Why do you have to pay employees to do the right thing?

June 22nd, 2010 in Business, culture, PlanetGNOME, Would you do it again for free?

Photo by eyetoeye

Energizer Battery Company is rewarding employees for flying coach. If employees fly coach, the company splits the difference with them – up to $2,000 for trips to Europe.

This just seems really strange. Let’s put aside the fact that employees are now getting a $1,000 bonus for flying to Europe, so they may be inclined to fly more. (That’s about $50/hour to sit in an economy seat! I’d consider a job doing that.)

At first glance this seems like an awesome deal. The company saves money, employees make money, everyone’s happy.  I’d be a lot richer if I got this deal. But I fly coach without an incentive. Or rather the incentive is that I think the GNOME Foundation can do better things with that money.

That’s the key. Obviously, that business class seat isn’t worth the the $2,000 more the company was paying for it. It’s not even worth half that much to the employee! The company is counting on the employee being willing to sit in economy for $1,000.

So why were employees flying business? Because they didn’t care that the company would be $2,000 poorer. They don’t think the company will do anything more important to do with that money than fly them in business. They either don’t have enough say in how the company makes financial decisions or enough visibility into the process to feel like that money would be wisely used. Or they don’t care about what the company is trying to do.

That is what this company is missing. Employees need to know the money they are saving is going to go to good use. It’s hard to stay in a budget hotel if you know your CEO is staying in a 5 star hotel. It’s easy to stay in a budget hotel if you know your company is going to ship 10 more computers to underprivileged kids with the $2,000 you saved.

The bigger problem here is that employees are either not bought into the company’s mission or they do not trust the company’s financial decision process.

11 Responses to “Why do you have to pay employees to do the right thing?”

  1. Joe Buck says:

    I’ve done about 25 international trips for my company; I flew coach every time, except in a couple of cases where the airline gave me an upgrade (once as payback for being bumped from an earlier flight); the company never paid for business class. I think it’s fair to let frequent travelers use their frequent-flyer points to get their own upgrades once in a while.

    stormy Reply:
    June 22nd, 2010 at 7:16 pm

    I think it’s totally fair to let you use your frequent flier miles to upgrade. I think most companies do.

  2. Simon says:

    Because flying baggage class long-haul isn’t much fun, especially if you’re particularly tall like me. And so if they expect me to fly halfway around the world for them, I’d hope they weren’t such cheapskates as to begrudge me a little comfort along the way.

    Note, I’m talking long-haul flights. For a 4-5 hour trip, it’s not a big deal being stuck in economy class. For 12+ hour flights like Auckland – LA, a very different matter. Even more so when that’s just the first leg, and you’re on another flight to London a few hours later.

    stormy Reply:
    June 22nd, 2010 at 7:17 pm

    I’m not talking about the companies being cheapskates – I’m talking about what it’s worth to them and what it’s worth to you being different values. That’s where the disconnect is.

    Freddie Reply:
    June 23rd, 2010 at 7:49 am

    How is this disconnect a bad thing?

    Energizer have formulated a system that is mutually beneficial to two distinct entities with different objectives. The company wants a higher profit margin and the employee wants a higher effective wage.

    Attempting to reconcile these two entities is an idea that is almost certain to fail. Why? As it requires them to have a shared goal/vision. While this may be fine for a non-profit group, such as a charity, it is not feasible for a profit generating publicly held company.

    Any money saved by employees choosing (with no incentive) to travel coach would almost certainly be translated into dividend for the shareholders. Unless the employee owns a significant stake in the company the decision (to fly coach or not) is a no brainer: fly business class and reap the rewards.

    Capitalism in this form works because it allows people with different, even orthogonal, viewpoints and value systems to mutually benefit each other. While a shared vision is never a bad thing it is foolhardy to rely on it for success.

    stormy Reply:
    June 23rd, 2010 at 8:09 pm

    Employees make lots of decisions for companies. Are you saying they have to be personally financially compensated before they will make the right decisions? Maybe that would explain why we think we need to give our CEO’s millions of dollars in bonuses. I think people will make the right decisions – even for proprietary companies – if they are given a voice, treated well and buy into what the company is trying to do.

    Freddie Reply:
    June 24th, 2010 at 4:40 am

    In general yes; if you wish for someone to make a decision that is in your best interest (i.e, the companies) you need to incentivise them to do so. For some small companies this motivation is intrinsic — if the company does well then it is very likely that I will also do well — but for larger companies an extrinsic motivation is nearly always required. This is one of the reasons why companies have so many layers of middle management: the desire to be promoted is a very strong motivation to do as the company desires. But this only works if there are enough layers of management for people to stand a reasonable chance of being promoted.

    Many CEOs are paid such large amounts because such people are in demand. If they were paid less then it is likely that they would be poached by competing companies. In this sense the board of directors seeks to pay CEOs as little as possible — every penny in their pocked is a penny not in the dividend of share holders. However, they realise that the CEO brings more value to the company than they take in wages/bonuses every year. It may be morale, it may be their managerial skills, their contacts, etc. etc.

    As for people buying into what a company is trying to do look into the John Lewis partnership. (John Lewis is a chain of department stores here in the UK.) While not a perfect business model it does give individual employees much more of a say/impact than they would have if it were a regular company listed on the stock exchange.

  3. Lefty says:

    It sounds to me like what they’re missing is a travel policy saying, “We don’t reimburse for anything other than coach tickets.”

  4. Alex says:

    I’m afraid that I must beg to differ. I know that I could use a 7 hour trans-atlantic flight to be productive. That is if I had a seat that allowed me to open my laptop, which a coach seat doesn’t. Even as a mid-tier consultant, I’d make back most, if not all of the cost of that business class seat given the ability to get work done. Start analyzing the cost of lost hours due to jet-lag and travel exhaustion due to crappy coach seats, and I believe we’re just at the tip of the iceberg of hidden expenses of coach travel. If you’re just popping home to visit Grandma, it doesn’t matter if you need a couple of days to recover, but a business traveler may arrive and go straight from the airport to a conference to deliver a presentation. Not going to be the best presentation if you’ve just spent the last 7+ hours in a cramped seat with someone else half in your lap the whole flight.

    Adam Williamson Reply:
    June 23rd, 2010 at 10:12 am

    Alex: good lord, can you feel a pea through sixteen mattresses too?

    stormy Reply:
    June 23rd, 2010 at 8:11 pm

    And maybe you’d be one of those people that wouldn’t take the $1,000 then. But this company is betting on most people taking it. So either they aren’t that much more productive in business (I’ve never seen anyone work for a whole flight, especially in business where you get at least two meals that take up the whole table) or they think $1,000 incentive will help them recover quickly.