Prioritizing Social Missions Can Boost Profits

Three Types of Pay Transparency Are Changing the Game

By Daniel Butcher

While there isn’t a nationwide pay-transparency law in the United States—at least not yet—10 states, several cities, and even one county (Westchester, New York) have such regulations. That means organizations may need to adjust how they communicate about pay depending on where they’re based and where they operate.

Academy of Management Scholar Peter Bamberger of Tel Aviv University said one type of transparency is letting employees freely talk about their pay with one another. That’s been protected by U.S. federal law since the passage of the National Labor Relations Act (NLRA) in 1935.

“Most employees don’t know that they have the right to talk about their pay with other employees—that’s part of the NLRA. Still, companies discourage it, and in fact, some companies go too far in discouraging it so that they’re actually breaking the law,” Bamberger said.

“There’s very little merit to stopping employee disclosure, particularly since we now have things like Glassdoor, which really make it easy for employees to find out what others are earning in return for disclosing their own compensation,” he said.

In the second type of pay transparency, employers disclose compensation ranges to current and prospective employees.

“Laws in more than a dozen U.S. states and several cities are pushing for some degree of partial transparency with mandatory employer disclosure of pay ranges,” Bamberger said.“Going beyond that, where it’s not ranges that employers show, but rather actual individual rates of pay, can be potentially risky.

“Our studies have found that letting employees see how much coworkers make tends to have some pretty detrimental effects, whether it comes to malicious envy or even counterproductive work behavior,” he said. “The comp ranges not so much, but revealing detail about how much specific individuals are making can be problematic, so you have to be very careful about how you go about doing it.

“There are some success stories that I’ve written about in a book that I wrote about pay transparency, but it can be problematic.”

The third type is procedural pay transparency, from which Bamberger and his research colleagues have found only positive outcomes.

“That is being open and transparent about every aspect of the pay system in your organization, telling employees about the basis of the compensation structure, for example, what are the criteria for increasing bonuses? How were bonuses calculated this past year? How are differential pay rates by levels in the organization determined?” Bamberger said.

“Most employees don’t have a clue as to what their benefits are or how compensation levels are determined in the organization—employee pay knowledge is really minimal,” he said.

“Where organizations enhance this procedural pay transparency, perceptions of justice and fairness increased dramatically, and that has a wide range of beneficial effects and implications on retention, social exchange and reciprocity among coworkers, and giving back to the organization.”

Pay Transparency Boosts Performance, Retention of Top Performers

By Daniel Butcher

Pay transparency laws can motivate star employee stay with companies and boost their performance, while spurring poor-performing working to quit.

Academy of Management Scholar Peter Bamberger of Tel Aviv University has conducted extensive research on pay transparency, including experiments to study the implications of pay transparency and secrecy on turnover.

“We found that pay transparency generated higher retention for higher performers, but other studies done by economists found that transparency is associated with higher rates of turnover, in other words, lower retention—so we have a disconnect there,” Bamberger said.

“But there are some indications that the turnover was higher among low performers, whereas, among high performers, that transparency didn’t generate a higher rate of turnover; in those studies, transparency may not have generated higher retention, like we found, but most of the turnover that those researchers found in their field study was with lower performers,” he said.

In other words, it’s a win-win situation for leaders and managers: Greater compensation transparency does not tend to encourage high-performing (and presumably well-paid) employees to leave the organization, while it does give a nudge to low-performing (and presumably modestly paid) employees to seek employment elsewhere.

“When workers don’t know what their colleagues are making, natural biases cause many to underestimate what we call ‘instrumentality perceptions,’ the instrumental role of extra effort to achieve the right incentive benefits in driving returns,” Bamberger said. “Their motivation is lower when pay is secret, and the result is, over time, a lower growth curve in performance.

“The slope of improvement is flatter when workers don’t know how much money colleagues earn than it is when pay is transparent and they can see how they’re doing relative to others,” he said.

The main takeaway is that pay transparency boosts performance and retention of top performers while leading to turnover of poor and middling performers.

Pay Transparency May Breed Malicious Envy

By Daniel Butcher

Overall, researchers have found that pay transparency benefits organizations with fair compensation structures by incentivizing top performers to continue working hard and reducing turnover of talented contributors. But in certain situations, it can breed envy of high earners and undermine organizational culture.

Academy of Management Scholar Peter Bamberger of Tel Aviv University explained that envy can be either benign or malicious, with benign envy increasing a person’s motivation to help others, while malicious envy tends to decrease motivation. Bamberger said that in cases he studied where pay transparency bred malicious envy among colleagues, the frequency of employees helping one another decreased.

