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Why Wall Street won’t ever change their spending ways

January 13th, 2012

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business man with piggy bank on head and hands onI’m going to get right to the point.  I have little faith that Wall Street will ever get smarter about how they spend their money. The reality is they have too much of other people’s money and deal in such large amounts day to day that they will never take seriously the efficiency and effectiveness of their own management systems.  They have seen good times and bad.  While they are talking about making dramatic changes now, history has proven that they will only be temporary.  Even though they are in a position now where their financial belts will have to be tightened, it will be only for a short time because when the economy improves they will return to their spendthrift ways.  Why?  Because they don’t know any better and since they are in the business of selling money have come to believe that money will solve their problems only if it is given in large amounts.  It is an environment where $100,000 is considered “chump change.”

What prompted this blog was an article in Bloomberg News titled, “Wall Street Mulls Partial Pay Freeze” by Jeffery McCracken and Christine Harper.  They talk about the fact that revenues in the investment-banking business have been so bad that they might have to resort to eliminating the practice of boosting pay automatically each year.  They quote Joseph Sorrentino of Steven Hall & Partners, an executive-compensation consultancy who said, “Pay increases have been traditionally automatic because there are traditionally very long hours in terms of the amount of work and this is another way to try to boost their morale and signify that they’re a strong part of the firm and that they’re appreciated.”  This quote cracks me up because it shows the almost total lack of understanding of the laws of behavior.

I can assure you that Mr. Sorrentino has no data showing that the way these investment banking firms structure bonuses improves junior bankers’ performance, retention or morale.  It is naïve to think that you can treat people poorly day to day, give them money at the end of the year and think that will create the feeling that “they’re a strong part of the firm and that they’re appreciated.”

The reason these firms can get away with wasting millions of compensation dollars is because practically every company in the industry is using the same poor uninformed compensation practices.  Therefore, no firm has an advantage or disadvantage.  The customer pays the freight.

If these firms ever get to a point where they must operate in a more sound way financially, I can suggest several things.

  1. Every problem cannot be solved with money, even on Wall Street.  What causes people to quit and go to another company is more about the way they are managed than the money they make.  If employees are treated poorly, they will leave for a dollar more.  If they are treated well, it will take a lot more to hire them away.  Make no mistake, loyalty cannot be bought.  Big bonuses have often helped a disaffected employee start a competitive company or retire early.


  2. Bonuses that are not earned, more often than not, do not strengthen productive behavior because that is not the contingency involved in receiving the bonus.  While upper management believes that annual bonuses increase loyalty and performance, they do neither because they don’t have to be loyal or productive to receive one.  They have to do just enough to stay on the payroll.  Of course management doesn’t believe this because if they did, they would make immediate changes where nothing would be automatic that was not individually earned.  A system where employees knew the personal accomplishments they had to achieve to earn the money would be far superior and less costly.


  3. Forget what rival firms do.  Focus on promoting to management only those who have good social skills and an understanding of the science of behavior.  Pinpoint the behaviors and results that are valuable and generously reinforce those behaviors and reward those who produce the results.  That way, the only thing that executives will have to “mull over” will be how to spend the money that is left over.

Ask Aubrey, Behavior 101, Consequences, Culture "Change", Incentives, Leadership, Performance Pay, Positive Reinforcement, Results, Rewards

Just do it!

October 26th, 2011

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Guest post by Christina Simms

CB055359Understanding why we procrastinate and how to beat it.

Having trouble whittling down your To-Do list? Do you find yourself saying (albeit with confidence) “I’ll get to that tomorrow.”? You aren’t alone. Procrastination seems to be the one thing you can almost always count on people getting done. But why do we seem to keep putting off for tomorrow what we could do today?

Every week I go through the same routine. I make a to-do list with the good intention of crossing everything off. I do the easiest, quickest things first; mark them off with a wonderful feeling of satisfaction and typically leave the more complex, challenging to-do’s for tomorrow. Before I know it, two weeks have passed and my list is that much longer.

People procrastinate on all sorts of things. We put off taking out the trash, mowing the lawn, doing our taxes, mailing Christmas cards. Most of the time, we find ourselves avoiding tasks because something about doing them is tedious, unpleasant, time consuming, or in some way negative. The science of behavior, specifically behavior analysis, provides not only the answers to ‘why’ but also how we can overcome our own procrastination.

