When an employee resigns, most companies assume the primary reason was money. Was the offer higher somewhere else? Should we counter? It’s an understandable instinct, compensation is measurable and it’s something a manager can change with a signature.
It’s also, according to the research, largely the wrong question.
In 2022, MIT Sloan Management Review published one of the most cited studies on the subject. Researchers Donald Sull, Charles Sull, and Ben Zweig analyzed 34 million employee profiles alongside more than 1.4 million Glassdoor reviews to identify what predicted which companies lost people fastest during the Great Resignation. Their finding was blunt: “A toxic corporate culture is by far the strongest predictor of industry-adjusted attrition and is 10 times more important than compensation in predicting turnover.”
Ten times.
An article featured in the McKinsey Quarterly found something similar in the research and framed it as a gap in perception. Surveying both groups separately, they found employees who left prioritized relational factors: feeling valued by their manager, feeling valued by the organization, and having a sense of belonging. In contrast, employers assumed the causes were transactional, inadequate pay and poor work-life balance.
The numbers are worth taking the time to reflect on. Among employees who quit, 54% said they didn’t feel valued by their organization, 52% didn’t feel valued by their manager, and 51% didn’t feel a sense of belonging at work.
This gap explains a lot of failed retention strategies. A company that misreads a culture problem as a compensation problem responds with retention bonuses and adjusted salary bands, then is genuinely puzzled when people keep leaving.
Why this happens
Compensation functions largely as a threshold. Below market rate, it’s a live problem and people leave it. At or above market rate, it stops being something employees think about daily. Culture doesn’t work that way. Leadership quality, whether your contributions are noticed, clear career paths, these are experienced continuously.
As you consider your own organization, first consider is your compensation at market rate? If the answer is yes, and you find you still have people unexplainably leaving, perhaps your company culture is to blame.
Here are 3 reasons why employees stay with their company.
- Leadership quality. McKinsey found uncaring and uninspiring leaders among the top reasons people left, with 35% listing it in their top three. This is less about charisma than about whether employees believe their manager notices them.
- Flexibility. McKinsey identified it specifically as a top motivator and reason for staying, not just a perk, but something people weigh when deciding whether to go.
- Growth. Lack of career advancement appears in nearly every study of why people leave. Employees who can’t see the next step start looking for one elsewhere, often before they’re unhappy about anything else.
The caveat that matters
None of this means compensation is irrelevant, and the research doesn’t claim it is. The MIT authors were explicit that pay and burnout do influence attrition, their point was that other aspects of culture matter more.
The honest version of the argument: pay has to be fair before culture can do any work at all. A company paying below market can’t buy loyalty with good vibes, and treating culture as a substitute for competitive wages is how this finding gets misused. However, once compensation is genuinely competitive, additional money delivers little retention value, while the relational factors keep compounding.
For managers, that reframes the question. It isn’t only about how much money it would take to keep this person. Instead, what else is pushing this person out the door?
