Say a director of operations is asked a question nobody has put to her before: what does your pay reward you for doing with the people who report to you? She can answer for her unit's output and for its costs. She can answer for headcount. Where her people get better at their jobs because of how she leads them, there is no column for that in her pay file, and the next quarter's priorities are unlikely to add one.

That gap is the one a field experiment at a Chinese medical equipment maker was built to probe. The researchers, Thomas Gall, Xiaocheng Hu and Michael Vlassopoulos, worked with a company whose two factories in Jiangxi used teams of about five women to package disposable infusion sets, each team under a team leader who also packed. Everyone on the line, leaders included, was paid a piece rate on what they personally packed.1 Leaders also drew a small monthly bonus for the role, 90 RMB in the plant that was later changed, set without reference to output and worth about 2 to 3 percent of their income.1 The authors began from a worry that leadership activity is harder to measure than output, which invites what they call "underprovision of leadership activities."1

What they changed

Starting in the summer of 2017, one plant changed how its leaders were paid. Managers rated each team leader every week on four criteria: efficient production, worker productivity, defect reduction, and team building. The leaders were ranked against one another, with monthly bonuses running from 205 RMB for first place down to 90 RMB for last place, and the standings were posted on the factory floor.1 A second plant kept its old scheme as the comparison. Worker productivity in the changed plant rose by about 7 percent relative to the comparison plant, and the leaders' own output per hour showed no statistically significant change.1

The leaders' daily output rose too, by about as much as their workers' did, partly because they worked longer days, but their output per hour did not move by any measurable amount. The gain in efficiency showed up in the people on their teams. The authors also report that higher ratings went with higher productivity among team members during the intervention, which they read as evidence that the ratings were picking up real leadership activity.1

What it cost, and what it bought

The scheme was not free. The authors put the added cost at about half of one worker's earnings, and judged it profitable because the productivity gain was comparable to hiring two additional workers.1 These leaders were paid by the piece for what they packed themselves, so every hour spent organizing the team was an hour of piece rate given up, and the authors' model predicts exactly that kind of underinvestment.1 Once part of the bonus depended on a manager's weekly judgment of how the team was led, time spent on the team finally earned something too. The time data lean that way, though loosely: leaders' working time rose by about 28 minutes a day, which was not statistically significant over the full period.1

Where I would be careful

The study is small. It covers one changed factory and one comparison factory with six or seven team leaders in each, and the authors describe their design as a proof of principle and likely not the optimal design.1 The fieldwork is also from 2017, although the paper only appeared online in April 2025 and in the February 2026 issue of the Journal of Economics & Management Strategy. A packing line in Jiangxi is not a regional vice presidency, and I would not tell any executive that 7 percent travels. What I do think travels is the mechanism, which is that people tend to spend their time on whatever the person above them rates and the pay plan rewards.

Leadership work goes unrewarded until someone is made to look at it, and a leader paid only for her own output has every reason to find something else to do.

The senior version of the same gap

My read is that senior leaders have the factory's problem in a more expensive form. Many directors and vice presidents carry bonus plans built on revenue and margin, then hear in the annual letter that developing people is the real job. Nobody sets out to write a plan that way; plans get written around what a spreadsheet can hold. I took up one version of this in an earlier piece on managers who are rewarded for holding their best people in place, and I will leave that argument where it sits. The point here is narrower. If a leader's week follows her pay file, then the most important thing she does with her people is the thing her compensation committee cannot see, and she knows it.

Two questions follow, and neither needs a new bonus plan to ask. Who in your company is assigned to look at how a leader's people are doing, and does that person's judgment ever show up in what the leader is paid or promoted for? And does the leader hear that judgment soon enough to change anything? In the experiment the ratings were weekly and the standings were posted where everyone walked past them. Plenty of review cycles deliver their verdict many months after the behavior it describes. My bet is that most executive teams could answer the first question for their sales leaders and could not answer it for anyone else.

So here is the question I would put to a room of senior leaders. If you asked each of your direct reports what their pay rewards them for doing with their own teams, what would they say, and would you like the answer?