By KEVIN DONOVAN
Published on: 12/31/04 A recent behavioral study demonstrated that animals understand and react to the concept of fairness. In the study, monkeys were given unequal rewards for completing equal tasks. The result was groundbreaking. The monkey receiving the lesser of the two rewards ceased participation in the activity after observing the unfair treatment.
The implications for the corporate world are noteworthy, especially for those who are unable to connect the dots between the value of fairness and the consequences encountered by many thousands of holiday travelers when US Airways was forced to cancel hundreds of flights.
The struggle of executives to "transform" their enterprises into viable businesses rarely grasps the importance of fairness as an essential component of their transformation.
It must first be pointed out that there is a critical difference between loyal employees and lifelong employees. Whereas the latter have only a financial stake in the company and may fill out their days to retirement by just showing up, loyal employees have a personal stake and will do everything in their limited power to help the corporation succeed.
Most workers have a deep and sincere desire to like who they work for, to be aligned with the goals of their company and to ward off any dissonance between why they get up to go to work every morning and what they want out of life. If the condition of fairness is eliminated, the unseen erosion of loyalty will be set in motion, and because fairness is a dichotomous concept — something is either fair or unfair and nothing in between — this erosion can occur rather swiftly.
Consider almost any front-line worker in the commercial airline industry. In a service industry such as this, each employee makes many hundreds of unsupervised, seemingly minor decisions each day on behalf of their company and each decision is in small part a projection of their relationship with their company.
For instance, if I am a lifelong baggage handler who normally unloads a 4:30 p.m. flight before I leave work at 5 p.m., I will not be there if the flight is late and arrives at 5:05 p.m. But if I am a loyal baggage handler, my personal stake transcends my financial stake and I will be there to finish the job because I care about my company and its customers (which, by extension of my stake in the company, become my customers).
If executives are getting paid bonuses independent of tangible performance (i.e. profitability), and baggage handlers are being laid off even when they exhibit loyal behavior that is above and beyond the call of duty, it is not a stretch for the worker to believe that exemplary performance on his part is more likely to reward the executive than the baggage handler. Add to that the realization that their CEO is probably getting paid around 400 times more than the baggage handler and it suddenly becomes very hard to stay past 5 p.m.
In the case of US Airways, hundreds of employees made an unsupervised decision to call in sick on Christmas Day — a decision that they were legally entitled to make but one that reveals the destruction of their personal stake in the success of their company or a belief in its long-term viability. The Trojan horse of severed loyalty arrived in Philadelphia right behind Santa and his reindeer.
What to do? It is very simple: Align the objectives of your highest-level worker (i.e. your CEO) with that of your lowest-level worker (i.e. your baggage handler), and your company will succeed. Cap executive compensation at a reasonable multiple of the average employee salary and tie it to that through thick and thin.
If one gets a pay cut, they all get a pay cut. If one gets a bonus, they all get a bonus. It is not just profit sharing — it is loss sharing as well. Flush out the perks (stock options, helicopter rides, corporate apartments, etc.) and build them into the visible total compensation so that everybody shares both the pain and the wealth. Pep rallies, sloganeering and silly morale building initiatives will not do it; there must be substantial and perceived fairness, in the simple form of a shared stake in the success or failure of the corporation.
Difficult? Oh, yes. This is challenging and some would say unrealistic. But it is not impossible, and in fact for some companies it will be the only alternative to the once unrealistic option of bankruptcy.
The recent proclivity of corporate leaders to move in lock step has imposed a thick wall of inertia against change, but done correctly, this simple act of mandating fairness will change the DNA of the company, inoculating the enterprise against the insidious effects of lost loyalty. More importantly, it is a tangible demonstration of long-term investment, something the holy triad of stakeholders — customers, employees and investors — all desire now more than ever.
Even the monkeys would approve.
__________________
Kevin Donovan, a former Delta Air Lines manager, lives in Decatur.
