Self‐managed work teams: An efficiency rationale for pay compression
Publisher DOI
Abstract
This paper uncovers a novel mechanism through which pay dispersion can have a negative effect on firm performance, even in the absence of equity or fairness considerations. We use a stylized model of a self‐managed work team to show that, when team‐work involves heterogeneous tasks, the provision of incentives to exert effort conflicts with the provision of incentives to share information relevant for decision‐making. Pay dispersion deteriorates information sharing as it induces workers to conceal “bad news” to maintain their coworkers motivation. The practical implications of our theory are that team empowerment should go hand in hand with pay compression and that empowerment should be avoided when team production involves strongly heterogeneous tasks.
Date Issued
2020-02-12
Publication Type
Article
Language(s)
en
Author(s)
Adrian, Nana |
Additional Credits
Journal
Journal of economics & management strategy
Publisher
Wiley
ISSN
1058-6407
Access(Rights)
restricted