The science of behavior tells us that it is consequences that determine whether or not we will do something again in the future. If you receive a negative consequence as a result of something you did (ie. a behavior) then you are less likely to do that behavior again in the future.  Alternatively, if there are positive consequences associated with something you have done, then you are more likely to repeat that behavior in the future.

Many years ago, Aubrey developed a tool to examine consequences called the PIC/NIC Analysis®. Again, the science tells us that consequences can be positive or negative, immediate or future, and certain or uncertain. The most powerful consequences are the positive/immediate/certain and negative/immediate/certain ones. In this age of instant gratification, procrastination has become even more prevalent. Lots of things are competing for our attention and the ones that win are the PICs because, frankly, they are more reinforcing to us. College students turn to Facebook instead of starting their 20 page papers, kids spend hours hooked on video games instead of cleaning their rooms, and 9-5 workers choose catching up on their favorite TV shows over an evening work-out.

This may sound like common sense, but if we all understood so well how behavior works, we wouldn’t be in danger of becoming Procrastination Nation. I turned to Dr. Aubrey Daniels for some wise advice about how to beat procrastination and get things done.

It is tempting to start by picking the low hanging fruit, but Dr. Daniels warns against this common practice. Instead, he suggests an alternative method to working through your To-do list. Start by making a list of everything you need to do. Next, rank the items from most desirable to least desirable. Now comes the hard part— start at the bottom of the list! If you can get yourself to do the worst half of the list first, finishing the other half will be a breeze. Dr. Daniels also recommends using the Premack Principle. Tell yourself “when I do this (undesirable task), then I can do that” (something fun and enjoyable). Of course the key to both of these solutions is to practice self-control, something that may take time to improve. Changing your habits can be hard to do, so start small and don’t forget to reward yourself as you begin to notice changes in how you approach your projects at work or chores around the house.

For more on the Premack Principle and PIC/NIC Analysis® read Performance Management: Changing Behavior that Drives Organizational Effectiveness

Ask Aubrey, Consequences, Goals, Motivation, Negative Reinforcement, Performance, Positive Reinforcement, Results

My 30 Day Plan to Create Jobs

August 25th, 2011

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jobsHow long do you think it will take the government to figure out the jobs dilemma?  I am sure that Congress and the President are busy working on this in the middle of their vacations.  I just spent five minutes thinking about it and here is my analysis and plan.

My analysis:

In order to create a real job there has to be demand for products or services.

In order to purchase the products and services that companies provide, consumers need money.

What is the quickest way to get money into the pockets of consumers?

My plan:

Substantially reduce the payroll tax.

Within 30 days, this will put more money in the pockets of all working people. The vast majority will spend whatever amount they get whether it is $10 or $1000.  With around 160 million job holders with more money to spend, the increase in demand could be substantial.

Therefore, since spending increases demand; increased demand increases jobs. Increasing jobs means more people with money which will create more demand which will create more jobs which will create more taxpayers which will generate more revenue for the government which means more dollars to fund the government or pay down the debt.

What is wrong with this logic? It must be something.  It can’t be that simple. Can it?

Ask Aubrey

Google Follow Up

December 30th, 2010

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googleThe following is a comment on my post “What was Google thinking?!“.  My response required more than few words so you’ll find it below.

Question: What would be an appropriate model for fiduciary reinforcement in an organization like Google, where creativity is highly encouraged and employees are about as fully empowered as anywhere on earth? 

Smaller reinforcements are generally the norm and asking employees to give more and more discretionary effort when they are often already working 70 to 80 hours a week is a difficult proposition. 

I realize that an examination of the system would probably lead to a means of ensuring appropriate reinforcements are capitalized upon but I was wondering, given the information that is available, what would be your inclination?

My Response: Thank you for your questions.  

While it may be presumptuous of me to question anything about Google in view of their huge success, I know the laws of behavior will catch up with them if they keep doing what they are doing now and that is non-contingent pay and benefits. There is an old Greek saying, “Whom the gods would destroy, they first send forty years of success.”  That was said two thousand years ago when things moved much slower.  I am sure that the time has shrunk to 20 years and quite possibly less.

From what I have read, and I need to point out that is not always the best source for knowing factually about day to day practices,  current management seems to think that money will solve their problems.  That is why they gave the salary increases and bonuses.  I don’t think money is the problem. I think management is the problem.  There seems to be too little understanding of the basics of human motivation.  This is demonstrated in part by the fact that the work environment has too many positive reinforcers that compete with the doing work of Google.  Haircuts, billiards, ping pong or foosball and others too numerous to mention in this response are all done on company time.  In the early days when discoveries were being made by the minute this probably worked well as people would work all night and weekends fueled only by their creations.  Today employees complain that if they eat dinner in the company dining room, they are expected to work late and that in many cases working late is unproductive and may be better described as hanging around long enough to avoid the frowns. 

