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ICS research student pens insights on pay dispersion

Friday, January 29, 2021

Junhyuk Oh MILR '20 conducted a literature review on both leadership and pay dispersion to gain insights on two areas and apply key ideas from both fields to hypothesize for further investigation.

Her question: How leadership can support a dispersed pay structure by sustaining positive outcomes?

While a dispersed pay structure exists in industries and yields both positive and negative outcomes, differentiated pay in given job classification can drive a more sustained positive effect from sorting out unproductive employees and encouraging productive behavior. If the workplace can foster an environment where pay differentials are justly explained and workers do not tunnel-view performance by isolating out co-workers, the dispersed pay can maximize positive business outcomes while mitigating negative outcomes.

The review led to two conclusions:

  1. Maintaining a trusted and responsive relationship between managers and workers is important to maximize positive outcomes from pay dispersion.
  2. Productivity can be improved by offering differentiated pay, but the pay systems and processes alone do not guarantee achievement of intended outcome. Supporting human factors (leadership) that aid such effort is needed to accomplish aimed outcomes and minimize unintended negative consequences.