Looking Up From The Bottom Rung
A quick word first1
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Should you care what your boss gets paid?
I came across another article about the impact of wage disparities, co-authored by my HBS colleague Zoe Cullen, whose work I drew on in the “Salary Transparency + Bargaining Power” article I posted earlier this week.
This one, “How Much Does Your Boss Make?” reveals other surprising impacts of salary comparisons. The “bosses” that Cullen and her co-author, Ricardo Perez-Truglia mean are the managers that employees directly report to (not the big cheeses in the C-Suite).
Their study focused on 2,060 employees of a multibillion-dollar company in Southeast Asia. The researchers found three things:
1. Employees had large misperceptions of their managers’ salaries.
2. Employees work harder when they discovered that their boss earns more than they expected. (Maybe they’re bucking for promotion.)
3. But when employees learn that they are getting paid less than their peers, they get demotivated and slack off.
Granted, it’s possible that the culture of the unnamed country where the company is located is different from the one where you work. It’s also possible that has its own distinctive culture that impacted the results. Still, I see parallels to the data in my earlier salary transparency piece.
Starbucks’ open website let’s its baristas (who average $30,000 annually) know that their store managers average more than three times that. Seeing that prize at the end of the rainbow may motivate them to work harder, at least for a time.
Salary transparency can be virtuous if it leads to equal pay for equal work. But there may be other motives for it. To spark productivity, paying the local boss well—and publicizing that fact—may be far cheaper than bumping up wages for those people down below on the first rung of the ladder.
Housekeeping
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Photo by Ricardo Cruz on Unsplash