If an employee in a leadership role does not feel that they are being fairly compensated, the amount of work completed may decline as time progresses and the injustice becomes more apparent. This is a strong example of the Distributive Justice Theory, explaining that the reward system and the method use for allocation may not be viewed as fair or just (Robins and Judge 74).
Another case could be when an employee has been with the company for an extended period of time, and is still being paid the same as the new hires. The experienced employee can show new employees the ropes of the business by training and mentoring. Welcoming a new employee into the business is a form of leadership, and the employee may recognize that they are not being properly compensated for their contributions. This may cause the employee to feel entitled to a raise and greater compensation because they can add value to the company. By teaching new employees the proper procedures of the company, the added value requires direct compensation for the employee.
In both situations, if the employee does not feel that they are being fairly compensated it may lead to the employee leaving the organization in search of a new career. When leaders feel that they are not being fairly compensated they may choose to leave the company in search of proper compensation for their skills. If this cycle continues, there will be a high turnover rate and a lack of competent leaders. This may also increase costs because the company now needs to hire and train new employees. This is an expensive endeavor, where increasing the pay of valued leaders may be a more inexpensive option, as well as better for the company. When leaders feel that they are compensated properly, this could lead to a more positive and productive environment. Pay satisfaction will release any negative feelings about unfair pay, and increase the morale of the leader.
Besides internal costs, there is the opportunity to hire an outside consultant to speak to the organization on leadership. The services of motivational speakers and leadership experts can cost anywhere from fifty to twenty-thousand dollars a day (Motivational Speakers). Without internal leaders, these costs may become a necessary option, putting the organization at a disadvantage.
In closing, when an employee portrays leadership qualities, take advantage of the opportunity to promote and maintain the employee’s compensation in order to prevent astronomical costs in the future.