A field experiment inside a large Asian bank found something quietly damning about how organizations advertise their own incentives. Employees, on average, underestimated their manager's salary by 14.1%, with a mean absolute error of 28%. When researchers Zoë Cullen and Ricardo Perez-Truglia corrected the misperception, showing workers that the boss earned more than they thought, the workers did not sulk. They worked harder: a 10% increase in perceived manager pay raised hours worked over the following 90 days by about 1.5%. The mechanism the authors identify is career concerns. People saw the manager's chair as their own future and ran toward it.
Read that result against its mirror image from the same study: a 10% increase in perceived peer pay reduced hours worked by roughly 9.4%. Vertical comparison motivates, horizontal comparison corrodes. Together they describe the engine of the manager trap. If the only visibly better-paid position in sight is a management position, then every ambitious person in the building is being paid, quite literally, to stop practicing their craft and start competing for reports.
The ladder next to the ladder
The dual ladder is the standard corrective: a technical or expert track that rises in rank and pay parallel to the management track, so that a distinguished engineer, a principal underwriter or a master teacher can keep doing the work at escalating levels of pay and prestige. The idea is old and the logic is sound. What is usually broken is the execution, in three recognizable ways.
First, the fake ceiling. The expert track exists on paper but tops out two levels below the executive band, so everyone can do the arithmetic on where ambition should actually go. Second, the parking lot. The track is used not to honor expertise but to warehouse managers who failed, which poisons its prestige for everyone else. Third, the missing voice. Experts get the pay band but not the invitation: decisions about architecture, product or standards are still made in rooms one only enters with headcount.
A dual ladder that works has to violate all three patterns. Pay must genuinely overlap, including at the top. Entry must be an honor with its own bar, not a consolation. And rank on the expert track must carry decision rights over the substance of the work, which is the prestige that actually matters to experts.
Proof that the prize can be redesigned
That this is possible, not merely wishable, is shown by organizations that removed the management prize altogether. Morning Star, the California tomato processor described by Gary Hamel in Harvard Business Review, has operated for decades with no managers, no titles and no promotions in the conventional sense; by 2010 it had around 400 full-time employees and revenues above US$700 million, handling a quarter or more of the tomatoes processed in the United States. Compensation is decided by elected committees of peers, based on the commitments each person has negotiated with colleagues. Ambition there cannot express itself as a pursuit of reports, because there are none to pursue. It expresses itself as taking on bigger commitments, which is the thing the company actually needs.
Academic work on self-managing organizations, notably Lee and Edmondson's 2017 synthesis, makes the general point: the defining move of these firms is eliminating the manager-subordinate reporting line as the unit of status, and formalizing responsibility through other instruments, such as Morning Star's annually renegotiated colleague agreements. One does not have to go that far to learn the lesson. The lesson is that status is a designed artifact. Companies decided, at some point, that status would live in headcount. They can decide otherwise.
The honest test
A dual ladder is real when a company can answer yes to three questions. Can a person on the expert track out-earn their own manager? Has anyone senior ever moved from management back to the expert track and been celebrated for it? And when the biggest technical decision of the year was made, was the most senior expert in the room by right, not by invitation?
Most organizations answer no, no and no, and then wonder why their best practitioners keep applying for the one job that ends their practice. People are not confused about incentives. They are reading them correctly. The confusion belongs to the company that built one ladder, called it two, and expected its experts not to notice.
Sources
- Cullen & Perez-Truglia (2022). How Much Does Your Boss Make? The Effects of Salary Comparisons. Journal of Political Economy. Employees underestimate manager pay by 14.1%; higher perceived manager pay raises effort (career concerns) while higher perceived peer pay reduces it. https://doi.org/10.1086/717891
- Hamel (2011). First, Let's Fire All the Managers. Harvard Business Review. Morning Star: no managers, titles or promotions; ~400 employees and >US$700M revenue in 2010; peer committees set pay. https://hbr.org/2011/12/first-lets-fire-all-the-managers
- Lee & Edmondson (2017). Self-managing organizations: Exploring the limits of less-hierarchical organizing. Research in Organizational Behavior. Defines SMOs by the systematic elimination of the manager-subordinate reporting line; documents Morning Star's CLOU contracts. https://www.sciencedirect.com/science/article/abs/pii/S0191308517300059