Want to Retain Employees? Pay Their Bosses More

Employees feel motivated when their bosses are paid well, according to a new study.
By: | July 26, 2018 • 4 min read
retaining employees
Businessman holding dollars/putting dollars in a pocket, closeup shot

That appears to be the upshot of a recent study from the National Bureau of Economic Research, based on an experiment conducted with 2,060 employees from a large commercial bank. The study’s authors, Zoe Cullen of the Harvard Business School and Ricardo Perez-Truglia of UCLA’s Anderson School of Management, found that a 1-percent increase in “perceived manager salary increases” led workers to increase their own work hours by 0.15 percent. In other words, “the perception that your manager received a raise may actually cause employees to work more hours or be productive,” writes MarketWatch reporter Elisabeth Buchwald in a summary of the study.

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However, a perception among employees that their coworkers are being paid more has the opposite effect: The study found that when people believe this is the case, they’re likely to work less hours, send fewer emails and (for those in sales positions) suffer a decrease in sales performance. For every 1 percent increase in a coworker’s perceived salary, employees will respond by decreasing the number of their own hours worked by 0.94 percent and it will increase the likelihood of their leaving the company by .225 percent.

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