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Compensation and Span of Control in Hierarchical Organizations

Author

Listed:
  • Pedro Ortin-Angel

    (Universidad Autonoma de Barcelona)

  • Vicente Salas-Fumas

    (Universidad de Zaragoza)

Abstract

This article presents evidence on the relationship between compensation ratios and spans of control within hierarchical organizations. We find that compensation ratios are lower than span of control at any position within the hierarchy, which is consistent with an elasticity of compensation to a number of subordinates lower than one. Managers' human capital endowments determine a significant part of the salary differences throughout hierarchical levels, as predicted by models of talent allocation in hierarchies. Differences in the size of firms should be attributed more to differences in their number of hierarchical levels than to variations in the span of control.

Suggested Citation

  • Pedro Ortin-Angel & Vicente Salas-Fumas, 2002. "Compensation and Span of Control in Hierarchical Organizations," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 848-876, October.
    • Handle: RePEc:ucp:jlabec:v:20:y:2002:i:4:p:848-876
    DOI: 10.1086/342040
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tim Hazledine, 2016. "Tip of the Iceberg? Organisational Foundations of Top Pay in New Zealand Listed Companies, 1995-2014," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 19(3), pages 197-206.
    2. Smeets, Valerie & Warzynski, Frederic, 2008. "Too many theories, too few facts? What the data tell us about the link between span of control, compensation and career dynamics," Labour Economics, Elsevier, vol. 15(4), pages 687-703, August.
    3. Eliza C. Forsythe, 2019. "The Occupational Structures of Low- and High-Wage Service Sector Establishments," Economic Development Quarterly, , vol. 33(2), pages 76-91, May.
    4. Smeets, Valérie & Warzynski, Frederic, 2006. "Testing Models of Hierarchy: Span of Control, Compensation and Career Dynamics," Working Papers 06-10, University of Aarhus, Aarhus School of Business, Department of Economics.
    5. Elizabeth M. Caucutt & Krishna B. Kumar, 2004. "Evaluating Explanations for Stagnation," Development and Comp Systems 0409002, University Library of Munich, Germany.
    6. Massón-Guerra, José Luis & Ortín-Angel, Pedro, 2014. "Entrepreneurship Capital and Regional Productivity Revisited," MPRA Paper 57470, University Library of Munich, Germany.
    7. Alberto Bayo-Moriones & Pedro Ortín-Ángel, 2003. "Internal Promotion Versus External Recruitment: Evidence in Industrial Plants," Working Papers 0303, Departament Empresa, Universitat Autònoma de Barcelona, revised Mar 2003.
    8. Teodora Paligorova, 2005. "Czech Managerial Compensations: Why Does It Pay Off to Climb the Corporate Ladder?," CERGE-EI Working Papers wp262, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    9. Hassink, Wolter & Russo, Giovanni, 2010. "The Glass Door: The Gender Composition of Newly-Hired Workers Across Hierarchical Job Levels," IZA Discussion Papers 4858, Institute of Labor Economics (IZA).
    10. José Ángel Zúñiga Vicente & José David Vicente Lorente, 2003. "Assessing the Structural Change of Strategic Mobility Determinants Under Hypercompetitive Environments," Working Papers 0302, Departament Empresa, Universitat Autònoma de Barcelona, revised Feb 2003.
    11. Pedro Ortin Ángel & Ana Millan Tapia & Stefan Sundgren, 2016. "Are the Most Capable Auditors in the Big 4 Firms? Model," Working Papers 1601, Departament Empresa, Universitat Autònoma de Barcelona, revised Jan 2016.

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