You state that ” asking employees to give more and more discretionary effort when they are often already working 70 to 80 hours a week is a difficult proposition.”  The fact is that if you have to ask for discretionary effort, it is an indicator that it is not being done because of positive reinforcement.  Discretionary effort is that which is given freely — not that which is expected, required or demanded.

There are several sources of reinforcement at work: 1) that which comes from the work, 2) that which comes from managers, 3) that which comes from peers, and 4) that which comes from policies, procedures and the physical environment.

I am quite sure that reinforcement that comes naturally from the work has diminished in the recent past. To quote a former Googler, “While outside, I had all these big ideas I could do if I worked there.  Once inside I discovered there were 18,000 googlers who thought the same.”  If you read the blog post in Tech Crunch by Michael Arrington, “Why Google Employees Quit,” you get the idea that reinforcement has been reduced from the other three as well. 

I would suggest that one of the things that is supporting Google these days is that their competitors are no better at management than they are.  My solution is that Google managers should learn something about the laws of human behavior.  Until they do things will not get better even if pay gets much better.  Thanks, Aubrey

Ask Aubrey, Consequences, Incentives, Motivation, Performance Pay, Rewards, Technology

Ask Aubrey: What’s your take on the JetBlue Incident?

September 30th, 2010

1 Comment »

A blogger recently posed this question to me:

jetblueSome weeks ago, Steven Slater, the former JetBlue flight attendant acted out the fantasy of a large contingent of employees who have had enough of on-the-job stresses. After a heated exchange with a passenger, he grabbed the PA and let out a few choice words, grabbed his stuff (including a few beers), and stormed off of the plane via the emergency exit slide announcing that he quit. Fortunately, the plane was on the tarmac and near the gate. Nobody was injured.

Love to understand this behavior from your perspective.

 

 

There are two aspects of this story that people need to understand: one is Mr. Slater’s behavior, and the other is management’s response to it.

As far as Mr. Slater is concerned, in my opinion JetBlue did the right thing by firing him.  The inconvenience caused to passengers and his public display of temper was enough to warrant firing.  The reinforcement he got from the media, that of fellow flight attendants who congratulated him on acting out a fantasy that most have had when confronted by unruly passengers, and that of the public at large would have made him difficult to manage later.  Therefore, I find no fault with JetBlue for terminating him.

I am not sure what the company has done to address the issue of stressful working conditions.  The most stressful part of any job is not the physical environment but the people aspect.  People’s stresses typically come from customers and management.  Of the two, management behavior is by far the most potent.  Customers are “always right.”  The fact that customers fought about overhead luggage space is a management issue.  Customers should not be put in a position to settle these grievances and flight attendants should not be put in the position of refereeing.   It is management’s job to see that adequate space is available, that gate agents deal with the luggage problem before customers board the plane, or that flight attendants are taught how to properly and positively deal with these situations if the first two options fail.

Although training in managing stress on the job can be helpful, day to day contact with time consuming and unhelpful policies and managers who attempt to enforce them are at the crux of these very stressors.  I suggest that JetBlue examine management policies and management behavior involved in implementing them as two areas that are usually not seen as the source or solution to incidents such as this.  Most attention is focused on changing flight attendant behavior rather than changing management behavior.  This is short-sighted because no long term change can be sustained without changes all the way to the top of the organization.  No reports have surfaced as to such management changes at JetBlue.

Ask Aubrey, Leadership, punishment

Words, Just Words

June 30th, 2010

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wordsI was asked the following question on the blog: “People talk about the difference between transactional and transformational leadership behaviours. Is this something you could blog about, the associated behaviours and the different sources and applications of consequences?”

My raw and unscientific response to this type of leadership literature (transactional vs. transformational) is that it is a lot of academic gobble-de-goop.  In my experience all that changes when people read these books is the way they talk about leadership.  As President Obama might comment, “Words, just words.”

Here is a sample from a web article by Iain Hay titled, Transformational Leadership: Characteristics and Criticisms.  

“Transformational leaders elevate people from low levels of need, focused on survival (following Maslow’s hierarchy), to higher levels (Kelly, 2003; Yukl, 1989).”

