After a rousing success, an entrepreneur decided to sell his company to a large conglomerate. Negotiators from the purchasing company, marveled at the entrepreneur’s achievement but gasped at the vast differences in pay among his employees.
Suspecting favoritism, a negotiator commented, “Your pay scale seems to be out of whack.”
“What do you mean?”
“You are paying some people a whole lot more than others, although they are doing the same jobs. Why is that?”
“Well, some people produce a lot more than others. I take care of my stars.”
The entrepreneur spoke truth. Research by professors O’Boyle and Aguinis shows that top producers in most groups do indeed produce more—a lot more—than average employees. A few high producers pull the average up, making most employees below-average.
Still most pay distributions follow a normal curve which makes the pay scale unfair to the very best producers. For instance, assume twenty employees in a group. In most departments, about ten employees would receive above-average pay and ten would receive below-average pay.
You want to pay fairly? Then pay your very top producers at least three to four times more than you pay average producers.