Dan Ariely talks about this in Predictably Irrational, and he gives a great example of this involving an Israeli daycare center: http://www.npr.org/2008/03/31/89233955/dan-ariely-takes-on-i...
[0] Of course, you could make the argument that this principle applies on a corporate scale, not just a personal one, which is the point of TFA - Ariely's study just happens to focus on the individual.
A few years ago, they studied a day care center in Israel to determine whether imposing a fine on parents who arrived late to pick up their children was a useful deterrent. Uri and Aldo concluded that the fine didn't work well, and in fact it had long-term negative effects. Why? Before the fine was introduced, the teachers and parents had a social contract, with social norms about being late. Thus, if parents were late — as they occasionally were — they felt guilty about it — and their guilt compelled them to be more prompt in picking up their kids in the future. (In Israel, guilt seems to be an effective way to get compliance.) But once the fine was imposed, the day care center had inadvertently replaced the social norms with market norms. Now that the parents were paying for their tardiness, they interpreted the situation in terms of market norms. In other words, since they were being fined, they could decide for themselves whether to be late or not, and they frequently chose to be late. Needless to say, this was not what the day care center intended.
But if it was just a social contract keeping me from picking my kids up late, I'd feel guilty about it and make sure that it didn't happen again. And the teacher might only have to stay a few minutes later.
In my case, I know that my kids' daycare will charge me if I pick them up late. But I don't know what the fee is, and I don't know if they've ever told me. I don't care... I'm not going to pick them up late (I've been close), because I know their teachers have other things to do, and I consider it rude. If I knew it was $50/hour or $100/hour, if I was working hard on somethings, I, on occasion, may have chosen to be late.
Social contracts are tougher to break than market based contracts.
Not all market contracts are necessarily stated in terms of dollar value.
There have been times when I ended up in SF or BART traffic. I misjudged my commute time and arrived late. (This doesn't happen a lot, maybe 1-2x/year)
Almost without fail, the staff were really negative about my lateness. Some have lectured me about how it messes up their schedule, makes it hard for them to board other dogs, finish cleanup, etc.
My thought on the matter is a simple economic one. If it's not worth it to the business to charge only $25-50 for a late pickup, they should think about what the "right" cost is. They actually have the power in this situation. Raising the cost would a) enable them to staff for this, and b) have a greater impact on habitual "late" arrivals.
As it is, I think,"Is it worth $25-50 to stay on this work call, knowing I may be late?" rather than,"I have to go, because I'll be inconveniencing the people that I trust to look after my dogs."
(Usually, it's more "I want to see my dogs," but you get the point.)
[1] Don't judge. I'd rather have them run around all day with a dozen people, a fountain to splash in, varied toys and 'playground' equipment, and a bunch of well-socialized dogs in their own size range than sit at home all day. :-)
http://www.npr.org/blogs/money/2012/07/13/156737801/the-cost...
It's a cut of a very small benefit, but it is still a cut. To do this without any prior discussion from the people receiving the benefit will only be taken badly.
The other thing that happens here is loss aversion. Losing that "free" coffee or soda is painful.
I had a client take cost-cutting to such an extreme, they no longer provided paper cups for employees to drink water. In theory they could've halted the water deliveries, but that was too probably obvious an indicator.
Sadly, them cutting the paper cups fooled a lot of their employees, in which they genuinely didn't think things were that bad. Anecdotally, the ones who thought nothing was wrong with cups being cut were the ones that were laid off weeks later.
Makes sense. The ones who didn't parse out the puzzle were probably the employees of lowest relative IQ and savvy, so they were probably the least valuable ones.
Perhaps the people laid off were the most intelligent but least politically connected because they were focused on their work to the exclusion of water-cooler chatter.
Unless you're filling swimming pools with soda or something, drink and snack expenses are rounding error on the salaries of your people. If it comes down to the free drinks, something else is broken. The real tragedy is when idiot bean-counters take over, and start imposing these sorts of nit-picky cost-controls because "that's what big companies do".
It takes a strong leader to stand up for company culture, because these sorts of issues often look like they're too small to be worth a fight. You grow to 200, 500, 1000 employees, and before long, you have to go out of your way to pull the Senior Bean-Counter for Drink Expenses aside and tell him to back off. That's when the bad stuff happens.
Diversion warning: it's surprising to me how many management decisions get made solely to make people feel like they have control in a situation where they actually have no control. It's the same mechanism the government exploits when making decisions about the TSA.
This is worth a Dilbert strip!
A simple, "I'll bring it up in our next meeting" would soothe me over much more than arguing over semantics and entitlement with me. Or even just being sympathetic: "Yeah, I know it sucks, but them accountants needed something to trim this quarter!".
But the defensive reaction tells me there is something lurking underneath the surface, be it frustration or resentment.
Obviously, it's the worst for the people who are being terminated. As a human, a good manager wants to assure them that s/he values their contribution, blah blah, but all they hear is what is said in the first 30 seconds. Hit the high points – we are laying you off, you are getting n weeks/months/years of severance, here is all of this in writing, plus your benefits package and final check, do you have any questions?
