Monday, October 25, 2010

Pay for Performance leads to Bias

This is a study done by MIT researcher Emilio Castella. I found the article's link at You may have to subscribe as a member to get to the link. This website is worth it -- and its free as long as you don't mind the occasional email touting a book or a conference or webinar. I've actually attend two webinars as a result of joining the 'free website.

The study concludes what is becoming more and more obvious to those of us following equitable compensation practices. The practice of wage setting must be as open and transparent as possible. In this study employees who received similar performance ratings were in fact not given the same pay raises. The folks who were responsible for setting pay took the liberty of fine tuning the pay adjustments. The same formula was not applied to all employees resulting in bias. Oops.

Here's the MIT sloan link:

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