Can Performance Be Managed Upward?

Media Magnify Scandals of Big-Name Companies

By Daniel Butcher

Companies that dominate their industries also have to deal with increased scrutiny. Any negative news, from layoffs and unethical conduct to data breaches, get amplified and can easily become scandals, according to Academy of Management Scholar Tim Pollock of the University of Tennessee, Knoxville.

Media attention is drawn by the accused or guilty party’s prestige, he said.

“If the perpetrator is high-reputation, they may get the benefit of the doubt for less severe misconduct as some kind of one-off thing, and the media may be less likely to cover it,” Pollock said. “But if the misconduct is severe, then the media is even more likely to scandalize the high-reputation firm’s misconduct, because we don’t expect that from high-reputation firms; it violates our expectations.

“When we have high expectations about a firm’s behavior, whether because we expect them to be more competent or act with more integrity, it’s a bigger deal and more disturbing when they violate that expectation,” he said. “That makes the incident more newsworthy to the media, increasing their coverage of the misconduct.

“These are sorts of things that we’re looking at and trying to understand: What are misconduct aspects and firm characteristics lead the misconduct to become a scandal?”

Pollock and colleagues compared the reactions to data breaches at two different companies of vastly different levels of prestige and name recognition: Facebook and Chegg, a U.S. education technology company that provides homework help, textbooks, online tutoring, and other student services.

“Facebook had a data breach of 50 million accounts; it was covered widely in the media and got lots of attention—thousands of articles were written about their data breach and the problems with it,” Pollock said. “And literally on the same day, Chegg, which is an academic software company, had a similar data breach—40 million accounts were breached, but it was barely covered outside of the the specialist media on data security, and a little bit in the in the education sector.

“So why Facebook and not Chegg? Facebook is better known,” he said. “More people use Facebook and have given them their data, so the expectancy violation is greater and possibly more personal.

“Journalists recognize this, and thus are more likely to scandalize the incident, because it attracts more readers.”

The Disconnect Between Leaders and Patients on Healthcare

By Daniel Butcher

Many people hurt by the high costs and insurance denials plaguing the U.S. healthcare industry might have been hoping that the response to the December 2024 killing of UnitedHealthcare CEO Brian Thompson would lead to reforms. However, most industry executives have tried to go back to business as usual, except with heightened security for senior executives, according to Academy of Management Scholar Tim Pollock of the University of Tennessee, Knoxville.

In response to the waves of criticism directed at U.S. health insurance and benefits-administration executives in the wake of Thompson’s killing, most industry leaders followed a typical crisis-management playbook, including a predictable public-relations script, he said.

“They’ve been saying all the things that they always say: that they’re beholden to achieving financial goals and medical providers’ increasing costs—‘medical costs go up, and so the insurance premiums have to go up’—and that they’re doing their best to provide coverage, and all these sorts of things, the usual platitudes that they roll out,” Pollock said. “But in terms of actually making some substantive changes, they don’t do much.”

“We’re one of the only countries in the world where healthcare coverage is privatized, and we’ve got the most expensive healthcare in the world with the 44th-best health outcomes,” he said. “It’s hard to justify the status quo on any rational basis.

“So if they want to repair and protect their reputation with customers and avoid this kind of backlash in the future, they have to understand where the customer is coming from and then find ways to speak to those problems and offer up a set of policies or practices they’re going to engage in—changes they’re going to make—to make this easier and better for customers.”

Health industry executives who try to defend the status quo of the U.S. healthcare system come off as tone-deaf at best, and uncaring or willfully dismissive of people’s suffering at worst.

“One of the mistakes that a lot of CEOs make is they try to defend the status quo, instead of saying, ‘You’re right; we’re not doing what we should be doing,’ and then, ‘Here’s what we’re going to do to make it to make it better,’” Pollock said. “There’s a whole other set of issues related to whether or not these things get implemented, but at least symbolically acknowledging their pain, their anger, taking some responsibility for it, and then saying, ‘We’re going to make changes that will address these problems and make things better going forward’ counts for something.

“But if they come out and talk about profitability, that their responsibility is to shareholders, or that this isn’t really a problem, or try to downplay the challenges that people have with high costs, denials of coverage, and administrative burdens, there’s a disconnect from patients’ experiences,” he said. “This is the issue you run into when leaders and customers are coming at a problem from opposite sides or completely different perspectives.”

Why Many Leaders Ignore Criticism

By Daniel Butcher

In the wake of the U.S. public’s reaction to the killing of UnitedHealthcare CEO Brian Thompson and the arrest of suspect Luigi Mangione, some CEOs in the health insurance industry downplayed the tragedy, rather than thinking about the root cause of people’s anger directed toward them.

