What’s fair to one may not be fair to another.
It doesn’t need to be entirely rational, either.
The recent story of golfer Matt Kuchar and his temporary caddie for a tournament in Mexico put pay fairness in the sports news spotlight. For those unfamiliar with the story or with how golfer compensation works, here is a recap. If all you care about is the commentary, skip down to the major heading.
Kuchar made a late commitment to play at the Mayakoba Classic in Mexico. His regular and long-time caddie, John Wood, had a previous engagement and could not work for Kuchar that week, so Kuchar needed to find a substitute for the tournament. He was connected with a local caddie, David “El Tucan” Ortiz.
Per reports, El Tucan agreed to work for Kuchar with the following compensation structure:
- $1,000 if Kuchar missed the cut (two days work, and Kuchar wasn’t in the top 70 at the end of those two days)
- $2,000 if Kuchar made the cut (four days work)
- $3,000 if Kuchar finished in the top 20
- $4,000 if Kuchar finished in the top 10
El Tucan might typically earn $800 per week in his usual role, so this is starting to feel like a pretty good deal. 25% more for just 2 days work… and a good golfer like Matt Kuchar was likely to make the cut, so $2,000 was a pretty safe bet.
Let’s pause from the story for a moment to talk a bit about how the golfers themselves and their normal caddies get paid.
Golfers have multiple streams of income. Their most predictable income comes from endorsements (see that Workday logo below? I like to know that a small portion of my company’s subscription pays for that bit of embroidery).
The most visible source of earnings comes from tournament prizes, or what’s known as the purse. Any individual event might have a multi-million dollar prize pool. The winner gets 18% of the pool. 2nd place gets about 10%… 20th gets 1.3%… down to 0.2% if you make the cut (70th place). Here is the full table, If you miss the cut, you get nothing.
Caddies commonly get 10% of a player’s earnings. So in a major tournament with a $10 million purse, the winner gets $1.8 million and the caddie gets $180k. Not a bad week’s work.
Of course, only one person can win. And Kuchar won, with El Tucan, at Mayakoba. His winnings were $1,296,000.
Per his agreement with El Tucan, Kuchar owed him $4,000 (for a top 10 finish). He paid El Tucan $5,000 in cash – with the extra $1k to reflect the nice week.
El Tucan did not find this fair. He emailed Kuchar’s agent and voiced his disagreement. Many supported El Tucan’s complaint, and the media got on Kuchar a bit. When questioned publicly, Kuchar defended his decision based on the agreement made, and also eventually disclosed they offered an additional $15,000 to settle the dispute. El Tucan refused that amount as not sufficient. After more time passed, Kuchar agreed to $50k and issued an apology.
What’s Fair is Relative
Depending on how you look at this story, you may have a variety of perspectives on what was fair. And that’s what makes it relevant for HR professionals.
Relative to his normal market rate, the $5,000 payment was very fair. If you focus on the hourly wage compared to substitute labor, he was overpaid as it was. He was better off than he would have been had he not engaged in the transaction.
Relative to most others who worked the same tournament, he did really well. The median player at the tournament won $15k, so his caddie got $1,500. 27 caddies made more than the $5k payment, and 104 made less. 60 of those 104 made $0. So his pay was in the 80th percentile.
Both of the above arguments get even stronger when the rate of pay was offered to increase to $20k. 92nd percentile pay among caddies. Six months of normal wages.
But relative to what Kuchar’s normal caddie would have been paid, even $50k is low. Had John Wood have been carrying Kuchar’s bag that week, he would have earned $130k. El Tucan is a bargain even at $50k.
Kuchar’s original arrangement with El Tucan was quite fair: competitive relative to other employment El Tucan had available, and commensurate with the likely value of other caddies looping that week. Had Kuchar missed the cut, his offer to El Tucan was more than John Wood would have made. But as Kuchar’s performance earned more, the amount agreed upon seems less fair.
The primary point here is that fair is a perception, not a fact.
Compensation can be above median… and unfair. It can exceed the expected value… and be unfair. We can give a 15% raise for a promotion… and it’s less than expected. We can come to agreement on an offer and a candidate is thrilled… but when the person comes to learn we had budgeted 5% more they feel taken advantage of. I know some of the most challenging compensation conversations I’ve had with my own teams are with the best performers who were well differentiated but expected more.
This is what makes pay fairness so challenging. To be fair for everyone, we have to predict how everyone will react to a situation once all facts are known. That’s a tall order.