For Immediate Release Nov. 23, 1998
From: Dennis Brown, [email protected]
Note: Matt Bloom can be reached for further comment at (219) 631-5104.
Major League Baseball teams in pursuit of Randy Johnson, Bernie Williams, Kevin Brown and other marquee free agents should avoid paying these stars significantly more than other players, according to a new study by a Notre Dame researcher.
Matt Bloom, assistant professor of management, found that baseball teams with wider pay ranges had poorer on-field and financial performances than those with relatively equal salary structures. The won-loss records, final standings, attendance, gate receipts, total income and franchise values all were worse for teams with more unbalanced pay distribution.
Bloom also discovered that individual player performances are worse on teams that have a wider range of pay, even for the players who are more highly paid. In addition, the study indicated that teams with a higher average of player pay turned in better player and team performances.
"The implications seem to be that baseball owners should pay their players well, but pay them relatively the same amount," Bloom said.
The results suggest that over time the negative effects of pay inequalities may be compounded if the players ó especially the stars ó who are hired in one season become underpaid relative to players hired in the next season.
"The costs of acquiring this year's star may negate the benefits of hiring last year's star," Bloom said.
The study, titled "The Performance Effects of Pay Dispersion on Individuals and Organizations," covers the 1985-93 Major League Baseball seasons and is forthcoming in the Academy of Management Journal.
While the study's findings are limited to Major League Baseball, it is possible they would apply to the corporate world, where there is an increasing emphasis on teamwork.
"Clearly, we need to learn more about how pay differences affect teamwork in other kinds of organizations," Bloom said. "Even so, the implications of the study may be important for the many organizations that are emphasizing team-based management."
A member of the Notre Dame faculty since 1996, Bloom teaches and conducts research on the effectiveness of incentive pay systems, the management of total compensation, and strategic human resource management. He earned his bachelor's degree from Baker University, his master's degree from the University of Kansas, and his doctorate from Cornell University.
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