“They may also motivate followers to transcend their own interests for some other collective purpose (Feinberg, Ostroff & Burke, 2005, p. 471) but typically help followers satisfy as many of their individual human needs as possible, appealing notably to higher order needs (e.g. to love, to learn, and to leave a legacy).”

“Transformational leaders are said to engender trust, admiration, loyalty and respect amongst their followers (Barbuto, 2005, p. 28).”

“This form of leadership requires that leaders engage with followers as ‘whole’ people, rather than simply as an ‘employee’ for example. In effect, transformational leaders emphasize the actualization of followers (Rice, 1993)”

In my 40 plus years of working with executives and managers, I have not heard one refer to these concepts or this literature.  Consultants and trainers may talk about them but everyday managers don’t.  The reason is at the heart of the “Ask Aubrey” question.  The associated behaviors and different applications of consequences cannot easily be determined from these theories and literature.  What would you tell someone to do to “engage followers as ‘whole people’”?  How would a leader measure movement from a transactional leader to a transformational one?  It can’t be done with these descriptions. These are labels—attribution after the fact, words looking for a home.

In the book, Measure of a Leader, James Daniels and I moved away from theory to specifying measures of leadership in a way that would allow one to track leadership effectiveness from day to day.  Our experience is that if someone can’t answer the question, “What would that look like?” or “What would I see you doing?,” instruction in these concepts is a waste of time.  Once we stop looking for “transformational leadership” and start observing actions, we discover measureable and repeatable patterns of behavior. 

While I understand the intent of the books on transformational leadership by Burns and Bass[i][ii],too much is left to the imagination of the practitioner for implementation.  It has been said that the devil is in the details.  The problem here is that there are no details.

 

[i] Burns, J.M, (1978), Leadership, N.Y, Harper and Raw.
[ii]  Bass, B. M, (1985), Leadership and Performance, N.Y. Free Press.  

Measure of a Leader

Ask Aubrey, Leadership

Ask Aubrey: Unions and Performance Feedback

March 25th, 2010

2 Comments »

GraphPaperQ:

I was recently promoted to a supervisory position at a federal agency where it is against the Collective Bargaining Agreement to discuss “performance standards” or “numbers” with employees. Everyone talks about how to improve performance in poetic terms that have little tangible meaning. I’ve read a couple of your books, but I would be run out of town if I ever showed an employee a chart of their performance. Do you have any tips for how I can get people re-focused without talking about numbers?

A: 

First let me say that I think the union has included a self-defeating provision in their bargaining agreement. The impact that performance feedback can have on not only performance but job satisfaction has been documented for over two decades. While I understand why this is an issue for the union, it is not in their long-term best interest.

Unfortunately, in the past untrained supervisors and managers have used performance feedback, i.e. charts and graphs, to punish rather than to recognize improved performance, or as a tool to help employees perform better. Of course people complained about the punishment and the union took up the cause.

In today’s economic environment, any union that does not actively work to help the organization perform better will eventually be replaced because business and government must improve. With private-sector unions, we have not had problems even with individual performance charts, primarily because they were used to recognize good or improved performance.

That said, you probably can’t do anything about that immediately.

I would suggest that you focus on recognizing on-task behavior when you see it, hopefully many times a day. While that is not as effective as including some performance tracking mechanism, it will improve results. If you can, I would also advise you to celebrate improved results where you give employees involved, an opportunity to tell you what they did to accomplish them. Encourage the team to share things that they saw others do that contributed to the improvement. This builds teamwork while improving performance. This kind of celebration does not expose individual performance but allows employees to voluntarily contribute. The effects of this kind of meeting can be dramatic on performance and morale.

Hope this was helpful,
Aubrey

Additional Resources:

Ask Aubrey, Consequences, feedback

Top Ten Reasons why you should NOT give your boss a holiday gift (Christmas, or otherwise)

December 16th, 2009

1 Comment »

no giftsI wrote a blog several weeks ago in which I mentioned that it might be a bad idea to give the boss a gift on boss’ day.  I have been amazed at the comments and interviews that I have received since.  The response has been more than anything I have written lately.  So I decided that in light of the approaching holidays, I might write a “Top Ten List,” a la David Letterman. 

