Good interpersonal skills and fairness go along way in keeping employees on the job. However, often times compensation is cited as a reason in exit interviews when other causes are present but people may be reluctant to discuss the other causes candidly. However, in competitive labor markets, compensation certainly matters. Special bonuses are often used to make quick adjustments to market pay scales. However, rewards don't have to be monetary in order to have an impact.
Formal communication has to do with information sharing.
It can take the form of open forums, newsletters, suggestion boxes, memos, voicemail and e-mail, etc. People like to be informed and listened to, so opening formal communications can have a positive impact on turnover. Informal communications are less obvious but also powerful forces. As these examples show, informal communications often conflict with formal communications. Of course, the most powerful informal communication is the rumor mill.