Wednesday, June 25, 2008

head2head: A sweet dilemma - Don't bring your home to work

Friedrick von Hayek pointed out the difficulty people have living in two worlds. On the one hand, we have our home life, which is governed by love and respect; on the other are our market interactions, which are governed by incentives and efficiency. No one advocates bringing market rules home with them. Tyler Cowen elaborates on this point in his recent book, Discover Your Inner Economist. He says that a parent would be mistaken to use monetary incentives to get their kids to behave or do chores around the house. Doing so would make one's child view their family responsibilities as a market relationship. As such, they would feel less responsibility to work beyond the marginal utility of their compensation. Further, when the child becomes old enough to work outside of the home, the wages the parent pays for chores and respect must compete with what the kid can get working at Starbucks.

Similarly, you can't bring family rules to work with you. The employee/employer relationship is firmly grounded in the world of market incentives. If you want an employee to stay late or be more productive, you have to offer a bonus or at least offer comp-time. Bosses, unlike family members, can't get away with saying, "this would really mean a lot to me."

This is why the free candy plan misses out on basic incentives. Free candy is a concession from the employer that requires no added effort from employees. It's like you're bargaining with someone and you offer $5 for nothing in return. After the initial positive feelings, the candy will simply become an expected part of the compensation package. At this point, the employer will have to maintain the level of candy in order to get the same productivity out of their workers. On the other hand, any stop in the flow of candy will be viewed as a decrease in compensation, creating an incentive for workers to work less.

There is also a human physiology aspect at work here. Candy provides a short-lived sugar rush, followed by a crash. If workers are eating the candy throughout the day, there will be peaks and crashes throughout the office, potentially wreaking havoc on productivity.

A better plan would be to use the candy as a reward. Bring out the bowl after the team completes a big project or after meeting another long-term goal. That way the candy will be viewed as an incentive to work hard, rather than a simple entitlement.

Read thinkin' chick's take.

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