CAMBRIDGE, Mass.--(BUSINESS WIRE)--The idea that an employer should reward workers based on merit has become a business standard in the United States and many other countries.
Organizations tout pay-for-performance as a symbol of commitment to reward employee performance. Surveys have found that as many as 95 percent of US employers use merit-based practices and procedures, typically involving performance reviews and merit pay.
But new research by MIT Sloan School Associate Professor Emilio J. Castilla and Stephen Benard of Indiana University has discovered important flaws in certain merit-based approaches. If not carefully designed or implemented, these initiatives can backfire, triggering unconscious biases in managers and creating disadvantages for women and minorities, the researchers found.
“Employers’ efforts to promote meritocratic values inside an organization can yield unintended consequences,” Castilla said. “Our research therefore illustrates the difficult challenge faced by employers who adopt certain merit-based practices and values.”
Castilla and Benard call this possibility for merit-based systems to introduce bias “the paradox of meritocracy.”
The study, just published in the journal Administrative Science Quarterly, provides a possible explanation for the persistence of workplace inequality today, decades after the widespread adoption of merit-based systems.
To understand how meritocratic systems work, Castilla and Benard presented groups of volunteers with workplace scenarios at a fictitious company called ServiceOne. Participants were given facts about the company and its employees, then asked to evaluate and compensate a small group of ServiceOne employees, including one male and one female whose profiles had been crafted such that they were equally performing their jobs.
All participants were told to distribute bonuses among the same set of employee profiles. In some cases, ServiceOne was described as committed to the principle of pay based on merit. In other cases, there was no mention of the company's stance on workplace fairness or pay based on performance.
In the situations in which ServiceOne was assigned meritocratic values, the participants favored men significantly over women, giving them bonuses more than $50 higher on average. When no mention was made about meritocratic principles, there was no bias evident against women, who received either the same bonuses as men or, in some experiments, even higher monetary rewards.
The series of experiments included both female and male participants, and women were just as likely to favor men over equally qualified women when distributing bonuses in meritocratic organizations.
The experiments were designed to be as realistic as possible, according to Castilla. The values statements ascribed to the company matched those used in certain organizations today, and the employee profiles were similar to those found in many workplaces. Most participants in the study had worked in business and had some managerial experience.
Although the paradox of meritocracy may seem counterintuitive, it is consistent with previous studies showing that when individuals are led to feel unbiased, objective, or fair, they are more likely to express biased behavior. Castilla said further research is needed to understand the underlying mechanisms leading to the paradox of meritocracy.
Before conducting the experimental research, Castilla had studied the gender and racial implications of using merit-based practices in real-world organizations. At one company with a stated commitment to meritocratic values, he found that women, ethnic minorities, and non-US born employees received lower bonuses than white men who had the same performance evaluation scores, worked at the same job, and had the same supervisor.
Castilla said that although the findings of their research identify the potential side-effects of certain meritocratic systems, employers should not abandon efforts to promote workplace fairness and equality. “Our findings simply demonstrate that the pursuit of meritocracy at the workplace may be more difficult than it first appears,” Castilla said. “I hope our research can help managers and practitioners better design and implement organizational strategies that mitigate biases and barriers inside organizations.”