Skip to main content

Tennis Tournament Theory of Management Salaries

I just stumbled upon the prize money table at Wimbledon. The winner gets one million pounds sterling. The runner up gets 1/2 million. The 64 first round losers get £11'250 each and the 32 second round losers get £18'750 each. In total, those 96 losers earn £1.32 million. So the two finalists earn more than the 96 losers competitors in the first rounds together. Furthermore, the increase over 2009 was 17.6% for the top 16 players, but only 4.7% to 6.8% for losers of the first three rounds.

Wow.

Are there any similarities to pay scales withing companies? Actually, I think I know the answer to this one. More interestingly, given that corporate pay scales do look like tennis tournament prize winnings, what effects does this have on cooperation and teamwork within the company, especially at the levels of top management or between the departments of the "Quarter-finalists"?

Comments

Anonymous said…
This is already fairly well covered.
Even wiki has an entry: http://en.wikipedia.org/wiki/Executive_pay
Peter said…
Hi Anonymous,

From the perspective of executive pay, I agree. My source was Tim Harford, author of The Undercover Economist.

The (not universally accepted) conclusion of tennis tournament theory is that doesn't matter what the CEO actually does; his salary is a motivator for the rest of the company to do their best.

Note that I don't say motivates the team to do its best, because this theory implies that everyone below the CEO is a competitor to each other.

I don't have any opinion on its validity to CEO salaries. I am however convince that it explains the behavior of the "quarter-finalists" beautifully.
Peter said…
BTW - the World cup has a much flatter distribution curve:

$8 million – To each team exiting after the group stage (16 teams)

$9 million – To each team exiting after the round of 16 (8 teams)

$14 million – To each team exiting after the quarter-finals (4 teams)

$18 million – Fourth placed team

$20 million – Third placed team

$24 million – Runner up

$30 million – Winner

Why is the treatment of soccer teams more egalitarian than of tennis players?

Popular posts from this blog

Sample Definition of Done

Why does Scrum have a Definition of Done? Simple, everyone involved in the project needs to know and understand what Done means. Furthermore, Done should be really done, as in, 'there is nothing stopping us from earning value with this function, except maybe the go-ahead from the Product Owner. Consider the alternative:
Project Manager: Is this function done?
Developer: Yes
Project Manager: So we can ship it?
Developer: Well, No. It needs to be tested, and I need to write some documentation, but the code works, really. I tested it... (pause) ...on my machine. What's wrong with this exchange? To the developer and to the project manager, "done" means something rather different. To the developer in this case, done means: "I don't have to work on this piece of code any more (unless the tester tells me something is wrong)." The project leader is looking for a statement that the code is ready to ship.

At its most basic level, a definition of Done creates a sh…

Scaling Scrum: SAFe, DAD, or LeSS?

Participants in last week's Scrum MasterClass wanted to evaluate approaches to scaling Scrum and Agile for their large enterprise. So I set out to review the available frameworks. Which one is best for your situation?

Recently a number of approaches have started gaining attention, including the Scaled Agile Framework ("SAFe") by Dean Leffingwell, Disciplined Agile Development (DAD), by Scott Ambler, and Large Scale Scrum (LeSS), by Craig Larman and Bas Vodde. (Follow the links for white papers or overviews of each approach).

How to compare these approaches? My starting point is Scrum in the team. Scrum has proven very effective at helping teams perform, even though it does not directly address the issues surrounding larger organizations and teams. An approach to scaling Scrum should not be inconsistent with Scrum itself.

Scrum implements a small number of principles and constraints: Inspect and Adapt. An interdisciplinary Team solves the problem. Deliver something of va…

Five Simple Questions To Determine If You Have the Agile Mindset

My company has started a top-down transition to Scrum and Kanban. Will that make us an Agile company? About 2 years ago, I attended a conference hosted by the Swiss Association for Quality on the topic of Agility. As a warm-up exercise, the participants were given the 4 values of the Agile Manifesto, then asked to arrange themselves in space. How Agile is your company? How Agile do you think it should be? Very Agile on left, very traditional on the right. There was a cluster of people standing well to the right of center. “Why are you standing on the right?” It turns out that they were all from the railway. “Our job is to run the trains on time.” They were uncertain whether this agility thing was really aligned with their purpose.
Is Agility limited to software? Steve Denning has collected the evidence and laid out the case that Agile is not limited to software, nor is it merely a process, nor is it something you can do with part of your time, nor is it something you can have your …