Knowing what your co-workers may lead to unintended consequences.
Boris Maciejovsky, associate professor of management at the University of California Riverside School of Business, outlines why.
Boris Maciejovsky is an award winning researcher and teacher, a TEDx speaker, and an Associate Professor of Management. His research interests are decision-making in economic, social, and organizational contexts. He is particularly interested in developing novel laboratory paradigms that help to isolate important aspects of real-world phenomena to study how such features influence decisions, processes, and outcomes. His work sheds light on (i) group decisions, learning, and knowledge transfer; (ii) information aggregation in social and organizational environments, and (iii) bargaining and negotiation.
Professor Maciejovsky received his Ph.D. in marketing from the Sloan School of Management at the Massachusetts Institute of Technology (MIT) and his doctoral degree in psychology from the University of Vienna. Before joining UCR, he was a faculty member at Imperial College London, the London School of Economics, the Max Planck Institute of Economics, and the Humboldt University of Berlin.
Salary Transparency Can Bring Unintended Consequences
If you are curious about your colleagues’ salaries, you’ll be happy to know that more and more employers are making their employee compensation packages known to all their workers.
Our study, however, found that when employers reveal how employees rank in job performance, pay transparency may have unintended consequences. Specifically, it can boost feelings of entitlement among top performers, who may feel they deserve significantly higher compensation.
In one of our experiments, participants were asked to imagine applying for a new job after learning their performance rank at a previous company. Those told they ranked third out of 500 requested substantially higher salaries than those ranked in the middle or at the bottom—despite receiving identical information about a peer’s salary offer.
Conversely, employees ranked near the bottom tended to feel demoralized. They were requesting less than their closely ranked peers and felt less entitled to a raise in general. We found that employees don’t simply react to how much others make—but rather, how close they are to being the top performer. It is that proximity to a high-status benchmark, not just the numbers themselves, that drives feelings of deservingness.
These findings are concerning because they may not bode well for workplace cohesion. Teamwork and collaboration may suffer, as demoralized employees may have little incentive to improve or collaborate with colleagues.
Our research is especially relevant as more states enact “right-to-know” laws requiring pay disclosures in job postings, and salary information is more accessible than ever. Transparency can expose unfair disparities and reduce systemic biases. However, our findings reveal a complex dynamic between social comparison and perceived self-worth—and highlight the need for employers to foster a workplace culture that supports growth and contribution at all levels.
Transparency is a powerful tool. But like any tool, it can have unintended consequences if not used wisely.
Read More:
[UC Riverside] – Is it good to know how much your co-workers make?
[SpringerNature] – Standard-Based Entitlement: How Relative Performance Disclosure Affects Pay Requests
