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Here’s how analysts can stop themselves being exploited by associates

Analysts and associates investment banks

Given the choice, associates will always encourage analysts to work harder

As an analyst in an investment bank, you may find yourself urged into overwork by your associate. A new experiment by French researchers at the ‘Group of Analysis and Economic Theory’ in Lyon, offers an insight into making your associate less prone to slave-driving.

The French academics conducted a blatantly unfair experiment involving two people – one senior and one junior. The subjects were asked to work together and complete a project. The senior staff member (S) was paid in direct relation to the amount of effort he was able to extract from the junior (J), on a scale of 1-10. Conversely, the more effort the junior put in, the less he was paid, as per the chart below.

Exploitation

The senior member of the team was able to ‘suggest’ how much effort the junior should exert. The junior didn’t have to listen, and could even disobey. But if he did, the senior could punish the junior, by removing some of his pay.

Even though the game was conspicuously unfair and rigged against the juniors, the experimenters found that the senior people repeatedly ‘tried to use their power to exploit junior workers’. That’s bad news, except the exploitation was greater under some conditions than others.

The charts below show the number of ‘suggestions’ made by the senior team member under different conditions. When information was symmetrical (SYM) and the junior knew all about the pay scale (and knew he was being exploited), the senior didn’t encourage him much beyond effort level three: the median suggested effort was 4.66. When information was asymmetrical and the junior didn’t know the pay scale (or the extent to which he was being exploited), the senior felt more confident in pushing him to higher levels of effort: the median suggested effort was 6.35.

Suggestions made by player S

Similarly, the number of punishments meted out by player S were far higher when player J didn’t know the extent of his exploitation, as show in the chart below.

Punishments

 

The researchers concluded that some coercion and exploitation in hierarchical structures are inevitable. However, senior staff feel more comfortable exploiting juniors – even in blatantly unfair games – when the juniors don’t realize the extent to which the exploitation is occurring. When juniors are aware that exploitation is taking place, senior staff temper their attempts to make juniors work hard for fear of transgressing social norms of fairness.

What does this mean for the hierarchical structure in investment banks? Firstly, if senior staff can benefit from making juniors work harder, they will. Secondly, if junior bankers are aware how much more senior staff are earning and  they let senior bankers know that they know this, senior staff might be guilt-tripped into giving juniors an easier ride.

Ok, maybe it’s not totally foolproof. But it’s worth a try.

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