Cafe Classic: Are Competitive Incentives a Turn Off for Women, a Turn On for Men?

Editor's Note:  As a woman, a mother of two (young adults: one male, one female) and a science book nerd, I found Louann Brizendine's book The Female Brain fascinating for its deep dive into the neurological and even endocrinological differences in our brains.  And so my antennae perk up whenever I see claims about gender differences in response to rewards, like the article and research highlighted in today's Cafe Classic.  Thought it would be interesting to revisit it.

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 Forceand 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 and enjoys reading in her spare time. Follow her on Twitter at @annbares.

Image courtesy of: old.penn-olson.com

Comments

[Stephen D. Bruce PhD PHR]

Many employees are already competing for incentives although they may not realize it. Our traditional appraisal systems (ratings of super, outstanding, good, OK, etc. linked to percent of raise) give the appearance of being individual (if you do this and this you can move from good to outstanding), but in reality, employees are competing against their colleagues for the few spots allocated for outstanding performers and the highest raises.

[Ann Bares]

Stephen,

You bring up a really good - and important - point. Forced ranking systems do create competition, which employees may or may not realize, depending on how much they know about the process "behind the scenes." For that matter, any performance goal may be competitive as well, depending on roles, lines of responsibility, structure, work processes and culture. In understanding the degree to which incentives are or are not competitive, it is critical that we dig beneath the surface and understand the deeper dynamics at work.

Thanks for the great comment!

[Karen Kervick]

Competition among co-workers in general has a negative connotation, and can be harmful certainly. However, along the lines of good stress and bad stress - a little competition can be motivating. Isn't that what the incentives are meant to accomplish? I think the type of incentive does depend ultimately on the goal to be achieved and whether it should be individually based or a team incentive.

A team based approach can also motivate as the success of the team (or not) impacts all participants. But then you may have the slackers reaping the same rewards as the achievers - who among us hasn't done the bulk of a school project when others didn't do their part?

What I find most interesting from the study is that it points to the fact that there are other issues at play in gender pay equity. One can't just say that women are not treated equally. Women are also clearly not inclined to professions where one might earn more income. This will never change. Are we saying now we should change the way we work to make it fairer for those who don't like to work in a competitive environment?

Although the distributors of trophies to all might advocate for all incentives to be team based and shared equally, there would be valid reasons when that type of incentive should not be used. Some work cannot be team based and there are still individual goals that can be incentivized. Or as management plans often are, a combination of the two, part team, part individual. Perhaps that is the best option to satisfy both character types.

[Ann Bares]

Karen -

Nice job highlighting the complexities at play here on a number of levels. Yes, successful talent management and even issues like gender pay equity are never as simple and linear as some would have us believe - or as we might like to think ourselves.

Appreciate the great comment!

[Jay Schuster]

The logic of 'team variable pay' is partially based on an attempt to eliminate competition between individuals where work requires coordination and cooperation and not individual performance alone. Although we certainly can have competition between teams, teams often provide better 'support systems' for individual team members.

Studies suggest teams with team-based variable pay outperform teams that either have no variable pay or have pay designs that create competition at the individual level. High technology was a 'hotbed' for team-based variable pay and resulted in some admirable improvements in work quality and satisfaction with work. However, it seems that paying at the team level, even in technology companies, has fallen out of favor.

One of the most influential forces in the elimination of pay designs (including team-based pay) has been the proliferation of surveys of what has been come to be called 'best practice'. In statistics we would call the result 'regression to the mean' with everybody 'wearing the same blue hat' so to speak.

The 'secret sauce' of effective survey use is to find out what other organizations do and then come up with a solution that is 'better' in terms of fit with your organization.

I think that if we could get some honest person from Wells Fargo to write on this blog about the negative influence of 'competitive individual incentives' we would find an interesting story to ponder.

[E. James (Jim) Brennan]

Jay covered two different situations involving "competition" in his comment. First half, he commented about intra-employer competition, where teams or individuals vie against each other in the same organization. Second half switches to inter-employer "competition" where the organization compares its pay system to those of different enterprises. First case shows fellow workers pitted against each other. Second deals with one employer studying the context of its reward programs against those of other enterprises. Same word but very different applications. Fascinating!

At Wells Fargo, for example, the individual sales incentive plans were probably based on targets derived from studies of normative total pay rates for similar productivity at like enterprises. There, the applicable "competition" was probably only between employers rather than between co-workers ... but it could have been both: sales objectives and contingent pay targets might have been shaped by surveys while the bonus reward budget could have been distributed per judgments based on making workers fight each other for their pie piece. Competition is certainly complicated.

[Ann Bares]

Belated thanks for the comments, Jay and Jim.

I share Jay's observation that team-based pay seems to be falling at least somewhat out of favor. In the very small sample size of conversations I've had with organizations who have moved to a bigger or even exclusive focus on individual performance in their incentive plans, I have encountered the response that it was a decision based on "best practice." Eventually, best practices like this do become self-reinforcing via surveys.

Also interesting that this shift, if it is happening, may be happening as many firms move to substantially change their performance management systems. There's a story there, I'm sure.

Appreciate the great conversation!