David Beckham’s last-minute goal against Greece that booked England’s place
in the World Cup finals was worth its weight in gold to travel agents and the
merchandising industry.
But it was less good news for Manchester United. Becks’ stunning free kick
added yet another notch to his spiralling market value. He is unlikely to sign
a new contract with United involving less than £100,000 a week and the asking
price will rise if the midfielder excels in South Korea and Japan. United may
lose Beckham to a European rival if it fails to meet his demands, and might
even have to sell him before his contract expires in order to guarantee a
lucrative transfer fee.
While the reward management in football might seem unique, ‘Beckamonics’ highlights
some underlying pay trends. Most obvious is the winner-take-all phenomenon. The
combination of technology, mass marketing and globalisation enables talented
individuals to command salaries far in excess of the average for their
particular profession. This not only intensifies the war for talent but also
means organisations must adopt more flexible reward structures – including
performance-related elements – to attract and retain talent.
The degree to which this is happening can be seen from statistics on pay by
occupation. Most of us are aware that the pay gap between people in high- and
low- skilled occupations has got much wider in the past 25 years. What is less
well known, is the gap is getting wider within occupations. Staff are being
rewarded for that ‘extra something’ – the flair or drive they bring to the
market whatever their position in the overall occupational hierarchy. This
indicates that employers are becoming better at linking pay to individual
performance. This could be seen as a positive development as it should
encourage workers to develop their talents and show greater effort.
There is a downside, however. While a wider pay gap can motivate, it can
also promote envy and work against team spirit which is important for success.
The risk is that while flexible reward systems are better at reflecting the
market value of individuals, they may run counter to efforts to improve the
performance of teams.
For football clubs this can often be seen when traditional pay structures
give way to market pressures – it is perhaps no coincidence that United’s form
tends to dip when contract talks get bigger headlines than goals.
The trend towards greater pay flexibility has not helped push the UK up the
world’s productivity league table. The trick for people managers is to devise
reward systems that meet the demands of star performers without alienating
co-workers. While the stars may be the difference between victory and defeat,
they can’t beat the opposition on their own.
By John Philpott, Chief economist, CIPD