“So if I’m envious of you, and I can see that you’re having difficulties at work, will I help without you coming to me and asking for assistance? Will I come to you and say, ‘Hey, I can see you’re having some problems, here’s advice or some type of information that could help you solve some of the problems that you’re experiencing?’” Bamberger said.

“I’m less likely to do that if I’m feeling envy toward you, and I’m more likely to feel envy toward you under conditions of pay transparency,” he said.

“For people who are natural helpers, it won’t make much of a difference, but for most people, particularly among those who are more competitive or have less prosocial motivation, it can make a big difference.”

Some business leaders and managers complain that transparency is problematic, because it makes people jealous, but Bamberger and his colleagues didn’t buy that argument. Their hypothesis was that people are jealous whether pay is transparent or not, and they imagine what other people’s pay is and base their jealousy on that.

“Whether or not employees see other people’s pay, it’s still a basis for jealousy, because they believe the worst,” Bamberger said. “The difference when pay is transparent is that it’s slammed in your face, and you can’t deny it, and therefore, it’s particularly in that case where the malicious envy can be sufficiently robust to be problematic, while one of these problems was reduced unsolicited helping among coworkers.”

Transparency Helps Orgs that Pay Employees Fairly

By Daniel Butcher

Organizations with merit-based raises and bonuses deemed equitable by employees benefit from pay transparency by incentivizing top-tier performers to put in maximum effort and stay at the organization, while encouraging many bottom-tier performers to look for new jobs.

“The bottom line, what we found is that people’s perceptions of the fairness of pay in their organization had a big impact on the degree to which transparency was associated with higher or lower rates of turnover,” Academy of Management Scholar Peter Bamberger of Tel Aviv University said. “And a lot of that can be explained by people’s perceptions of trust.

“Where employees have a sense that pay is distributed fairly, you get a lot of benefits from pay transparency with regard to reduced turnover, because essentially, in most cases, where people believe that pay is fair, pay transparency is showing that the pay is, in fact, fair,” he said.

“And it’s driving higher levels of trust, which encourage people to stay in the organization, and in those situations where people are feeling that the pay is unfair, it’s typically people who are performing less well and are rewarded less well, transparency can be problematic, because then you’re actually making it obvious to them that they’re not doing as well and they’re likely to leave to look for greener pastures.”

In this way, Bamberger and colleagues were able to explain inconsistent findings regarding pay transparency and turnover in prior studies. They explained these mixed effects by showing that pay transparency can both increase and reduce turnover.

“For people who are performing well in an organization and getting those higher rewards and feel that their pay is fair, transparency drives higher retention, but for those who are feeling that their pay is unfair, perhaps because they’re getting lower rewards, typically transparency can actually drive higher rates of turnover,” he said.

Bamberger and his fellow researchers looked at employees’ overall perceptions of pay fairness, regardless of what their frame of reference was in terms of level of seniority or job title.

“What we found is when the two are aligned, high transparency with high perceptions of justice, they’re getting higher retention,” he said. “When there’s high transparency with lower perceptions of justice, we were seeing higher levels of turnover.”

Sharing Info, Workloads, Positive Feeback Boosts Productivity

By Daniel Butcher

Leaders who can install processes for effective, timely information-sharing, fair workload distribution, and civil communication—including positive feedback—foster the best collaboration and productivity among team members.

Academy of Management Scholar Peter Bamberger of Tel Aviv University said that lackluster productivity is often a result of poor information-sharing and workload-sharing behaviors.

“Team processes are hard; people can’t always pick up the signals that they need to,” Bamberger said. “For example, if they have a piece of information that someone else needs, when should they pass it on to this other person? A nurse has a test result; when should she pass it on to the to the team leader or attending physician?

“If she passes it on too early, she’s going to disrupt what they’re doing, which clearly affects their performance, but if she passes it on too late, it could be deadly, so timing and synchrony of such tasks are crucial,” he said.

Incivility and rudeness also undermine productivity, while civility and kindness tend to boost it.

“In research on medical teams, we demonstrated that when people experience gratitude at work it can often, but not always, have beneficial implications,” Bamberger said. “A lot depends on the source of the gratitude and the nature of the task at hand.

“In one experiment, we had the three teams: a control condition, one that viewed a video before they started the day from a senior neonatologist talking about how grateful he is to everybody in the field for doing the wonderful work they do to save these babies, which had nothing in terms of a productivity boost, but then we had a third group where we had a mother of a preemie talk about how grateful she was to the medical team that saved her child, and that had massive positive effects,” he said.