It's also very unlikely that the manager had much say other than in terms of force ranking people (if that). I found out at 9pm the night before that I would have to cut more people than planned.
Your boss may have been thinking something along the lines of,"20% of our company just lost their jobs and you're worried about the free chair massages???" because their brain is still in the context of not only "I can't protect my team," but also "I had an active role in their termination." They're often in the "bargaining" phase of grief and thinkin,"without x, I could have kept one person," or "One of my leads could do my job with this new team size, so my leaving will save 2-5 jobs in the next round." Those things go through your manager's head.
The best a manager can do is to take the "survivors" away from the office (conference room in another building, on a walk to a local park, whatever) while people have the opportunity to pack their personal effects. Tell the team everything you can about why the layoff took place, who was affected, and get as much of the bad shit out that you can.
They'll rant at their managers, they'll rant at the company, and the managers have to take it. Try to avoid the company party line and give people as realistic a view as possible of what is happening and what will likely happen. Try to bring in the highest execs possible to answer questions, because a manager may or may not know, or be able to tell, some details about the financial forces driving the decisions.
TL;DR - It sucks for everyone, including your manager, so s/he may be crankier than normal. Extend compassion their way as well. If you're a manager, see the blowback coming and get in front of it and be genuine.
I think seeking to understand the financial state of a company is smart for both employees and consultants, but the assumption that "upgraded beverage selection" unequivocally equates to "doing well" is naive.
Frankly, in my experience, a young company adding a bunch of perks is just as likely to be living beyond its means as it is to be doing very well financially, but that doesn't really matter. As a consultant, you don't mitigate the risk of not getting paid by asking about the soft drink selection or looking at the lunch menu. You mitigate risk by diversifying your client base, negotiating favorable payment terms and watching receivables like a hawk. All things you should be doing anyway regardless of the client or the state of the client's break room.
Take, for example, Tumblr, which right now is a pretty big success. Just a month ago, they laid off their entire editorial team. Who knows if it was at all related to the Yahoo purchase, or if it was a decision made because Tumblr really need to cut expenses? But sometimes companies change course and cut because of ostensibly responsible financial concerns.
In the case when an exciting company has to trim (but not just die), how should it handle the case of having a fancy coffee machine and possibly saving a job? It seems it would be a bit awkward if the company laid people off but kept all of its original ostentatious perks.
I have no knowledge of Tumblr's internal workings, but I would bet if you talked to the folks who used to be on that editorial team they'd have stories of their own budget being squeezed in trivial ways before the layoff. Laying people off is hard, managers don't like to do it, so they almost always look for other ways to save money before biting the bullet and canning people. And when management decides that a particular division isn't critical to the overall business, it's typical for the bean-counters to be unleashed on that division to look for "economies" that other divisions more beloved by management don't have to bear.
Since the process of layoffs generally involves a rank-and-yank, the people who remain are precisely the ones who have the option of working elsewhere. They can generally (depending on the location) get an offer within a day.
Companies just see an easy line item savings without thinking of the impact on the employees they desperately need to hold onto. On top of any potential insult to the employees, the companies that do this are giving off a terrible impression. "OMG. They can't even afford free soda anymore. This ship is definitely sinking."
Coffee - not as familiar with the economics of coffee, but of course dedicated machines will end up costing somewhat less than going directly to starbucks.
And most Cokes in a convenience store are now $1.50 or more, at least where I live.
http://www.nytimes.com/2009/10/09/education/09harvard.html?r...
And that makes sense in the beginning. As Ben Horowitz said[3]:
If you don’t have winning product, it doesn’t matter how well your company is managed, you are done
But as companies grow, that is not enough. Ben Horowitz complements[4]:
Why even bother with management if that is the case? But the truth is: there are several things that are very important:
1: if you get into trouble, and if you have bad management, your company will probably die. Like the people will just quit, they are not bonded to it, the don’t like working there, they never liked working there, and that is that, it is a wrap. ...
2: if you succeed at building a company that everybody just hates working at, what have you done? You just made a whole lot of people a whole lot more miserable in their lives.
[1] http://tom.preston-werner.com/2010/10/18/optimize-for-happin...
[2] http://www.justin.tv/startupschool/b/272031754
[3] http://www.youtube.com/watch?feature=player_detailpage&v...
[4] http://www.youtube.com/watch?feature=player_detailpage&v...
Then one day a guy came in with a hand cart, loaded the coffee machine on it, and rolled it away. A week later the layoffs started.
The lesson here isn't that there's something intangible or magic about free sodas or coffee. It's that when you used to give out free sodas and coffee, and then you stop, you're telling everyone in the company that business isn't as good as it used to be. Beverages are an easy thing for the bean-counters to get approval to cut, so when times get tough, they get cut first. But they're also a small line item, so while they're the first thing to get cut, they're usually not the last.
In other words, the free sodas are the proverbial canary in the coal mine. When they die, it's time to get out if you don't want to die with them.
This is why, when I visit clients these days, I make a point of going with them to their break room to get some coffee before our meeting starts. If their beverage situation has been upgraded since my last visit, they're doing well. If it's been downgraded, I know to be on guard for bean-counters coming after my relationship with them.