 

Here are my top ten reasons “why you should NOT give your boss a holiday gift”: 

10.  If you do it because others do it, you are doing it for the wrong reason and you will probably resent it

9.  If the boss expects it, s/he is a bad boss to begin with and a gift may act as a positive reinforcer for bad boss behavior

8.  If a gift affects the boss’ behavior toward you, it is not a healthy work situation for you or the boss

7.  It puts pressure on the boss to reciprocate and it is not a good idea to put pressure on the boss

6.  It gets expensive for the boss if there are a number of direct or indirect reports who need reciprocating

5.  It is the economy, stupid

4.  It may cause the boss to question your motive

3.  It is a good time to break this bad habit

2.  A card with a hand written note is probably more meaningful – and it is a better, more appropriate habit

1.  The boss doesn’t need it – give it to someone who does

In addition to writing your boss a note, here are some more suggestions of how to recognize and positively reinforce your boss in a meaningful way all year round.

Ask Aubrey

What Can We Do To Motivate Our Employees?

November 15th, 2009

2 Comments »

What can we do to motivate our employees?” This is a question I get a lot as a consultant. Managers want to know how to motivate people. How should we respond to this question?  “Thank you.”

This question deserves more than a few sentences answer.  I’ve written more than one book on the subject.

Without asking you to buy or read the books, let me give you an executive summary.  The first thing you must do is to discover what is reinforcing to each person.  No two will be exactly the same, so a manager or supervisor must first spent the time to get to know what things are meaningful to each person – the things that they like, value and appreciate.   How do they spend their discretionary time and money.  What are the working to achieve for themselves, friends and family.  What are they things that they would like to see happen daily at work.  What are they working to be able to do long-term and short–term.  Not only those things like house, cars, savings but what are they working to be able to do this weekend, tonight and tomorrow.

The most important is to establish yourself as a positive reinforcer.  You do that by pairing yourself with positive reinforcement.  This is done most of the time by spending time with each person to find out what is important in his/her life.  If the person likes you, a pat on the back is appreciated.  If she doesn’t, it could be a punisher.

Once you know what employees positive reinforcers are, set up opportunities for them to earn them.  You obviously cannot make all of a person’s wants and desires available, but you certainly can show an interest in how the employee is doing in relation to accomplishing them.  Most people like to be appreciated for their accomplishments.  It may be as simple as taking the time for someone to tell you how they accomplished something or it may be just an acknowledgement of extra effort.  Obviously most people like to earn tangible things that cost money, however that is only a small part of what it takes to create a highly motivated workforce.  Social reinforcers should dominate and should be a daily affair.

This is a quick answer but I hope it gives you some ideas for your work. To read in-depth on the subject check out Bringing Out the Best in People and Performance Management.

Ask Aubrey, Motivation

Ask Aubrey: Performance Feedback

August 27th, 2009

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A recent vistor asked, Could you clarify why you do not consider Performance Feedback a type of reinforcement? I don’t understand how Performance Feedback is an antecedent when it seems the behavior is what triggers that feedback. Additionally, wouldn’t telling someone that they’re doing a good job at a certain task be both performance feedback and (social) positive reinforcement?business-impact2

Aubrey’s Answer

I am assuming that the performance feedback to which you refer is some graphic display showing a history of performance, where a person can see where they have been, where they are and where they are going. When positive reinforcement is paired with this performance feedback, the feedback becomes a secondary reinforcer. With enough pairings, the person usually gets reinforcement from seeing the graph even in the absence of others.

You cannot assume that performance feedback is positive to every employee. Feedback is information about performance that will allow the person to change that performance. It is quite possible that there are employees who don’t care about improving. This comes from not liking the supervisor, not trusting the supervisor or not caring about the success of the supervisor. I remember years ago, a young supervisor gathered his team together following a management meeting. He told the gathering of employees that “they told me in the meeting that if we don’t improve quality, that they are going to run me off.” One of the employees spoke up and said, “We don’t care if they run you off!” If a supervisor doesn’t establish himself/herself as a reinforcer as a first order of business, employees will not be concerned with their priorities and will not be able to develop a team where people want to help. (This is typically referred to as “buy-in.”)

If telling a person he or she is doing a good job is a positive reinforcer, then the behavior that is affected is the behavior that is occurring at that time. This is why one must be careful about when you say that to people. If you tell someone that they are doing a good job when they are on break, as much as people would like to believe that it will impact performance, it is not likely. They may like you more because of you having done it but it is really a stretch to think it will change behavior that has not yet occurred.

(For a more detailed explanation read Performance Management).

Ask Aubrey

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