A good friend of mine who works in the tech industry recently made a big decision to leave his job at a mid-sized software company, and compensation was a clear motivator. He’d been with the company for several years, and while the base pay was competitive at first, his responsibilities kept growing leading projects, managing a small team, but his salary barely budged. Despite consistent high performance, raises were minimal and bonuses inconsistent. What pushed him over the edge was when he found out a new hire with similar experience was brought on at a significantly higher salary. According to him, that broke his sense of fairness and respect in the company.
This aligns with what we learned in class about distributive justice and equity theory when employees perceive their compensation as unequal compared to their peers with similar input, motivation and job satisfaction drop sharply (Week 8: Introduction to Compensation). It wasn’t just about the money; it was about the message. The undervaluation of his work signaled to him that the company didn’t truly recognize or reward loyalty and growth.
When he accepted a new offer elsewhere, the base salary was only moderately higher, but the incentive structure, equity options, and transparent pay bands made him feel like he was joining a place that valued his contributions. It wasn’t just a financial move it was about regaining a sense of worth and fairness. His story is a clear reminder of how critical compensation design is not only for attracting talent, but also for retaining and motivating it.