A theory of status and coordination in organizations[Formal and real authority in organizations]

Firms can motivate workers by offering them social status. Much of the literature argues that a rise in status is a powerful work incentive while ignoring its impact on coordination. This article shows that when workers need to collaborate while having individual vested interests, status differences may reduce the organization value by distorting efforts from different workers. However, status differences can increase the organization value when status effects changes in both authority allocation and cost of taking actions amongst workers. These results have practical implications for human resource management and promotion policies.