Any activity, regardless of the genre, needs a positive motivation to move forward. The same goes for employment, which needs positive zeal not only to perform in a better way but also to continue with the organization. For example: A GOOD BOSS in a bad company can motivate you to work harder than a BAD BOSS in a good company! Agree???
Do you know the amount of remuneration your colleagues earn? It is found in a study that if you get to know your peer earns more than you, it tends to sabotage your positive zeal to perform consistently. Also, it spikes the urge to change the job immediately.
On the contrary, it is found that knowing the salary of your boss can motivate you to work harder.
What experts say?
A study was conducted on the effects caused due to the salary comparison and learning the salary of your manager. It was co-written by Ricardo Perez-Truglia and Zoë B. Cullen, assistant professors at the Anderson School of Management of UCLA and Harvard Business School, respectively.
This study can prove to be highly beneficial for the employers that are looking forward to understanding the underlying concerns of the diversified behavioral pattern of the employees.
Ricardo Perez-Truglia and Zoë B. Cullen have conducted a study on 2,060 employees belonging to the diversified hierarchies of a commercial bank worth multibillion-dollar. They have considered the emails sent on a daily basis to calculate the number of hours spent in the office. This helped to understand the total productive hours of the employees. Also, the remuneration at every level was studied.
Workers were asked about their perception of the salary received by the managers, peers, and executives along with their pay and job satisfaction. In order to confirm the version of the employees, the researchers have cross-checked the data from the HR department and offered monetary rewards to the people who showcased honesty while disclosing the figures. It was concluded that less than 33% of the workers succeeded in guessing the correct answer, with only 5% truth, despite the award scheme.
“Don’t pick a job. Pic a boss. Your first boss is the biggest factor in your career success. A boss who doesn’t trust you won’t give you opportunities to grow… William Raduchel said.”
An Unexpected Outcome
The results obtained from the research contradicted the common intuition. Cullen stated that after knowing the salary of the managers, the zeal to work harder enhanced exponentially. However, the result was the opposite when the employees got to know a wide rank difference between the manager and employee.
The study was compared between the employees and managers who were five positions away from each other. The employees who consider themselves unworthy to reach the position of the managers had enhanced their hard work to a minor level. On the contrary, people who were just one or two positions away from their managers boosted their level of effort in the company by a significant amount.
A Contradictory Reaction Motivate You to Work Harder
Opposite reactions were achieved from the knowledge of the compensation received by the peers and managers.
In fact, for every 1% higher than the perceived salary of the boss, the employees contributed 0.15% more hours while they worked 0.94% lesser hours after learning the 1% higher than the expected salary of the peers.
Employers find it difficult to identify the competent workers who have the potential to offer a productive outcome. Even in this stringent market, the employers can lose 0.225% employees when they learn their peers get 1% more than the expected salary.
Also, Ricardo Perez-Truglia and Zoë B. Cullen have come forward with other observations in regards to the lack of uniformity in the wages and huge pay gaps, which include:
- Female employees can work with a lower wage than the male employee, provided the latter hold a higher position. This proves the existence of the higher wage gap among the genders in a vertical margin and lesser in the horizontal level.
- Within the companies, the effect of the social forces is negligible which reduces the scopes of inequality at the horizontal level as the firms are not forced to increase the vertical gap.
- Previously, the transparency regarding the CEO pay was considered of great importance but the study has proved otherwise.
Related: Why You Need to be Transparent with Your Employees?
Note for the Employers
The study conducted by Ricardo Perez-Truglia and Zoë B. Cullen has compelled a few companies to remodel the compensation plans along with the level of transparency of salary. It is concluded that the increment is more beneficial based on the position rather on the performance, which can successfully avoid the inequality among the peers that leads to depression.