Sports agents are ninja compensation experts. They all know why Lionel Messi, comparative to the value he creates, gets paid more than anyone else on his team. Same team. Same grade (Global Elite Football Player). In fact, their very livelihood, as sports agents, depends on this. Economic research has validated the accuracy of their art.
We are all entrepreneurs, or sports players, because we all must create a product (ourselves) that ascertains a certain amount of comparative value. But somehow everyone thinks Jack and Jill should be paid the same. Let’s find out, together, as to why we, humans, don't think so.
So, what makes Jill believe she is an entrepreneur?
Well, when she ascertains that she alone (or her enterprise) can uniquely create something of value. And… when she knows she will be rewarded, as compared to others, in proportion to the value she creates. Meaning – if Jill creates more value than others, she comparatively, will earn more than those who do not. When we believe, realistically, we are worth more in pay, it is because we have created a higher validated value than others – comparatively.
This does not mean that such an event makes us holistically better than someone else with a lesser comparative achievement. Not at all. It does mean, however, the market by defined criteria will rightly determine your comparative performance.
The market will determine your fair market value.
A value that all will and can accept.
When we ask CEOs “Should everyone in the same grade be paid the same way?” They, on average, answer as follows: “Yes, this is what our Head of HR and Head of Total Rewards has said is correct. Everyone in the same grade should be paid the same. Internal equity.”
We tell them this is wrong*. Comparatively. We tell them if, and only if, proof can be garnered**, that they should insist on a comparative differentiation in pay. Even in the same grade.
Business is not equity. It is performance.
Why this comparative nonsense? Please, author, get to the point. OK – here it is: we don’t think so. Literally. In the world of scientific neuroscience research we, as humans, do not think this way.
The ventral striatum (one of the areas in our brain) constitutes one of the main structures of the reward mechanism and seems to play a role in the formation of stimulus – reward association. (1) The research tells us that we are hardwired to receive a psychological reward when we are compensated more as compared to others for the higher value we create. In contrast, we become upset with childish peevishness when this does not occur. A “Not fair!” mantra is forced into our ears. It is unpleasant. Like a bad jingle tune, it won’t go away.