Mythology of Management Compensation

by Edward Lawler



The secrecy policies of organizations and the consequent tendency for managers to estimate incorrectly the pay of other managers may also affect the managers' motivation to perform their jobs effectively in other ways. Several studies have shown that accurate feedback about task performance is a strong stimulus to good job performance. People perform better when they receive accurate information about how well they are performing relative to some meaningful standard. For managers, pay is one of the most significant and meaningful pieces of feedback information they receive. High pay is considered a sign that the manager's job performance is good. Low pay is a signal that the manager is not performing his job well and that new behavior is needed. Because of the tendency managers have to overestimate the pay of their subordinates and peers, the majority of the managers see their pay as low and in effect are receiving negative feedback. Moreover, although this feedback suggests that they should change their job behavior, it does not tell them what type of change they should make in their behavior.

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