Canadian Academy Discover, Publish, Thrive
This research investigates the factors contributing to the frequent discrepancies between the performance of individuals within organizations and their corresponding salaries. The study particularly focuses on situations where actors or employees serve as highly visible representatives of their organizations. We propose that two intangible assets, namely celebrity and status, may influence the strength of the connection between individual performance and compensation levels. Utilizing a panel dataset comprising professional footballers from the top five European leagues, we identify a positive correlation between players’ performance in a given period (season) and their subsequent season’s salary. Additionally, we observe that this correlation is negatively influenced by both the players’ celebrity and status. The paper delves into theoretical contributions, managerial implications, and the applicability of the findings to diverse contexts.
In examining a professional football environment, this research reveals that celebrity and status significantly influence the connection between performance and compensation, acting as negative moderators. The subsequent sections delve into the potential implications of our findings for both theory and practice, as well as the applicability of the results to various business contexts.
Theoretical contributions:
At a fundamental level, this study affirms the existence of a direct connection between individual performance and compensation in specific public-facing scenarios (Montanari et al., 2008; Thrane, 2019), supplementing the well-established pay-for-performance paradigm. The primary contribution lies in portraying this relationship as contingent upon factors that moderate its intensity. An individual’s value and, consequently, compensation may not solely hinge on their direct contribution to organizational performance; rather, it may be influenced by indirect variables such as celebrity or status, which temper the direct contribution. Essentially, this work demonstrates that there are limits to the direct impact of performance on compensation, and these boundaries are dictated by the celebrity and status of the focal actor.
This is particularly evident in industries with a large audience attuned to the actions of individuals or firms, where emotional responses are likely, and actors serve as prominent examples of significant industry changes (Rindova et al., 2006). Secondly, by untangling the distinct effects of celebrity and status, this study enriches the literature on intangible assets (Pfarrer et al., 2010; Pollock et al., 2019; Rindova et al., 2006). While prior research predominantly focused on intangible assets’ impact on organizational outcomes, this study establishes a link between these assets and individual compensation, suggesting that under conditions of celebrity or high status, the emphasis on performance may diminish.
Regarding celebrity, this work contributes to celebrity studies (e.g., Wade et al., 2006; Zavyalova et al., 2016) by providing insights into a concept relatively less explored compared to reputation and fame (Sorenson, 2014). Celebrity is considered a distinct, intangible asset based on high public attention and emotional evaluation (Pollock et al., 2019), with the findings highlighting its complementarity with performance in determining compensation. However, organizations also prioritize reaching organizational performance, valuing individuals who contribute resources toward this outcome. Furthermore, organizations requiring sustained attention may assign greater value to an individual’s celebrity, illustrating that celebrity alone can hold value for organizations, making the actual performance less critical in determining worth.
This study also advances research on status (Piazza & Castellucci, 2014; Podolny & Phillips, 1996) by providing empirical evidence of the decoupling effect of status on the performance-pay relationship. Existing literature on status in organizational settings suggests that its visibility and stability often lead to its inclusion in determining an actor’s value. In line with this, our study posits a moderating effect where high-status actors’ compensation depends more on their status level than their actual performance.
Lastly, this study contributes to the literature on social evaluations, addressing the confusion surrounding the distinctions between various constructs like reputation, status, celebrity, or stigma. While existing knowledge has explored how these evaluations influence actions, market outcomes, and firm performance, the study responds to a call for more research to differentiate the effects of these constructs. By examining both celebrity and status, it reveals that both constructs influence an actor’s perceived worth by diminishing the impact of observable performance on their salary. The contextual nature of these effects suggests that the influence of different evaluation constructs is not universal but contingent on specific contexts.
Managerial implications:
The findings of this study carry significant managerial implications for both individuals and organizations. The study highlights the potential distortive impact of status and celebrity on the performance–pay relationship, urging organizations to be cautious. While selecting and compensating actors based on status is understandable, organizations must ensure a rational connection between an actor’s status and current performance to avoid discrepancies in salary. Similarly, the study points out that celebrity can also influence pay levels, emphasizing the need for organizations to consider both job-related performance and the attention a celebrity might bring.
Furthermore, the study suggests that managers should carefully frame and manage the performance–pay mechanism in alignment with organizational and financial objectives. It encourages organizations to improve transparency in assessing an actor’s contribution, considering both performance and the influence of celebrity and status. For individual actors, the study proposes strategies to maximize salary, such as leveraging social media and press coverage to generate public attention.
The research indicates that celebrity plays a crucial role, especially for average performers who can enhance their compensation through effective social media management. The stability of status contrasts with the more accessible path to celebrity, making it a potentially lucrative avenue for higher compensation. The study extends its implications beyond sports and entertainment to various business contexts that share commonalities such as visibility and global exposure.
Additionally, the study suggests that the influence of status on the performance–salary relationship can shield professionals from performance fluctuations. High status may protect individuals from performance-related variations, especially beneficial for those expecting declining performance in later career stages. The study broadens its applicability to CEOs in diverse industries, asserting that celebrity can disconnect individual actions from their contextual impact. It highlights a perception that external audiences, particularly journalists, attribute firm performance to the personalities of celebrity CEOs, emphasizing celebrity over actual results, which subsequently influences compensation. This underscores a disconnection between CEOs’ performance and their compensation in the context of celebrity.
Conclusion:
This study aimed to investigate the influence of intangible assets on the relationship between performance and compensation. Utilizing previous research and a quantitative panel study on professional football players, we confirmed our hypotheses that both celebrity status and high standing negatively moderate the link between performance and pay. Our contributions to existing literature include revealing that the performance-pay relationship is contingent on factors that modulate its strength. We demonstrated that a social actor’s value, and consequently their pay, may depend not only on direct contributions to organizational performance but also on other dimensions like celebrity or status. Additionally, our study expands the understanding of celebrity as a potential substitute for performance in organizations requiring sustained attention and highlights how status can overshadow actual performance by serving as a substitute signal. This research extends insights into the role of intangible assets in organizations, particularly in contexts exposed to high media attention, social network engagement, and digital broadcasting.
Source:
Giangreco, A., Slavich, B., Piazza, A., Castellucci, F. & Mohadjer, C. (2021). The Role of Celebrity and Status in the Performance–Pay Relationship: Evidence from the ‘Big Five’ European Football Leagues. M@n@gement, 24, 1-16. https://www.cairn.info/revue–2021-1-page-1.htm.