of a control group would be desirable. Examples from this cell include examining the role of benefits in applicant attraction; the impact of performance-contingent benefits on employee performance; and the impact of flextime on performance, absenteeism and turnover. The final cell represents the most rigorous research design: multiorganizational longitudinal research. With this type of design, substantive issues concerning benefit-outcome linkages could be examined in such a way that inferences could be made about the causal ordering of variables. Consider Relations between Benefit Programs and Firm Performance Recently, a great deal of interest in the impact of human resource practices on firm performance has been generated (e.g., Kleiner, Block, Roomkin, & Salsburg 1987). Because providing employee benefits is a large cost of doing business, we would expect that firms would have an interest in how these expenditures affected the bottom line. Milkovich and Newman (1990) note that

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employee benefits are valued because the improved retention and increased satisfaction thought to result from better benefit coverage will, some organizations hope, have bottom line effects on profitability. This review suggests that we do not yet have the data available to examine these impacts, and we would like to suggest one potentially useful approach to direct research in this area. The majority of studies within the compensation-firm performance literature have dealt with executive compensation. This research literature is dominated by studies which measure annual compensation and bonuses of executives and relate those figures to changes in stock prices, usually abnormal rates of return. Ehrenberg and Milkovich (1987) have suggested several major drawbacks to using changes in stock prices to investigate relationships between compensation practices and firm performance. They suggest instead that research on the effects of compensation policies on firm performance needs to focus on intermediate-level outcomes, or those factors that we would expect to be impacted by aspects of the benefit program and that, in turn, can be related to decreased costs or increased productivity. For example, Williams (1989) argued that attracting a larger or more qualified applicant pool could contribute to firm performance by allowing a firm using valid selection procedures to select a more qualified work force than a firm attracting fewer applicants. Linkages with firm performance could be established for most of the behavioral outcomes discussed in this paper. We believe that following the strategy of establishing links with important intermediate outcomes is the most profitable approach to research on benefit programs and firm performance.

ACKNOWLEDGMENTS The authors wish to thank Timothy Baldwin for his helpful editing of the manuscript. Also, special thanks to Debra Mesch and an anonymous reviewer for their helpful comments and suggestions on a draft of this article.

NOTE 1. An exception is the research on employee stock ownership plans (ESOPs). Three studies have examined employees’ level of satisfaction with ESOPs specifically (Buchko 1993; Klein 1987; Klein & Hall 1988). Our review, however, will focus on satisfaction with benefits generally.

REFERENCES Allen, S. G. and R. L. Clark. 1987. “Pensions and Firm Performance.” Pp. 195-242 in Human Resources and the Performance of the Firm, edited by M. M. Kleiner, R. N. Block, M. Roomkin, and S. W. Salsburg. Madison, WI: Industrial Relations Research Association. Allen, S. G., R. L. Clark, and A. A. McDermed. 1993. “Pensions, Bonding, and Lifetime Jobs.” Journal of Human Resources 28: 463-481.

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