I previously discussed Predictably Irrational by Dan Ariely and was intrigued with the concept of behavioral economics.  As I was reading the book, I couldn’t help but consider the ways in which his research could influence the workplace.

In Chapter 4, Ariely writes extensively about social and market norms.  Social norms are those that control our desire to help others; essentially, this seemed to me our wish to be “neighborly.”  Market norms are those that control our business relationships; Ariely writes that there is nothing “warm and fuzzy” about market norms.

“People are willing to work free, and they are willing to work for a reasonable wage, but offer them just a small payment and they will walk away.” In various iterations of one study, participants were asked to perform a small task for various amounts of money, nothing at all, or a gift.  The participants that worked the hardest in this study were those that were not paid at all for their work; the participants that performed worst were those that were paid only a token amount of money!  Under the guise of social norms, people are willing to help others.  A small gift did not negatively impact performance (a box of chocolates), until that gift was given a monetary value (a $5 box of chocolates).  Basically, people will work hard for reasonable compensation (market norms) or to help their fellow man (social norms).

“Money, as it turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well.” Ariely cites the example of firefighters, policemen, and soldiers; certainly these are not the most well-paid employees in America but they risk their lives on a daily basis for their professional pride and sense of duty.  To motivate employees, he suggests that employers look beyond token financial bonuses to find ways that social norms can provide motivation.

Ariely argues that, if a businesses ask employees to perform above and beyond (work late to meet deadlines, travel on weekends), then the business must offer something in return (job security, comprehensive medical benefits).  These relatively intangible sacrifices and benefits fall under the category of social norms, and serve to develop a positive working relationship and employee loyalty.  He also suggests other positive ways to reward employees through social norms:  adequate sick leave, personal gifts in lieu of cash bonuses, flex time, and family picnics.

While it might seem easy to just flippantly toss some social norms into business relationships, either with employees or customers, Ariely cautions against combining the two without some careful consideration.  “Although some companies have been successful in creating social norms with their workers, the current obsession with short-term profits, outsourcing, and draconian cost cutting threatens to undermine it all.” Check back soon for further discussion about those dangerous waters!

About Kelly: Kelly has been working as a contract technical writer for Inova Solutions for nearly three years. As a recovering high school English teacher, she enjoys the opportunity to still employ her ‘red ink’ when writing, editing, and formatting documentation. You can contact Kelly at kelly@insideinova.com.