Take a moment and think about your salary and wages. Your bonuses. Your stock options. What explains how much (or how little) you make? Is it your education? Your experience or seniority? Your organization’s performance, the cost of living in your area, your occupation, or your own individual performance?
You’re Not Paid Based on Your Performance
What actually determines compensation on a systemic level? And what should?
February 23, 2021
Jorg Greuel/Getty Images
Summary.
When asked about the rationale for the size of their paycheck, both workers and executives overwhelmingly point to one factor: Individual performance. And yet research shows that this belief is false and largely based on three myths people have about their pay: that you can separate it from the performance of others; that your job has an objective, agreed-upon definition of performance; and that paying for individual performance improves organizational outcomes. Instead, your pay is defined by four organizational forces: power, inertia, mimicry, and equity. The bad news is that these dynamics have reshaped the economy to benefit the few at the expense of the many. The good news is that, if pay isn’t some predetermined, rigid reflection of performance, then we can imagine a different world in terms of who is paid what, and how.