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Enhancing Organizational Performance


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My 7 year old daughter, Audrey, asked me to play the game of Life with her the other day. I said sure and she proceeded to set up the board. Not being much of a board game fan, I had to ask what the objective of the game of Life was. She said it was to get to retirement with the most amount of money. I couldn’t help myself and had to wonder is that the objective of life – to get to retirement and if you have the most amount of money you win? Is that what it is all about? Is that how we should be measuring our lives, our happiness? Seems rather shallow, or does it?

One measure of economic prosperity for a country that has traditionally been tracked is called the Gross Domestic Product (GDP), defined as the total value of the goods and services produced within a country during the course of a year. There are some economists who apparently feel that this approach is somewhat lacking and have put forward the idea that a new index should be developed. Some are calling this new index a GWB or General Well Being index. This work is described in a cover story of The Economist (December 23rd-January5th) titled “Happiness (and how to measure it)”. The concept is that traditional measures of simple economic performance are not measuring all that is important when it comes to a country’s economic performance but that the happiness of it citizen’s (and by extension, employees working in organizations) counts as well.

The idea they are espousing, I believe, is that money (at least money alone) does not buy happiness – now where have I heard that before – oh yeah, generally from people with money. The article actually lists a survey item that has been asked of the American public every year or so since 1972 as a measure of happiness. “Taken all together, how would you say things are these days – would you say you are very happy, pretty happy or not too happy”? The article describes the “upstart science” of Happiness, mixing psychology and economics.

Will Industrial Organizational Psychologists now be inundated with demands from CEOs to measure “Happiness” within their organizations as defined within The Economist, because it has been linked to business outcomes? While I am a big proponent of different sciences combining their efforts to move along our total understanding of how things work, I think this effort might be misguided, at least regarding their approach to the concept. The article talks about some of the initial findings of this work, some of them very obvious and some needing further explanatory work. One of the findings was, “the rich are happier than the poor” – what was that about money can’t buy happiness? But one finding that they need more explanation upon is that “affluent countries have not gotten much happier as they have gotten richer”. Hummm…. wonder why?

Let’s look briefly at CEO compensation for a possible answer. There has been ongoing debate about CEO compensation, especially within the USA, about the pay levels given out to the CEOs of major corporations – mostly that they are exorbitant but some saying that they are worth the money.  One finding that appeared in the October 16th 2006 edition of The Wall Street Journal stated that CEO pay levels had “soared to 369 times that of the average worker” and how could anybody possibly be worth that much? I don’t want to get into the debate as to whether companies should be paying their CEOs as much as they do, it is clearly a sellers market at the moment with respect to CEO pay and will remain so until boards don’t feel like they need to purchase insurance policies, called “CEO pay”, to make sure they can keep what they perceive to be the best CEOs and hence reduce risk to the organization. What I am much more interested in is the ratio – 369x that of the average worker. This ratio has increased dramatically in recent years and what I want to compare it to is the level of satisfaction towards pay experienced by CEOs and by the average worker. Is the level of satisfaction towards pay among CEO’s 369 times that of the average worker? And has the rapidly increasing ratio resulted in rapidly increasing satisfaction ratio equivalent to the absolute amount?

The answer of course is no. CEOs are not 369x more satisfied with their pay than average workers. Why not?  It is because of several factors. One, in general, CEOs believe they are worth the money. They have to. If they felt they were not worth it, they would feel like they are doing something wrong by taking all that money, hence one way to resolve that dissonance is to say to yourself, “they are paying me that, so I must be worth it”. Second they don’t look at the “average” worker within their company as their pay comparator they look at other CEOs and think well, this is what the market pays for a good CEO.

Humans have been able to justify in their heads all sorts of behavior under all different kinds of conditions, horrible and otherwise, justifying compensation levels in comparison is a relatively minor thing. So why doesn’t a country’s happiness quotient go up in tandem with its affluence? It does not because it is very easy to justify to themselves that they are worth it and deserve the increase in affluence and because their comparators change, they will no longer compare themselves to the impoverished nation next door and say “look how lucky we are”, they will compare themselves to a more wealthy nation and say “how come we don’t have what they have”? And remember People are People, we all basically want the same things.

Another finding that the researchers don’t understand has to do with workload. They can’t seem to get their arms around the finding that those who work less are not happier, and that elderly people who stop working earlier than their peers tend to die younger.  On the first point I have conducted investigations that clearly show that the most “satisfied” within the organization are those that feel that they have “about the right amount” of work to do, followed by those who report being overwork. The least “satisfied” in the organization are those that feel that they have “too little” to do. They feel that their work is not valued by the organization (or at least by individuals within the organization) and that they are being sidelined (and sometimes they are right), in addition to feeling devalued at work this can lead to tremendous stress in people’s personal lives, causing negative emotions. With respect to workers who retire early, there may be some confounds at play, for instance do those who retire earlier have health problems that caused them to retire in the first place, or does the lose of being busy and feeling valued by the organization cause stress related illnesses to appear?

Where will the measure of Organizational Happiness go? It used to be the kiss of death to be thought of as doing “happiness” surveys. Will The Economist article begin a process of rehabilitation of “happiness”? In Britain, the Conservative Party is already suggesting that it be used in replace of GDP. Research conducted at Carnegie Mellon, Science News (December 16, 2006), has shown that “frequent basking in positive emotions”  – being happy – defends against colds. Sheldon Cohen of Carnegie Mellon states that “we need to take more seriously that possibility that a positive emotional style is a major player in disease risk”. So will organizations now find benefits in having “happy” employees? Oh yeah …what about scharmerei? That is when someone brings with them a zeal or extravagant enthusiasm for a cause, a person or an organization – they are happy to be there.

© 2010 by Jeffrey M. Saltzman. All rights reserved.

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Written by Jeffrey M. Saltzman

October 23, 2009 at 10:37 am

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