Published on: 12/31/04 A recent behavioral study demonstrated that animals understand and react to the concept of fairness. In the study, monkeys were given unequal rewards for completing equal tasks. The result was groundbreaking. The monkey receiving the lesser of the two rewards ceased participation in the activity after observing the unfair treatment.
The implications for the corporate world are noteworthy, especially for those who are unable to connect the dots between the value of fairness and the consequences encountered by many thousands of holiday travelers when US Airways was forced to cancel hundreds of flights.
The struggle of executives to "transform" their enterprises into viable businesses rarely grasps the importance of fairness as an essential component of their transformation.
It must first be pointed out that there is a critical difference between loyal employees and lifelong employees. Whereas the latter have only a financial stake in the company and may fill out their days to retirement by just showing up, loyal employees have a personal stake and will do everything in their limited power to help the corporation succeed.
Most workers have a deep and sincere desire to like who they work for, to be aligned with the goals of their company and to ward off any dissonance between why they get up to go to work every morning and what they want out of life. If the condition of fairness is eliminated, the unseen erosion of loyalty will be set in motion, and because fairness is a dichotomous concept — something is either fair or unfair and nothing in between — this erosion can occur rather swiftly.
Consider almost any front-line worker in the commercial airline industry. In a service industry such as this, each employee makes many hundreds of unsupervised, seemingly minor decisions each day on behalf of their company and each decision is in small part a projection of their relationship with their company.
For instance, if I am a lifelong baggage handler who normally unloads a 4:30 p.m. flight before I leave work at 5 p.m., I will not be there if the flight is late and arrives at 5:05 p.m. But if I am a loyal baggage handler, my personal stake transcends my financial stake and I will be there to finish the job because I care about my company and its customers (which, by extension of my stake in the company, become my customers).
If executives are getting paid bonuses independent of tangible performance (i.e. profitability), and baggage handlers are being laid off even when they exhibit loyal behavior that is above and beyond the call of duty, it is not a stretch for the worker to believe that exemplary performance on his part is more likely to reward the executive than the baggage handler. Add to that the realization that their CEO is probably getting paid around 400 times more than the baggage handler and it suddenly becomes very hard to stay past 5 p.m.
In the case of US Airways, hundreds of employees made an unsupervised decision to call in sick on Christmas Day — a decision that they were legally entitled to make but one that reveals the destruction of their personal stake in the success of their company or a belief in its long-term viability. The Trojan horse of severed loyalty arrived in Philadelphia right behind Santa and his reindeer.
What to do? It is very simple: Align the objectives of your highest-level worker (i.e. your CEO) with that of your lowest-level worker (i.e. your baggage handler), and your company will succeed. Cap executive compensation at a reasonable multiple of the average employee salary and tie it to that through thick and thin.
If one gets a pay cut, they all get a pay cut. If one gets a bonus, they all get a bonus. It is not just profit sharing — it is loss sharing as well. Flush out the perks (stock options, helicopter rides, corporate apartments, etc.) and build them into the visible total compensation so that everybody shares both the pain and the wealth. Pep rallies, sloganeering and silly morale building initiatives will not do it; there must be substantial and perceived fairness, in the simple form of a shared stake in the success or failure of the corporation.
Difficult? Oh, yes. This is challenging and some would say unrealistic. But it is not impossible, and in fact for some companies it will be the only alternative to the once unrealistic option of bankruptcy.
The recent proclivity of corporate leaders to move in lock step has imposed a thick wall of inertia against change, but done correctly, this simple act of mandating fairness will change the DNA of the company, inoculating the enterprise against the insidious effects of lost loyalty. More importantly, it is a tangible demonstration of long-term investment, something the holy triad of stakeholders — customers, employees and investors — all desire now more than ever.
Even the monkeys would approve.
__________________
Kevin Donovan, a former Delta Air Lines manager, lives in Decatur.
