Why some of your colleagues and boss are paid more than you
MANILA, Philippines – You probably do more work than your colleagues and your boss just sits on the desk. They earn more than you, too. Ever wonder why?
ING Bank said the practice has something to do with the so-called tournament theory, which has been used to structure pay by many companies for a while now.
The idea has been around since the late 1970’s when economists Edward Lazear and Sherwin Rosen suggested that workplace compensation should be based on an individual’s relative position in a company, rather than who is being good at their job.
“One reason this happens is that it is difficult to calculate what earnings should really be, it’s much easier to say Jack is better than Jill,” ING said in a newsletter.
This reward of higher pay encourages workers to raise their game.
The caveat, however, is that employees should feel that they have a realistic chance of winning.
While competition might work in theory, the practice has faced criticism over the years.
ING said that tournaments-based pay could be used to justify unfair payment structures and get in the way of teamwork.
Competition can drive workers to outshine each other, rather than help each other out.
Moreover, ING said that some research found that tournament theory was never properly tested in actual practice.
“Experts have also suggested that traditional tournament theory, aimed purely at monetary incentives may work well in the abstract, but has a number of weaknesses for running a company employee reward scheme in modern workplaces,” ING said.
Research also found that people tend to value other rewards such as health insurance and better work-life balance than just additional cash in their pockets.
Meanwhile, another report showed that employees enjoyed receiving unexpected rewards.
“Annual bonus structures might often seem too far off to really care about throughout the year as people tend to discount benefits further in the future and value more immediate benefits more,” ING said.
This is not to say that tournament theory is untested and outdated.
Rewards could be geared toward team effort and output, rather someone’s relative position to a company.
Team-based tournaments increase collaboration and help co-workers to be successful alongside an individual’s own success.
“Revision of reward schemes like gamification could be an important step forward either through a departure from (certain principles of) tournament theory, an adaptation of it, or a mix of the two,” ING said. – Rappler.com