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Productivity reflects companies’ generosity

There’s a good reason why generous companies get more productivity from employees. An article on the website productivitypuzzle.com points to some of the data.

You might remember Gravity Payments – a U.S. credit-card processing company — and CEO Dan Price, a story which had an astonishing 500 million interactions on social media in 2015. Price is the young entrepreneur who announced that Gravity’s new minimum salary would rise to $70,000, even though to help fund the raises, he’d have to cut his own salary by $1.1 million, empty his retirement accounts and re-mortgage his personal properties.

No wonder so many business people thought he’d lost his mind.

Back in 2012, he had shown employees generosity with 20% pay rises. A funny thing happened. Productivity jumped 30-40%. He repeated the 20% increase the next year and productivity went through the roof.

And with the announcement of the new minimum wage rise, new customer enquiries, which had averaged 30 a month, jumped to 2000 in just the first two weeks. In an industry where customer retention is typically 68%, Gravity now boasts a 95% rate.

This was never a business strategy. But what this story does is illustrate the powerful connection between pay and productivity.

It also reflects the findings of a group of Harvard researchers in 2013. They found that companies perceived as generous by their employees got far more productivity than those companies perceived as miserly.

The Harvard researchers who came to that conclusion had advertised jobs typing in CAPTCHAS, offering $4 an hour to one group and $3 an hour to another group, with the stipulation that the entries had to be correct. Each group worked as hard as the other.

When the $3-an-hour group was told the budget was bigger than expected, and they would receive $4 an hour instead, something interesting happened. They worked much harder than their counterparts.

The reason: they perceived their employers as generous.

Companies who can’t begin to offer sweeping gestures like Price’s should not despair. They can show their generosity in other ways, such as flexible working or anything else meaningful to their employees – it’s the thought that counts.

The companies that view employees as commodities are the ones struggling with productivity.

Steve New of Oxford University’s Saïd Business School points out in his white paper Productivity: There’s a Better Way: “A serious constraint on productivity is organisations’ institutionalised contempt for ordinary workers. … Asking people to treat workers with respect is not the same as asking for a workers’ paradise.”

Fast Company weighs in, “People are not just another category of resources that happens to be human. They expect fairness. They appreciate generosity. Their value to the company varies greatly depending on how they believe they are being treated. Positively and negatively, they reciprocate the intentions of their employers.”

Demonstrate respect for employees. What a novel concept.

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