Undercover Boss

In the past few weeks, I have watched a couple of episodes of Undercover Boss. I think it is a bit dishonest. The way that the boss throws the company’s money around at the end, so that he appears kind and generous, is a bit cheesy.

However, I find it interesting from an economic perspective. One of the principles of economics is that in a market economy people get paid according to their productivity. If employees want more pay, they need to be more productive.

The undercover bosses find a few duds, but mostly they are surprised by the dedication and enthusiasm of their staff. They are so impressed that they want to do something them to bless them.

The interesting thing is that economic practice does not match economic theory.

• These bosses have no idea how productive their staff are.

• They are paying these staff less than they are worth (that is why they feel they need to give them something to compensate them).

• The boss only identifies a few of their good performers. All the others in the business are not recognised and will probably continue to be unrewarded.

• Most bosses do not know what is going on in their business. They are surprised by the negative consequences of many head office decisions.

• When they find a bad employee, they usually fire them.

• Although the undercover bosses have not been doing their job properly, and are not as productive as they think they are, they never suggest taking a pay cut (a double standard).

Contrary to economic theory, the program shows that productivity and remuneration are often disconnected.