Monday, April 22, 2024

Trust in staff key to corporate success

OPINION

Increasing productivity monitoring can be demoralising, humiliating, and toxic, writes Professor Ananish Chaudhuri of University of Auckland’s Business School.

Monitoring performance in blue-collar jobs has been ubiquitous for a while now, but it is spreading to white-collar jobs – and there is evidence this reduces trust and destroys motivation.

According to a recent article in the New York Times, “Eight of the 10 largest private US employers track the productivity metrics of individual workers, many in real-time.”

The same article points out that such productivity monitoring is also spreading among white-collar jobs and roles that require advanced degrees.

In some cases, such micromanagement applies even to spiritual care for the dying!

The NY Times article quotes a hospice chaplain whose employer required chaplains to accrue “productivity points”. A visit to the dying: one point. Participating in a funeral: one and three-quarter points. A phone call to grieving relatives: one-quarter point.

Ananish Chaudhuri
Ananish Chaudhuri is professor of experimental economics at the University of Auckland’s Business School.

White-collar workers are now echoing complaints voiced by blue-collar ones and describe being tracked as demoralising, humiliating, and toxic. Available evidence suggests that such management practices simply do not work in enhancing productivity.

Employment relationships often create a dissonance between the goals of the worker and that of the employer. The employer wants the worker to work hard, but the employee is better off shirking as long as that shirking does not lead to a loss in pay or getting fired.

An obvious way to extract work from employees is to make pay dependent on performance and monitor workers to prevent shirking. However, there are at least two fundamental problems with this approach.

A fundamental problem with the micromanagement approach is that it is not even financially sound.

Carrots and sticks

First, this approach assumes that workers are motivated purely by extrinsic carrots and sticks and have no intrinsic motivation. But humans react to myriads of emotions such as anger, shame, guilt, pleasure, altruism, and reciprocity.

We contribute to charity, lend a helping hand to those less well-off, and go beyond our job descriptions not because it benefits us materially but because it gives us a warm glow.

In Auckland’s Onehunga Mall you will find ONE, a venture by a group called Everybody Eats. Here, you will get a set menu dinner. At the end of your meal, you can pay whatever you want. This pay-as-you-wish model is becoming popular. If people are purely extrinsically motivated, then there is very little incentive for one to pay much at the end of the meal – unless you’re a local and wish to go back. Such restaurants should find it difficult to keep going as people eat more than they pay for. But evidence suggests otherwise. Many such restaurants thrive.

In one famous study conducted in Haifa, Israel, researchers monitor parents who arrive late at their children’s day-care centres. When the parents arrive late, a teacher has to stay back, and the study designers implemented a fine for those parents who arrived late for pick-up. The behaviour of the parents utilising those day-care centres where fines were introduced was compared to another group of identical centres with no fines for late parents.

Interestingly, the researchers reported that once fines were introduced, the number of late arrivals went up! Why? Most likely, earlier, the parents felt guilty when they were late. They thought that when they were late, the teacher was being nice by staying back. But the fine is merely a price for coming late. So, just as the parents were paying for the services of the day-care centre, now they were paying a price for arriving late. There is no guilt or shame in paying to buy the teacher’s services.

In fact, in those day-care centres, not only did the number of late arrivals go up, it stayed high even when the fines were withdrawn. Once the norm of late arrivals had become entrenched, it was hard to dislodge.

Cyber-loafing

In another study, a group of researchers explored cyber-loafing (when an employee uses the business internet for personal browsing during work hours) in a simulated employment relationship.

They compared two different types of decision-making regimes: autocratic decision-making and group involvement via voting on a desired course of action. Their findings suggest that while autocratic decision-making and group voting regimes both curtail cyber-loafing, it is only with group involvement that there is a substantive improvement in a cyber-loafer’s subsequent work performance.

The second fundamental problem with the micromanagement approach is that it is not even financially sound.

For one thing, monitoring is often costly and there is always the problem of quis custodiet ipsos custodes – who will guard the guards themselves? This leads to a proliferation of not only monitoring but the inevitably of middle managers who contribute little to the organisation’s bottom line.

In studies others and I have carried out, we find that once compliance costs are subtracted from firm revenue, the resulting returns are much lower than a situation where we repose trust in the workers expecting them to do the right thing. Yes, some would abuse that trust. But studies suggest that they are usually a minority. It is far more economical to prosecute those trust-breakers than assume that everyone will shirk and implement costly monitoring approaches that ultimately reduce organisational trust and destroy intrinsic motivation.

This article reflects the opinion of the author and not necessarily the views of the University of Auckland.

This article first appeared in the National Business Review.

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