Peer Bargaining and Productivity in Teams: Gender and the Inequitable Division of Pay
36 Pages Posted: 27 Feb 2018 Last revised: 18 Aug 2018
Date Written: August 14, 2018
A recent trend in organizational design is to reduce hierarchy and allow employee teams to self-manage tasks, responsibilities, and rewards. Yet we know little about the implications of this arrangement for worker productivity, pay equity, and organizational performance. We provide the first firm-based evidence that when worker teams are allowed to internally allocate compensation, the ensuing peer bargaining process can generate inequitable outcomes for women. We demonstrate this using risk-adjusted fixed-effect models to identify productivity and peer bargaining traits in 965 workers at 32 large Chinese beauty salons. We measure individual productivity through service and card sales and measure bargaining through the division of team-based commissions. We also build a parsimonious bargaining model to explain the mechanisms driving our empirical results. We find that although productivity and bargaining outcomes are positively correlated, female workers consistently receive bargaining outcomes below their productivity level, while men are consistently overcompensated. Importantly, we provide evidence that our results can only be explained by a combination of higher prosociality and lower bargaining power in women. Our findings provide unique organizational evidence on how the delegation of pay authority generates bargaining among peers that might impact firm operations and performance. Furthermore, we provide important evidence that the discriminatory social dynamics observed throughout society are evident in operational designs that delegate decision rights to teams. Managers seeking to implement self-management by peers must anticipate the myriad of productivity, retention, and ethical implications that can result when peer workers bargain over tasks and rewards.
Keywords: Productivity, Bargaining, Gender, Negotiation, Equity, Fairness, Compensation
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