Competence and experience are overrated - that's what really matters in the job

Simeon Schudy, Professor of Behavioral Economics and Experimental Economic Research at the Ludwig Maximilian University in Munich, deals, among other things, with the question of the reasons for success and failure at work. He knows what spurs people on or demotivates them - and explains what is important when it comes to promotion.

WORLD: What can people derive from findings from behavioral economics for their day-to-day work?

Simeon Schudy: From the application process and job performance to salary increases and promotions, behavioral economics play an important role in success and failure. Empirical studies provide a whole series of important insights, also for practice.

WORLD: Let's start with the application. What makes the difference between successful and unsuccessful candidates?

Schudy: Experience has shown that it is not just the technical requirements. Sure, they are the basic building block. But companies are primarily looking for applicants who are a perfect fit. These are usually the ones who go the extra mile, find out about the company and the position and use this knowledge. Those who are willing to invest more time can credibly signal interest in the new employer. If you're not very interested, you won't. We are therefore also talking about expensive signals.

WORLD: Applicants should therefore make it clear why they want to work for this particular company. Nowadays, however, it is increasingly the companies that have to take care of their employees, not the other way around. Can they also send out such signals?

Schudy: Absolutely, they now have to. Ultimately, they too must show that they understand what applicants expect from a job. These include home office options, flexibility and family compatibility. If you don't promise that, you're going to have a hard time.

WORLD: The promise is one thing, the actual implementation is another. What is the threat if a company does not implement such announcements from the application process?

Schudy: That's dangerous. Because little lowers the work performance of employees like disappointed expectations. If, for example, a certain expected work performance was described in the job interview, but then suddenly much more is expected, this has a particularly strong negative effect. The employees are initially overburdened by the extra work. If it also comes unexpectedly, the effects will be amplified.

WORLD: Overtime cannot always be avoided. Under what circumstances are employees willing to accept them?

Schudy: Much can be regulated through motivation. Ideally, the employee should have this intrinsically, because their goals are in line with those of the company. This also enables managers to give them more freedom. When employees realize that their work is meaningful, then there is less risk that they will not fulfill their tasks.

WORLD: To do this, a company must first clearly define its own goals. Does it help that people are currently looking everywhere for the purpose, i.e. the meaning of their own company?

Schudy: That can help. But it also has to be authentic. For example, a social foundation company can take up the cause of doing something about inequality in the country. This is more difficult for a B2B company from the manufacturing sector. Therefore: It is better to identify a less ambitious purpose that the employees then also believe in. For a screw manufacturer, it can help if the employees know what ultimately happens to the screws. It's just nicer when you can say, for example: "The screws that I build end up in a space shuttle."

WORLD: Nevertheless, the purpose of the company often remains something rather abstract for the individual employee.

Schudy: It is all the more important to clearly convey to the individual employee what contribution they are making. So the managers should explain to him why his job is important for achieving the goals. And also why he is the right person for this position.

WORLD: Words are one thing, but for many, appreciation is also reflected in salary. What role do financial incentives play in employee motivation?

Schudy: They can help if you do it cleverly. The great danger here is that the employees perceive something as unfair. It must be understandable why someone earns more than someone else and that good performance pays off. If someone actually achieves more or is more productive, wage inequality is also accepted. If differences in productivity are not perceived, then unequal pay has a negative impact on work performance. It is also important that incentives must be linked to achievable goals according to clear criteria. This not only applies to the financial side, it also applies to other measures, such as more autonomy or freedom of choice in everyday work.

WORLD: So more transparency in salary is not necessarily helpful. But if I don't disclose anything, that can also look suspicious, right?

Schudy: Possibly. As an entrepreneur, I have to think carefully about how each measure affects the employees. Even very transparent incentive systems can therefore have unwanted negative effects.

WORLD: You have to explain that.

Schudy: There was a study on the question of how to reduce absenteeism among trainees. The idea was to give them incentives to show up for work - on time. But that didn't do anything. On the contrary: absenteeism actually increased. Because this system may have signaled to the trainees that punctuality and reliability are not the norm, but something special that needs to be rewarded. You can then no longer easily reverse the effect by abolishing the failed incentive system. Something like that gets stuck. Therefore, such steps should be considered very carefully.

WORLD: A permanent salary increase is likely to be more interesting for many employees than individual incentives. What can you do to increase your chances of getting one?

Schudy: Let's look at it a little more fundamentally: most would probably think that the amount of earnings depends primarily on school education, parental home or professional experience. Studies show, however, that these aspects do not explain much of the variance in salary. Two thirds are due to other factors.

An important driver that the research was able to identify are personality traits. In particular, conscientiousness and salary are very strongly correlated. The causal relationship is scientifically unclear, but it is striking. The same applies to what we call persuasion. One would probably speak negatively of Machiavellianism, i.e. the ability to influence or even manipulate others.

WORLD: Do these qualities also help to get promoted?

Schudy: They definitely play a role too. Extroversion is also extremely important here. Those who draw attention to themselves and are communicative have a higher chance of being promoted. However, that does not have to be good for the company, because extroversion says nothing about the ability to lead. A more introverted person can also be a very good boss. It is the task of the companies to find good selection processes that are as objective as possible.

WORLD: So the personality traits say nothing about whether I would be a suitable manager.

Schudy: They definitely play a role, but good leadership is also very easy to learn. There are certain techniques that anyone can learn. So companies need to think a lot more about how to empower new leaders and not expect to get ready-made managers. For example, training is required. If they approach it that way, they also have a much broader range of potential leaders in their workforce.

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This article was first published in May 2022.