“We demonstrate what that does to the team interaction through the implications based on a theory in cognitive science called [Fredrickson’s]broaden-and-build, which explains how positive emotions have beneficial effects on people’s ability to be flexible in their thinking, to absorb more information, and things like that.”

Bamberger and colleagues also demonstrate that the effects were much stronger when a mother expressed gratitude than when a senior colleague did.

Sharing positive customer feedback

Business leaders and managers can leverage these insights to improve their effectiveness.

“They can demonstrate gratitude themselves; it does make intuitive sense that if managers and leaders behave with civility and politeness, then that may set an example for the rank-and-file employees to do the same, but they can encourage customers and clients or patients to say ‘thank you’ directly,” Bamberger said. “If you like the way a flight attendant treated you on a flight, you’re supposed to write the company, but what if you were actually put in direct contact with the flight attendant and were able to express the gratitude directly?

“Our evidence suggests that that’s going to have a much stronger effect than a manager saying, ‘You got three positive letters this week,’” he said. “Setting up systems for customers to directly express positive feedback has the potential to significantly boost employee morale and performance.”

Rudeness Doesn’t Motivate Workers—Quite the Opposite

By Daniel Butcher

Some business leaders and managers resort to barbs or even shouting to motivate staff members, but research shows that a coercive leadership style is counterproductive. In fact, civility leads to improved team cohesion and performance, while rudeness hurts workers’ performance.

Academy of Management Scholar Peter Bamberger of Tel Aviv University said that several research papers on the subject explore the implications that emotion-laden events in organizations have on interpersonal relations and team dynamics. In a nutshell, rudeness creates a huge distraction that undermines productivity.

“For example, why can’t you text and drive at the same time? When you’re driving, the reason you don’t text is because—aside from it being against the law—you’re distracted,” Bamberger said. “It’s a complex process to text—it takes your attention, so you have limited cognitive resources, and driving is also complex.

“Whatever goes to the texting is not available for driving, and the result could be death,” he said.

What’s the connection between texting while driving and leadership style, as well as interactions between coworkers? Rudeness and even mild incivility are actually highly emotional events that occur frequently in the workplace.

“Many, many employees experience rudeness at work, and it’s rather ambiguous,” Bamberger said. “It’s not like being bullied or attacked physically, but in response to rudeness, you’ve got to try to figure out what is threatening to some degree, but you don’t know how threatening it is.

“And precisely because of that, and largely unconsciously, your brain is engaging and trying to determine the degree of threat,” he said. “That’s not a mindset that’s conducive to analysis, attention to detail, or any type of thought-demanding work.”

Why One-Size-Fits-All Diversity Training Fails to Deliver

By Daniel Butcher

The more customized and personalized in-office training sessions are, the more effective they tend to be, and that’s especially true for diversity training, according to Academy of Management Scholar Quinetta Roberson of Michigan State University.

“We’ve all had different experiences; we all have different backgrounds,” she said. “Taking that into consideration, our starting point might be different in terms of the things we need to learn in training—somebody might need it to be more knowledge-based, whereas maybe another person is more emotion-oriented and needs to learn how not to be so reactive.

“Organizational leaders might say, ‘This sounds like a hell of a lot to customize—we have a 10,000-person organization, so how can we customize diversity training for each individual employee?’ but it’s mainly about designing for a wide range of people with different frames of reference and learning styles to improve the return on your training investment,” Roberson said. “A lot of companies buy training off the shelf, and they say, ‘This person, this competitor, or this company in our industry uses this consultant or this diversity-training program.’

“I guess it works for some of them, because they’ve been using it for years, but that doesn’t mean that it’s tailored to address your people and your culture.”

The big-picture takeaway that Roberson stressed is the important of developing flexible, customizable diversity-training models—or working directly with people who do develop diversity training and learning in a way that suits the organization’s purposes.
“Diversity training should not be a plug-and-play one-size-fits-all approach and just hoping that it’ll address all of the organization’s issues,” Roberson said.

“If leaders are spending this money, and if the organization’s people are spending time in this training, then they want to ensure that they’re getting bang for their buck—some return on their investment—and that is going to be something that’s useful and tailored to their people and their culture,” she said.

Connect the Dots from Training to Learning

By Daniel Butcher

Employee training is most effective when leaders and trainers integrate and reinforce learning objectives and key concepts throughout sessions and encourage participants to apply the new knowledge in their roles.

Academy of Management Scholar Quinetta Roberson of Michigan State University said that pre- and post-training elements are just as important as the training session itself.