Keeping blinders on is a red flag for narcissism, according to Academy of Management Scholar Tim Pollock of the University of Tennessee, Knoxville. He and Arijit Chatterjee of ESSEC Business School researched narcissistic CEOs and found that the more narcissistic the executives are, the more likely they are to ignore critical messages, and surround themselves with yes-men.

“Many CEOs, especially narcissistic ones, surround themselves with people who say, ‘No, don’t listen to the critics. You’re great. You’ve done nothing wrong. Everything’s wonderful,’ as opposed to saying, ‘Hey, we’ve got a real problem that we need to fundamentally think through and deal with,” Pollock said. “So there’s nobody to rein in CEOs when they’re making bad decisions or alert them to a blind spot that they have.

“We all have good ideas and bad ideas, but leaders need people to tell them when they have a bad idea and to stop them from from acting on it,” he said. “When you don’t have those people in place telling the CEO to tap the brakes, the bad ideas just spread, and a narcissistic CEO doesn’t want to hear the negative stuff, whereas a less narcissistic CEO who really wants todo the best job possible will actually cultivate that and make sure they have people around them who will tell them the truth, even if it’s something that they don’t really want to hear, but that they need to hear.

“But a narcissistic CEO will fire truthsayers; they’ll get rid of people who they perceive as disloyal for telling them negative stuff or telling them that they’re wrong.”

Reactions to CEO’s Killing Illustrate U.S. Health Insurers’ Bad Rep

By Daniel Butcher

The killing of UnitedHealthcare CEO Brian Thompson in New York in December 2024 exposed Americans’ intense frustration and deep-seated anger at the U.S. healthcare system. They’re forced to pay more and more for health insurance every year, while dealing with administrative burdens and denials of doctor-recommended procedures, medications, and other medical services.

Academy of Management Scholar Tim Pollock of the University of Tennessee, Knoxville said that people’s reactions to Thompson’s killing point to the horrible reputation that the U.S. health insurance industry has with the general public.

“Almost anyone in the U.S. you talk to about health insurance has complaints—I’m sure you could probably recount your own healthcare or health insurance war story, when something got declined, or you had problems getting treatment or getting [a procedure or medication] paid for,” Pollock said. “It happens to everybody in the U.S., and in some cases it can be pretty devastating, resulting in bankruptcy and losing all your assets when you have to absorb the costs when coverage is denied for a medical emergency or an expensive medical treatment.

“So there’s a lot of anger around how our healthcare system has been working or failing to work for for people, and it creates this pent-up anger in the [American] populace,” he said. “And so, aside from leading one person who was clearly having additional issues to go out and kill the CEO of UnitedHealthcare, you see the public respond by putting up these social-media posts, like ‘Request for thoughts and prayers denied’ and ‘You failed to get prior approval for having an object removed from your chest, so therefore, it will not be covered’—that kind of stuff, and making the shooter almost a folk hero in certain quarters.

“These kinds of posts that people are putting out there and many others cheering them on speaks to the anger that folks have.”

Merriam-Webster defines infamy as an “evil reputation brought about by something grossly criminal, shocking, or brutal.” Some health insurance leaders have looked themselves in the mirror and wondered what they could do differently, while others have denied responsibility for people’s suffering, both physical and financial.

“We talk about celebrity a lot, which is tied to people’s positive emotional reactions,” Pollock said. “But there’s another kind of emotional reaction called infamy, which is a bad reputation associated with people’s negative emotional reactions that are highly visible.

“A lot of these industries have become infamous, and as the face of the companies, the CEOs will take the brunt of people’s ire.”

How CEOs Can Help Fix U.S. Health Insurance

By Daniel Butcher

In the aftermath of the killing of UnitedHealthcare CEO Brian Thompson and the arrest of suspect Luigi Mangione in December 2024, it’s crystal clear that many people are deeply dissatisfied with the U.S. health insurance industry. With no realistic hope for legislative reform on the horizon, though, the onus is on employers to ease the administrative burden on employees and go to bat for them when health insurers or third-party administrators (TPAs) deny coverage of their doctor-recommended procedures, medications, and other medical services.

Academy of Management Scholar Tim Pollock of the University of Tennessee, Knoxville said that whenever he’s spoken to people who work in human resources (HR) about this issue, they often say that they don’t have sufficient staff members to handle benefits-administration oversight. In that case, it’s up to C-suite executives to come up with a solution for proper oversight of insurers and TPAs.

“HR people often say that’s the responsibility of the insurance companies, and many organizations outsource benefits administration,” Pollock said.

“Part of what they should be doing, though, is tracking this stuff and saying, ‘Okay, are we getting what we’re paying for?’ because things like health-insurance costs and benefits are hugely important to their employees, but they’re treated as a fringe benefit by the company,” he said.

