Selection Benefits of Below-Market Pay in Social-Mission Organizations: Effects on Individual Performance and Team Cooperation

Research output: Contribution to journalArticle

Abstract

Many organizations whose core purpose is to advance a social mission pay employees below-market wages. We investigate two under-appreciated benefits of below-market pay in these social-mission organizations. In a series of experiments, we predict and find that, holding employees' outside opportunities constant, those attracted to social-mission organizations that pay below-market wages perform better individually and cooperate more effectively in teams than those attracted to social-mission organizations that pay higher wages. The individual performance effect arises because below-market pay facilitates the selection of value-congruent employees who are naturally inclined to work hard for the organizational mission. The team cooperation effect arises because employees expect team members who have selected a social-mission job that pays below market to be more value-congruent and, therefore, more cooperative than those who have selected a social-mission job that pays higher wages. Collectively, we demonstrate that in social-mission organizations, offering below-market pay can yield selection benefits.
Original languageEnglish (US)
Pages (from-to)57-77
JournalAccounting Review
Volume95
Issue number1
DOIs
StatePublished - Jan 1 2020

Keywords

  • below-market pay
  • pay level
  • employee selection
  • social mission
  • cooperation
  • value congruence

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