Friday, May 27, 2011

Headcount freeze: How behavioural economics can help

Inevitably at some stage or another you won't have, or cannot have the level of team resourcing you believe you need. You catch your team muttering about "being two heads down" and morale's on the slide.  As many Australian businesses inch towards the end of financial year, deferring recruitment of staff to maximise financial results, what lessons can we draw from Behavioural Economics to improve matters?

Behavioural Principles to Apply
Social contract - it can be tempting to ask staff to work above and beyond for the good of the team, applying social norms to a work relationship. But you can't have it both ways - if you expect staff to go above and beyond, they'll expect you to protect them. Any cuts will breach the social exchange and further impact morale.
Completion - we innately seek to complete tasks. If you have to stop projects, reallocate priorities make sure you give your staff the opportunity to close-out the activity. Get them to do a final status report even if the project is pulled mid-stream because scrapping the project in front of their eyes is deeply disheartening.
Framing - due to the strong sense of "loss" of staff, you will need to reframe the team. Shake off the absence of these resources by changing the physical surrounds so that the empty desks are not a reminder. And do more team driven activities to make the sum of parts a greater whole.

Case studies
Have you ever noticed when someone leaves, parts of the job they used to do just fall away? Even when two people are doing the same job they will focus on different aspects.

In a headcount freeze scenario, you want to have the non-essential elements of the jobs people get busy doing, fall away. That means bringing to a conclusion some 'pet' projects that people invariably develop.

Now, it's easier said than done to stop a staff member working on something they enjoy, particularly when it will generate benefits for the business. You'll need to be aware of the Ikea effect (discussed by Dan Ariely in both Predictably Irrational and Upside of Irrationality), where we overvalue something because of the effort we have contributed. It means that the project that your staff member has worked so hard on will come with significant emotional attachment.

Use your knowledge of completion (our drive to see things through) to have the staff member provide a final status report even if the job is midstream so at least in their eyes, their work has been acknowledged and concluded.

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