Buffer.com (B)

Susanna  Gallani; Tiffany Y. Chang; Brian J. Hall; Jee Eun  Shin

Supplement | HBS Case Collection | May 2017

Buffer.com (B)

by Susanna Gallani, Tiffany Y. Chang, Brian J. Hall and Jee Eun Shin

Abstract

Buffer decided to release its salaries and compensation calculation formula to the public, and the public reaction was greater and more positive than they would have imagined. The company experienced both an increase in volume and a change in the kinds of inbound applications they received. As the company continued to grow, Buffer's senior leaders continued to revise the compensation formula based on feedback both internally and from the public. Particularly, they hoped to strengthen the link between pay and performance, which in the current version of the formula was incorporated using a loosely defined "experience level" component. However, defining clear performance metrics and experience levels was not an easy task.

Keywords: compensation; compensation design; company values; culture; transparency; attraction; selection; performance measurement; performance measures; performance metrics; startup management; Compensation and Benefits; Organizational Culture; Values and Beliefs; Performance Evaluation; Measurement and Metrics;

Language: English

Format: Print

10 pages

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Citation:

Gallani, Susanna, Tiffany Y. Chang, Brian J. Hall, and Jee Eun Shin. "Buffer.com (B)." Harvard Business School Supplement 917-020, May 2017.

Working Paper | HBS Working Paper Series | 2020

Nominal and Opportunity Effects of Managerial Discretion

Wei Cai, Susanna Gallani, Jee Eun Shin, Wei Cai, Susanna Gallani and Jee Eun Shin

We examine the performance consequences of managerial discretion when compensation payoffs are interdependent; that is, when rewards or penalties given to some employees cause others not to get them. Using proprietary data from a company that gives monthly rewards and penalties based on a combination of objective metrics and subjective performance assessments, we document both a nominal and an opportunity effect of managerial discretion. The former refers to performance consequences associated with workers who receive rewards or penalties due to managerial discretion (actual recipients). The latter refers to performance consequences associated with workers who would have received rewards or penalties had there been no managerial discretion (would-be recipients). Our study is, to our knowledge, the first to provide empirical evidence of performance consequences associated with the opportunity effect of managerial discretion. In additional tests, we explore theory-consistent explanations of our results. Our findings contribute to the literature on subjectivity in performance evaluations and have important practical implications for the design of incentive systems.

Keywords: compensation interdependence; nominal and opportunity effects; Managerial Discretion; performance measurement; Employees; Compensation and Benefits; Management; Decisions; Performance; Measurement and Metrics;

Citation:

Cai, Wei, Susanna Gallani, and Jee Eun Shin. "Nominal and Opportunity Effects of Managerial Discretion." Harvard Business School Working Paper, No. 20-075, January 2020. View Details

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