“It isn’t a primary focus for CEOs—they don’t consider it to be part of what they need to be doing, but that would be a great thing for them to do.”

A coordinated effort to prioritize oversight of health insurance and benefits administration among senior executives at U.S. companies could help employees’ well-being and healthcare outcomes.

“Even a Walmart or some other company that employs millions of people, they’re one company in the face of a huge [healthcare] industry, but if you had a bunch of CEOs of big companies band together and say, ‘This is not adequate. This is not sufficient. We aren’t happy with the services that we’re being provided,’ and they make it public, that could bring about change,” Pollock said.

“Going public has to be a big part of it; that’s going to help bring pressure to bear on health insurers and TPAs, because one of the challenges they face is the U.S. insurance company playbook as well, which says, ‘Okay, fine, then go work with somebody else,’” he said.

“But they’re all doing the same stuff, so employers don’t really have an alternative, and it’s to the extent that either somebody can come along and provide a different kind of service, which is going to be very hard, or employers are going to have to try to find ways to put pressure on insurers and TPAs collectively, publicly, building on the emotional reaction that people in the U.S. have had to high healthcare costs, administrative burdens, and frequent denials of medical services.”

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.”

Mentors Influence How Much College Grads Drink

By Daniel Butcher

The quality of mentorship can be a key factor in early-career professionals surviving and thriving at an organization. And more specifically, senior executives’ alcohol use, especially while entertaining clients, has a big influence on junior employees’ drinking habits.

Academy of Management Scholar Peter Bamberger of Tel Aviv University said that for at least the three years after graduation, alcohol consumption levels typically don’t change much. But there’s a caveat.

“We do find a couple of factors that are instrumental in getting alcohol consumption to move, which gives managers some clues as to what might be done to speed up that maturing out process for junior employees and hopefully reduce the risk of managers having to deal with people with problem drinking,” Bamberger said. “This is a soft side of the socialization process when these young adults come into the organization, so some of the most instrumental factors have to do with mentoring programs, veteran employees who are there to support the newcomers.

“You have to be a little bit careful there, because we did another study in China, where we found that, for employees in sales and sales-support occupations who are social connectors, post-college alcohol consumption moves in the wrong direction,” he said. “Many young people coming into these positions within three months after graduation show patterns of hazardous drinking.

“We demonstrate that, in such cases, their ‘mentors’ are their clients who end up ‘teaching’ them how critical it is to drink in order to build trust and close the deal—now, this may be more of a sales-department client-related phenomenon, and it may be more intense in China than other parts of the world.”

In China, it’s well-known that salespeople can’t close a deal unless they show their clients a good time the night before a meeting. Such occasions often include heavy drinking. However, Bamberger notes that many companies based in many countries worldwide, including across Europe and the United States, have salespeople and clients who also have behavioral patterns like that.

“The socialization [process] is [influenced by] mentoring by certain individuals, which can be problematic,” Bamberger said. “But our study with a college students in the U.S. finds that where you have that kind of support, particularly with newcomers mentored by veterans with low or moderate levels of drinking, you can expedite the pace at which young adults mature out of this pattern of a high level of alcohol consumption.

“There are other factors and things that managers can do [to help expedite that maturation process] as well, some of them having less of an effect, including a review of alcohol-drinking policies as part of the orientation program—our findings are that that doesn’t do very much,” he said.

“Managers do need to look at what else worked to reduce problem drinking among their younger team members.”

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.”

Pay Transparency Reduces Compensation Differentials

By Daniel Butcher

Pay transparency can lead to pay compression, in which employees’ compensation—regardless of whether they’re long-tenured or new, high-performing or just sliding by—tend to cluster around an average or median level for a particular role.

Academy of Management Scholar Peter Bamberger of Tel Aviv University said that people perceive their employer’s compensation structure to be unfair tend to leave the organization. In those cases, pay transparency can interfere with employee retention goals. But he’s found in his research that pay can be a moving target, where pressure to recruit can drive up new hires’ compensation, higher than longer-tenured employees serving in similar roles.

“It’s important to see what the impact of pay transparency is on individual behavior, but we also want to see what happens with turnover rates at the firm level,” Bamberger said. “The argument was based on several research papers in economics in particular with consistent findings that when pay becomes more transparent, it also becomes more compressed.

“Essentially, managers differentiate between stars and poor performers less and give everybody more or less the same or a similar raise and bonus,” he said.

While the economists didn’t really look at the mechanism as to why that is, Bamberger and his colleagues did examine that and came up with a theory to explain the trend.

“The argument is that managers are kind of lazy, and they prefer not to have to deal with an employee coming in and demanding that they deserve more than someone else,” Bamberger said. “So when pay is transparent, regardless of differences in individual contribution, they just give everyone the same level of pay increase or bonus.”