_15-214×300.jpg” alt=”” width=”102″ height=”144″ />Dan Ariely, a behavioral economics professor at Duke University, has spent his career amassing research data to show that the decisions we make are often shaped (or misshaped) in ways that are “Predictably Irrational,” the title of one of his books.
We live in two different worlds, says Ariely, one where social norms prevail and the other ruled by market norms. The author provides many funny examples of the damage that can be done by mixing the two – from fining parents for picking up kids late (thus allowing parents to do a quick cost/benefit analysis of being late) to your love life (complete with a Woody Allen quote, of course).
My favorite chapter is the one that explores social versus market norms and the confusion that arises when we mix the two. For example, some economists will argue that gift-giving is economically inefficient. Everybody has experienced this: We spend more than we want to produce less satisfaction than the recipient might get by spending the same amount of money on something else.
So why does non-monetary gifting persist (and why is it often considered more socially desirable than cash)? For the same reason that, if you offer your mother-in-law $300 for having prepared Thanksgiving dinner for the family, she will be less than thankful.
Ariely describes experimental research demonstrating that people happily do things for free that they would not do for pay. But when a market norm is introduced, the mental calculus changes. Once market norms get set in our minds, it takes a long time (if ever) for social norms to re-emerge with the importance they had before.
We should think hard about the signals that companies send to employees and customers by mixing market and social norms. Wages, prices, rents, dividends and cost-benefit analysis are essential business concepts, of course. But companies today also are trying to position themselves socially. By no means is this limited to social media and networking: think of advertising campaigns built on “good neighbor” and “we can help” themes.
If social loyalty is a valid business goal, then every business decision should be made with that in mind. Ariely gives an example of a hefty bounced-check fee at your bank. If the relationship is strictly business, you probably shrug it off. If the bank wants a social relationship, then a friendly call from a bank manager or an automatic fee waiver might be a better strategic fit. “You can’t treat your customers like family one moment and then treat them impersonally – or, even worse, as a nuisance or a competitor – a moment later when this becomes more convenient or profitable,” writes Ariely.
The notion of social norms in employee relationships is relatively new, as industrial age management concepts finally give way. This makes sense in an economy built on intangibles and creativity. And surely, the electronic devices we carry home with us at night have blurred the lines between workplace and home, paid time and personal time.
It’s silly to think that we can or should undo the market norms that govern a company’s dealings with employees. It’s not at all silly to think that decisions affecting employees should be made with the social relationship top of mind.
Ariely asks readers to imagine that he wants to give out year-end bonuses to top performers. Is cash necessarily the best reward? Suppose the true objective is to encourage your top performers to be even more creative. Might the best bonus be an all-expenses-paid vacation designed for relaxation and refreshment? The author makes the case that gifts and benefits for employees should be kept in the social realm to maximize employee pride, satisfaction and commitment to the work.
One last thing to consider: Maybe you do need to run your company, your customer and your employee relationships strictly by market norms. In that case, maybe you also should save the money you’re spending on feel-good advertising and social media – as that’s not the game you’re in.
Frank Ovaitt is President and CEO of the Institute for Public Relations.
Frank,
You, Roger and Maril address one of the most fundamental questions businesses and organizational communicators wrestle with: how to fashion authentic and appropriate communications that will resonate with workforceswho are increasingly cynical of management.
In addition to the perception of most companies as primarily driven by transactional vs. relationship-building behavior, the volume of disingenous communications coming from blogs and web overall makes it even more difficult for organizations to foster lasting engagement.
Thanks for furthering the dialogue on this critical subject.
Jim Simon
Great conversation, Frank and Maril. I can’t help but mention that the Page Society’s New Model talks about the importance of CCOs understanding behavioral science. I vividly recall a conversation with a colleague in the financial services sector about values and culture which revealed his view that it was all about financial incentives. That said a lot about what was valued at his company — money — and demonstrated an ignorance of the often much more important motivators mentioned by Maril in her excellent comments on Frank’s terrific post.
Great post, Frank! Thanks for starting the discussion. I’ve seen many leaders struggle with this very challenge. For example, when employees come to expect annual bonuses, these types of incentives can actually demotivate performance when the company has an off year and cannot pay out. In such a case, employees can feel the missed payout as a takeaway. But there’s a bigger idea that I think gets to the heart of the challenge—and that’s the difference between compliance and engagement.
As part of the Let Go & Lead (http://www.letgoandlead.com/) project, I had the opportunity to sit down with Dan Pink (http://www.letgoandlead.com/dan-pink/) on this very subject. Dan framed the discussion in a way that I think is worth mentioning here. And that is: We tend to think of management as a naturally occurring phenomenon, something given to us as part of some higher order; when in reality, management is something that we invented back in the 1850s. If we think about management as a technology (a technology for organizing people for greater productivity), it’s easy to get the insight—there are very few technologies from the 1850s that we use today!
One of Dan’s comments has really stuck with me over the last year: “Management is the perfect technology if you want compliance. But no one has ever been managed into engagement.” As work shifts to more complex and creative tasks, their motivations are shifting too. Traditional carrots and sticks—or as you’ve teed up “market norms”—do not motivate performance. What does? Connecting to a greater sense of purpose; having a sense of autonomy and self-direction in your work; having the chance to build mastery; and feeling like you can make real progress in your work.
I just look at my team. I have an employee who spends hours every week in ballet class, another who does the same in improv class, another who’s taking piano lessons. They pursue this work not because of aspirations to become a prima ballerina, the next Will Ferrell or a great concert pianist. They do it for the love of the work. I believe it can be that way with our jobs. That’s our greatest opportunity as leaders—finding ways to tap into our employees’ passions and create an environment where they can apply their gifts to a meaningful result.