Peer Bargaining and Productivity in Teams: Gender and the Inequitable Division of Pay

41 Pages Posted: 27 Feb 2018 Last revised: 23 Feb 2019

See all articles by Lamar Pierce

Lamar Pierce

Washington University, Saint Louis - John M. Olin School of Business

Laura W. Wang

University of Illinois at Urbana-Champaign

Dennis Zhang

Washington University in St. Louis - John M. Olin Business School

Date Written: February 21, 2019

Abstract

Problem description: A recent trend in personnel operations is to reduce hierarchy and allow employee teams to self-manage tasks, responsibilities, and rewards. Yet we know little about how this arrangement relates to worker productivity and fairness.

Academic/Practical relevance: We provide the first firm-based evidence that when service teams are allowed to internally allocate compensation, the ensuing peer bargaining process can generate inequitable outcomes for women.

Methodology: We demonstrate this using fixed effect models to identify productivity and peer bargaining traits in 932 workers at 32 large Chinese beauty salons. We measure individual productivity through service and prepaid card sales and measure bargaining through the division of team-based commissions. We also build a parsimonious bargaining model to explain our empirical results.

Results: 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. We also demonstrate that the resulting inequity is positively correlated with shorter tenure.

Managerial Implications: Our findings provide unique organizational evidence on how bargaining among peers relates to productivity in service operations. We show that the discriminatory social dynamics observed throughout society are evident in operational designs that delegate decision rights to teams, and that the magnitude in these systems is at least as large as those observed in traditional hierarchical pay systems. Managers must anticipate and mitigate this gender-based inequity because it is in and of itself an operational performance issue, and because of the myriad of productivity, retention, and ethical implications that can result from peer-based bargaining.

Keywords: Productivity, Bargaining, Gender, Negotiation, Equity, Fairness, Compensation

Suggested Citation

Pierce, Lamar and Wang, Laura W. and Zhang, Dennis, Peer Bargaining and Productivity in Teams: Gender and the Inequitable Division of Pay (February 21, 2019). Available at SSRN: https://ssrn.com/abstract=3123915 or http://dx.doi.org/10.2139/ssrn.3123915

Lamar Pierce (Contact Author)

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-5205 (Phone)

Laura W. Wang

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States
4696844455 (Phone)

Dennis Zhang

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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