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Lamar Pierce

Lamar Pierce, professor of organization and strategy at Washington University's Olin School of Business.

With gender-pay arguments raging everywhere from soccer stadiums to Silicon Valley, it’s hardly shocking to learn that female staffers at a Chinese beauty shop chain got smaller commissions than their male colleagues.

A new academic paper, however, suggests that the broader business world can learn something from the way this firm was organized and what led to the unequal pay.

The 32-location beauty chain, with 932 employees, used what management gurus call self-managed teams. That’s one of the hottest fads in business today, embraced by leading companies from Google to General Electric.

The beauty shops incentivized employees to sell prepaid gift cards to customers who came in for a haircut or manicure. If two or more workers played a role in a gift-card sale, the chain let them decide how to split the commission.

The theory was that the workers themselves know best who should get the most credit for a sale. Also, as you’ll often hear in Silicon Valley, employees are happier and more productive when they have control over key aspects of their work. At the beauty shops, the biggest commissions didn’t necessarily go to the top salespeople. Female employees, who made up nearly half the firm’s workforce, were more productive than their male colleagues but earned 24 percent less.

Lamar Pierce, a professor of organization and strategy at Washington University’s Olin Business School, studied the beauty-shop data with Olin colleague Dennis Zhang and University of Illinois accounting professor Laura Wang.

The disparity they found is even bigger than gender gaps of 10 percent to 19 percent that other researchers have found in hierarchical organizations. Maybe old-fashioned bosses are fairer than we give them credit for being.

“It could be that a formal manager has stronger incentives to try to match rewards and performance,” Pierce told me. “When you have hierarchy you tend to have more formal processes. These processes aren’t perfect, but they do typically constrain opportunities for inequity.”

He compares self-managed teams to a kindergarten class in which the teacher allows students to do whatever they want. “You get more hitting and screaming,” he said. “There can be good outcomes of letting kids play and explore together, but there also can be some bad outcomes.”

The Chinese firm’s unequal outcomes, the professors say, are all about bargaining power. For a host of cultural and social reasons, men are more assertive than women in peer-bargaining situations.

Most firms that embrace self-managed teams don’t go so far as to let workers set one another’s compensation, but teams do make decisions that affect pay and promotion opportunities. The team member selected to make a presentation to management has a better chance of being noticed than the one assigned to type up meeting notes.

Pierce isn’t against self-managed teams. He can see the advantages, but he says someone needs to make sure that the women aren’t always assigned the note-taking while the men present the PowerPoints.

“It’s important for leaders to set expectations, and that includes making people aware of some of these concerns,” Pierce said.

After Google was hit with a #MeToo protest last year, its leaders pledged to address concerns about sexual harassment and unequal pay. Perhaps a start would be to think about whether the company’s beloved team structure might be making the problem worse.

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