Competitive Incentives: A Turn Off for Women, A Turn On for Men?

Here's a piece of information that caught my attention yesterday, via Harvard Business Review's The Daily Stat:

Men were 94% more likely than women to apply for a job if its salary potential was described as being highly dependent on competition with other employees.

THAT is interesting. Men are nearly twice as likely to pursue a role with pay based on competition?  While the fact of this difference didn't really surprise me, the size of it did.

Neuroscientists have told us that women, on a neurological level, are wired to ease interpersonal conflict while men are geared to enjoy and even get a positive boost from it.  Does this mean, then, that men naturally gravitate toward - and women away from - competitive incentives?

A deeper look at the research (authored by University of Chicago economics professor John List and others) Do Competitive Workplaces Deter Female Workers? suggests that the reality is, in fact, more nuanced than that.  And while it is impossible to do justice to a 48 page research paper in a short blog post, here are a few of the notable results highlighted by the researchers (and paraphrased by me).

-Competitive workplaces (defined as those with a "individual tournament-based" pay approach which features a significant proportion of variable pay based on competition with other workers) significantly increase the gender gap in application, with women's likelihood of applying for the position dropping substantially relative to that of men.  Note that this is where we see that 94% number crop up.

-The gap is not driven by men opting to compete and women opting not to compete, but rather a significantly stronger aversion to competitive workplaces among women than among men.  In other words, the presence of the competive incentive approach discourages both men and women from applying - its just that the effect is much stronger for women.

-Several factors related to the workplace affect the gender gap including the degree to which compensation is linked to relative performance and whether the arrangement is team-based.  So, the more strongly leveraged the pay package (the greater the proportion of the competition-based incentive relative to fixed salary), the more aversion women show to it ... but introducing the element of a team makes it more attractive (or at least less unattractive) to them.

Bottom line, it would appear that both men and women prefer non-competitive pay "regimes" - but evidence suggests that competitive incentives are a much stronger "turn off" for women.

What can HR and compensation pros take away from this?  Here are a couple of thoughts, and I'd love to hear yours.  I think the findings of this research should encourage us to use care and caution in developing reward packages - outside of sales* - that are overwhelmingly leveraged on individual performance, particularly where individual performance is measured in a way that encourages competition among co-workers.  And where a competitive element is demanded by the role or surrounding busines conditions, we should remember that introducing a balancing element of team rewards might be a key to employee acceptance.

*Because this research was conducted with non-sales jobs and applicants, I don't think we can draw any conclusions about sales compensation from it.  Anyway, as we all know, sales people are different...

Ann Bares is the Editor of Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations.  She earned her M.B.A. at Northwestern University’s Kellogg School, enjoys reading and cooking in her spare time.  Follow her on Twitter at @annbares.

Image courtesy of: old.penn-olson.com

Comments

[Laura Schroeder]

That feels... high to me.

I can imagine women like a higher fixed pay to variable pay ratio (we're the 'gatherers', after all;-) but I recently read a post saying that women are "77 percent of women insist that hard work, not connections, account for their advancement" http://blog.hreonline.com/?p=1596.

If this is true, compensation packages based on individual quality of work might be welcome to women who want to advance based on their own hard work rather than team or other performance measures.

Nonetheless, it's a good yellow light for companies trying to reduce fixed pay by increasing variable pay.

[Ann Bares]

Laura:

I hear you - I was struck the same way.

I don't think the results of this research, at least as I understand them, are at odds with the "77% of women" statistic that you quote. Remember, the issue presented here is not just individual incentives, but individual incentives structured as a competition against one's co-workers. It's one thing to assess and incent me on my individual performance against independent standards and measures (i.e., my own "hard work") - it's quite another to force me to earn my incentive by winning out over my co-workers in a tournament style assessment (which represents the centerpiece of this research).

Of course, even this distinction is not as clear as it would appear on the surface - since we know that individual incentives that reward each person on their own merit and hard work can produce competition ... even unproductive competition.

Nonetheless, as you say, these are points well worth considering for companies thinking to up their variable pay game.

Thanks - always - for the thoughtful comment!

[Dan Walter]

SO I took a look at the article and was interested with this portion:

"The online job ads that attracted the largest proportion of men offered a $12 hourly base pay with a $6 bonus if the employee outperformed other workers."

Now I know that behavioral economists tell us that the results from experiments with low amounts can be applied effectively to high amounts, but I am not convinced.

I wonder what the difference would be if these jobs offered $100/hr plus a potential bonus of $50/hour. Perhaps the more competitive females don't see the $12/hr jobs as worth competing for.

While I do agree that women lean toward a more team-based, balanced environment, I find the difference from this article unlikely to be representative of the US job market as whole.

Of course, any goal-based pay system that incorporates both an individual and a group component is going to be generally more effective for everyone except the absolute top person. Maybe that is a component of this. Perhaps women see an extra $6/hr as not worth doing everything possible to be the ultimate winner. It is common knowledge that there is almost always one person who is willing to stop everything to come in 1st, even when the prize is nominal. Maybe women understand this more innately than men and avoid jobs where there is an "all or nothing" outcome.

[E James (Jim) Brennan]

Just throwing out random thoughts here... not wedded to any one idea that follows:

Men are traditionally more socialized towards competitive environments while women are usually reared to be supportive rather than aggressive. Very general, of course. Hence, it could be that men tend to be less emotionally involved in situations involving business conflicts (fight hard, then have drinks with their rivals) while women will actually become more emotionally engaged (and thus often more effective in results) but find it more difficult to be "good losers" as men are trained to be. In my experience, women are more ruthless and worse enemies then men. I find nothing contradictory in women insisting their success was due to hard work rather than connections and the concept that women embrace peer-competitions with less enthusiasm than men. They may not feel the need to prove themselves (i.e., their value is a given, not subject to test) as much as men do, nor be as eager to compete against their co-workers for a prize, which boys will do just for fun.

I have earned powerful enemies in board rooms by condemning reward programs that pit employees against each other in Darwinian struggles by observing that the enemy is out there and not in here. Incentive schemes based on internal competitions are destructive rather than constructive, IMHO. Getting ahead at the expense of your co-worker by fomenting rivalry only weakens the coherence of your organization. Creating incentives to fight, sabotage or block the effectiveness of your peers is terribly counterproductive.

[Ann Bares]

Dan:

I see that Typepad ate my original response to your great comments and observations...

I agree that the research results may not be representative of the dynamics at higher pay levels, and also that the strength of the results may not be representative of the broader labor market. But I do think the core conclusions resonate for me.

Again, I read this as less about individual versus team incentives (although my reactions did get into that distinction) and more about using pay to establish inter-worker competition - and the fact that this is unattractive to a fair share of ALL applicants, but particularly unattractive to women.

Excellent food for thought, though - thanks for sharing your take on it here.

Jim:

They're good random thoughts - I think I would agree with all of them .... particularly your last paragraph. It is difficult to imagine how reward programs that pit employees against one another can be constructive in the long term - for either the organization or the employees.

Thanks for weighing in!