There are also pressure problems. Gain-sharing plans, in particular,can create very hight peer pressure to do well,since the pay of all depends on everyone's efforts.Theodore Cohn,a compensation expert,liked to talk about the Dutch company,Philips, in which twice-yearly bonuses could run up to 40% of base pay."Managers say that a paper clip never hits the floor a hand will be there to catch it," Cohn recounted. "If a husband dies, the wake is at night so that no one misses work. lf someone goes on vacation, somebody else is shown how to do the job. There is practically no turnover."
Similarly, Cohn claimed that at Lincoln Electric, where performance-related pay is twice the average factory wage, peer pressure can be so high that the first two years of employment are called purgatory.
Another kind of pressure also emerges from equity-ownership and profit-sharing systems-the pressure to open the books, to disclose managerial salaries, and to justify pay differentials. Concerns like these bubble up when employees who may never have thought much about other people's pay suddenly realize that"their" money is at stake.
These concerns and questions of distributional equity are all part of making the system more fair as well as more effective. Perhaps the biggest issue, and the one most disturbing to traditionalists, is what happens to the chain of command when it does not match the progression of pay.If subordinates can outearn their bosses,