“We talk about letting people set their own goals like, ‘This is what I want to get out of the training’ or ‘This is how I want to progress through it,’ because that’s part of that act of learning and being personally responsible in the training,” Roberson said.“In the post-training environment, what happens a lot is that people who were in diversity training are excited—‘I learned this, and I met some cool people,’ etc.

“But the manager says, ‘I need you to do XYZ; get back to work—I missed you for this time you were gone,’ and so work piles up and they’re expected to jump right back into work and so don’t have an opportunity to apply what they’ve learned,” she said.
“So having managers or leaders who actually work with their employees to set goals for how they’re going to use their training in their job or building some of those into their performance evaluation help employees to feel that it’s not just something they went through that was a waste of time.”

Giving participants the opportunity to share and actually have responsibility for sharing, such as a train-the-trainer feedback forum and asking people to share what they’ve learned with colleagues and be subject-matter experts on something that was covered during the training session is a best practice, Roberson said.

“Those kinds of things at least make sure that what they learned in the training is not forgotten and tossed to the side but rather it’s actually pulled into their work,” she said. “And it helps the employees make the connection between what they learned in the training and what they actually have to do in the work environment.”

Why Many Big Brands Reneged on Diversity Commitments

By Daniel Butcher

In November 2024, Walmart joined other major corporations such as automakers Toyota and Ford Motor Co. in scratching its diversity, equity, and inclusion (DEI) initiatives in the face of threatened boycotts. Walmart announced that it had pulled out of The Human Rights Campaign Corporate Equality Index, which gave priority treatment to suppliers based on racial or gender diversity, and ended support for a racial equity center established after a police officer killed George Floyd in 2020.

Those decisions come in the wake of the U.S. Supreme Court’s 2023 decision ending affirmative action in college admissions, which has emboldened conservative groups to pressure companies to turn their backs on their DEI commitments. For example, Trump adviser Stephen Miller’s America First Legal group has sued companies with DEI initiatives and programs focused on helping Americans of diverse racial and ethnic groups.

Academy of Management Scholar Quinetta Roberson of Michigan State University recalled that she was confused and saddened when John Deere & Co., Tractor Supply Company, and other companies announced that they were scaling back their DEI initiatives in response to criticism and boycott threats from a conservative influencer.

“For those who recognize the value of DEI, it’s perplexing that a non-shareholder could wield such influence over corporate decision-making,” Roberson said. “However, this response reveals a deeper issue: The vulnerability of these firms’ DEI efforts suggests they were never a meaningful part of their mission or strategy.

“Instead, these initiatives were likely performative and transactional, lacking true integration into the companies’ business strategy and operations,” she said. “Unsurprisingly, such superficial approaches to attracting, engaging, and retaining key talent leaves companies exposed to both vulnerability and scrutiny.”

Why the Meanings of DEI, CRT, and Woke Have Been Warped

By Daniel Butcher

As the political pendulum swings, ideas and policies that were once uncontested and niche become controversial and mainstream. Often, terms used to define academic discourse are redefined by politicians and pundits.

For example, Academy of Management Scholar Quinetta Roberson of Michigan State University said that terms such as diversity, equity, and inclusion (DEI), critical race theory (CRT), and woke have been removed from their original context and weaponized to support people’s political ideologies.

“When people use terminology like woke [in a disparaging sense], you’ve already told me everything I need to know, because it is not a scholarly construct—it is not its intended meaning; they’re using it in a different way,” Roberson said. “They’ve removed its context and significance and politicized it.

“Also, people are equating woke strategies with DEI, and if you unpack that, their conceptualization of DEI becomes primarily about race and maybe a little bit about LGBTQ, but it’s race and ethnicity primarily,” she said. “You don’t hear about it when people are talking about gender, veteran status, or all of the things that are protected categories like disability.

“It becomes this dog whistle for why the speaker doesn’t like certain things about how race is discussed.”

Opinions differ on why that is the case. But repurposing language has long history among political movements. Sometimes, it’s simply a way to deflect uncomfortable topics of conversation or debate.

“There are some people who consider words like equity to mean that some people get a bigger slice of a fixed pie—some people are going to get ahead and some people are not,” Roberson said. “If they think about diversity training, in their mind, that means that some people are going to be made to feel bad about how others have been treated unfairly.

“It’s this conflict-management strategy, where they say, ‘Let’s not talk about it at all—some people had it bad years ago, but we are a post-racial society,’” she said.

“If people use certain terminology, I already know where they sit, and am less likely to engage in a debate with them, because I know that they’re going on opinion or rhetoric rather than on evidence.”