Status in Organizations

Firms can motivate workers by offering them social status (e.g. access to power and privileges) instead of higher pay. Much of the literature emphasizes that status raises work incentives, ignoring the impact of status on coordination. However, I show that when workers need to cooperate with each other and each of them has their own vested interests, too much status differences may exacerbate conflict over workers’ preferred actions, and hence distorts coordination. Moreover, it is likely to be profitable for firms to introduce status differential when promotions lead to a change in the roles of the workers.