The world of work is a funny old place. Men who are four inches taller than average earn 10 per cent more a year than shorter men, and more women get hired when job interviews are conducted blind with personal details such as name, age, race and gender removed from the application.
What this tells us is that the workplace is made up of two strands: the strand on the surface that makes much of fairness, equity and recognition; and the silent strand beneath that’s influenced by human bias and behaviour.
Behavioural economist Matthias Sutter has spent the last two decades unravelling these complexities and has now put his findings, based on analysis of 50 research papers, down in print. Behavioural Economics for Leaders was published in January by Wiley and the two examples at the top of this piece are taken from his book.
Behavioural economics is a relatively new discipline within economic science and Prof Sutter lifts the lid on how it can underpin some of the odd and irrational ways people navigate the workplace. This includes why smart people behave strangely, why women are less likely to ask for a pay increase than men and if you throw enough money at someone, will they ignore any moral concerns they might have about their job or employer?
Sutter is director of the Max Planck Institute for Research on Collective Goods. He also lectures in experimental economics at the University of Cologne and describes behavioural economics as a practice that uses empirical methods to understand the motivation behind human actions and a scientific framework to understand the strange and sometimes surprising aspects of professional life.
And in case you’re a below average height male dying to know why you get paid less than your taller peers, Sutter’s explanation, based on research carried out in the US, is that taller teenagers build larger social networks in their teens, particularly through sport. By doing so, they acquire better social skills that translate into higher salaries in adulthood. (Maybe that’s one of the reasons behind the rise in the number of men going for leg-lengthening surgery which can add up to six inches to someone’s height while subtracting around €80,000 from their bank balance.)
Sutter’s research focus over the past 20 years has been on investigating the stages of professional life, yet he never ceases to be surprised by outcomes ultimately driven by behavioural economics. He puts this down to the “human factor”, adding that “our working life always concerns fallible, complicated human beings”.
Sutter’s book is split into eight chapters and each comes with a key finding that can be read and understood independently of the others. There are quirky “finds” in there, including why a surname starting with Z (or later in the alphabet) rather than one beginning with A will give you an advantage in job interviews. But the author also delves into broader issues including why social skills play an increasingly vital role in one’s professional life as one rises higher in an organisation and why weak network connections matter more than strong ones.
Behavioural economics as applied to hiring and retaining talent touches on why managers make systematic hiring mistakes and how AI can help, the unintended negative consequences of salary transparency and why start-ups with more women last longer.
Sutter also looks at the impact of behavioural economics on teamwork, motivation and productivity and at gender and the reasons for unequal pay. (In a nutshell, women are more risk averse while men overestimate themselves.) There’s also a section on salary and bonuses and why paying people more doesn’t mean they’ll make better decisions.
Hybrid working is a hot and sometimes controversial topic at the moment, and Sutter weighs in with a word of warning. “Working from home is great – but it may hurt your career,” he says, citing a Stanford University study carried out with a control group of 500 employees in a travel company in Asia who were split into working from home and in-the-office groups for nine months.
During the trial period, productivity rose 13 per cent due to remote work, largely because fewer breaks were taken and a higher number of telephone calls were processed per shift. Job satisfaction was also higher among those working from home and they stayed longer with the company.
“So far, so good,” Sutter says. “However, the home office had a serious disadvantage that became apparent only when the data was analysed in greater detail. Promotions [to team leader] were much more frequently given to employees working in the office.”
A study from Harvard University with an online retailer in the US came up with similar findings. In this case work-from-home productivity increased nearly 8 per cent but the likelihood of being promoted declined by more than 10 percentage points.
“Fewer opportunities for advancement are therefore a side effect of the home office that ought not be underestimated,” Sutter cautions.
Finally, is it worth the hassle of changing your surname to gain advantage in settings where the alphabet dictates the running order?
Quite possibly, Sutter says, because potentially life-changing events such as job interviews typically run A-Z. The research shows that if you’re in the first batch you’re less likely to be successful because you will be compared with those who follow. If you’re at the end of the alphabet, however, there’s a good chance you’ll be the last candidate seen and the impression you make will stick.
