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« Why Management Makes Bad Decisions | Main | Strategy »

"That’s not fair" and other "irrational" behavior

Anyone who has ever raised a child (or managed employees) has heard this before. It seems a sense of fairness is very basic in the human condition. Even infants will respond to "that’s not fair." Try putting two hungry ones next to each other and give one two spoonfuls of food for every one spoonful the other gets – I’ll bet you get a very unhappy infant. The unfairness doesn’t even need to directly impact the person – we have all witnessed our children (and employees) being deeply anguished by unfair acts committed on a friend or even a complete stranger.

The concept of equity – and the fury when it is violated - lies deep in the human psyche; in fact it seems to go even deeper than us humans. Recent studies have proved that some primates have a very keen sense of fairness. In a recent study, pairs of capuchins (organ grinder-type monkeys) were placed next to each other and trained to exchange a small rock with human handlers to receive a reward, usually a cucumber. Partners of capuchins who made the swap either received the same reward - the cucumber slice, or sometimes one (but only one) would receive a better reward - a grape, which in monkey-land is a more desirable food.

The response to the unequal treatment was astonishing.  Capuchins who witnessed unfair treatment and failed to benefit from it often refused to conduct future exchanges with human researchers. Many would not eat the cucumbers they received for their labors, and in some cases, they hurled their food rewards at the human researchers. With unfair treatment, monkey performance compliance fell from 90% to 20%!  The monkeys now responded negatively to a reward which had previously been acceptable.  In addition, the monkeys on the short end of the stick never behaved negatively toward the monkeys getting the grapes; they blamed the human researchers – those in control who drove the unfair exchange.

This type of "irrational" behavior has also been studied in human economic transactions. One, called the Ultimatum Game goes like this - take two people and tell them they have the opportunity to split $10. Furthermore, tell one person that, as first mover, they get to make a one time offer, and tell the other person that, as second mover, they get the opportunity to either accept or reject this offer. If the offer is rejected they both go home with nothing. Many would predict an unequal split favoring the person who gets to make the offer. For example, if I offer a $9 - $1 split, where you only get $1, you should take it because a dollar is better than nothing. Instead, a majority of the offers are split equally. In fact, up to 30% of the people rejected the offer if it wasn’t completely equal. It seems that many people are willing to give up their own potential gain to block someone else from unfairly getting more than themselves. It gets even worse when there are many "players" and each gets multiple turns – in these cases the split is almost always 50-50 and those who don’t play fair are cut off from any additional opportunities.

So you might be saying, gee John, this is interesting (yawn) but what does it have to do with me? As a business owner or supervisor you must manage and lead employees – and it seems all employees have some degree of the concept of fairness hardwired in them – yes, even you.

If you have managed for very long you have probably had experiences where one employee is given a raise and another employee(s), upon learning of the raise, immediately resigns or goes into a career ending funk. It is amazing. The unhappy employee(s), who often are great employees, somehow concluded that their contribution had been devalued because of the increased compensation given to another.

As someone attempting to manage a team, this drives you crazy. You have an employee who is happy in their job until someone else's condition changes. When employee A got a raise, employee's B situation remained unchanged. They were making the same pay as the day before and had the first employee not been given a raise, they would have remained satisfied. Yet the change in another employee’s compensation was perceived as so insulting that they could no longer work for the company.  Or have you ever terminated one employee and had another happy, until the then productive employee get up and leave with the now ex-employee?

You might have wondered where does this feeling of being "screwed" come from? It comes from deep within each of us. It gives strong evidence to a school of economic thought which claims that economic decision-making is based as much on an emotional sense of fairness as it is on rational considerations. Actually, this might misstate reality. Rather than seeing these as conflicting behaviors – one "rational" and one "emotional," perhaps the "sense of fairness" and "rational thinking" may simply be parts of a larger whole. Ah, but that’s a topic for another day.

Regardless, this reality is bad news for the "rational" manager who believes they can "reason" their way out of work place issues – compensation, benefits, promotions, team building, etc. Because if the employees don't see the playing field as level, there most certainly will be significant consequences in the workplace.  Don’t forget the monkey-land example from above, compliance fell from 90% to 20%! That’s a serious decrease in productivity! Also remember, the monkeys didn’t get mad at the other monkeys, they got mad at those in control of the situation -- the researchers (in our world that’s management and ownership). I’m certain every seasoned manager out there can tell similar tales.

Attempt to expand your perspective as to why people make some economic decisions -- sometimes to their own detriment, in relation to the efforts and compensation of others (you yourself might do the same thing). You might think "it’s my business and I can do what I damn well please," or perhaps "it’s none of their business how I choose to run my business," or a million other such thoughts. But of course you may be both legally and technically correct, yet still be very, very wrong. Ignore this reality and you may be headed for a major management nightmare, such as employee turnover, low morale and decreased productivity. Even health is based, in part on how "fair" your employees think you are. An "unjust" raise, promotion or firing can cause untold grief. Move forward with your eyes (and heart) wide open.  This entire issue again emphasizes the incredible importance of culture in all organizations.

Long ago I had a management professor (who was also a practicing psychologist) who described the evolution of management thought as:

1. The hands approach – viewing employees basically as physical tools; they are simply strong backs and hands to get the job done. Nothing else matters and they are managed accordingly. Not too effective then, REALLY not effective today.

2. This evolved 180% degrees to the head approach (when science was taking over the world in the 1950s). Now only "logic" and "reason" mattered – for those Star Trek fans, this assumed everyone was like Spock. Needless to say this approach was also flawed. Reason will only get you so far.

3. This circled back on itself and became the heart approach – (during those wondrous times in the late '60s and ‘70s when thinking was viewed as bad and only emotions mattered). Here the only thing that matters is our emotions – touchy feeling management gone wild. This too was less than satisfactory, yet some out there still blindly cling to it.

4. To the present (at least for those successful managers), the total body approach – the hands, heads, and hearts approach. Whether it’s studies on "fairness" or economic decision-making or team building or a thousand other fields, they all come down to one reality – each of us is a complete system. To be an effective manager (or leader), you must manage the complete person. To act as some part simply doesn’t exist or doesn’t matter is just ignoring reality. And in my experiences, ignoring reality sooner or later leads to very bad results.


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