Study: Some employees work harder after finding out boss's salary

While many companies and bosses treat salary details as classified information, it turns out that bosses who are transparent about how much they make may end up fostering higher workplace morale than those who aren’t.

The Wall Street Journal reports a new study shows, among other things, that employees tend to underestimate their bosses’ compensation, but that they work harder when they find out that their bosses make more than they had guessed. When employees discover that their peers make more than they do, on the other hand, they tend to slack off.  
The researchers found that employees who learned that their bosses’ salaries were higher than they expected would spend more time in the office, send more emails and increase their sales numbers.
In an interesting twist, the larger the salary misperception was, the more productive the employee was likely to become. Employees who discovered that their co-workers were better paid were less productive.

The increase in measurable productivity is relatively modest—according to the paper, employees who find that their boss’s salary is 10% more than they had imagined will spend about five more minutes in the office a day.
What’s surprising, though, is that employees are motivated rather than embittered by their bosses’ higher salaries, says Ricardo Perez-Truglia, an author of the study and an assistant professor of economics at UCLA’s Anderson School of Management.

The reason, he says, is that the higher salary is aspirational—employees have an extra incentive to work hard so they can be promoted and perhaps one day make their bosses’ pay. The study was recently published by the National Bureau of Economic Research as a working paper. Dr. Perez-Truglia’s co-author was Zoë Cullen, an assistant professor at Harvard Business School.
To conduct the study, Dr. Cullen embedded herself in a private commercial bank in Asia, which she declined to name. She surveyed a sample of 2,060 workers at the bank, a multibillion-dollar corporation, according to the study.
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