Harvard Business Review

Treat Your Employees Like Neighbors


Posted on Harvard Business Review: October 21, 2011 9:49 AM

Another baseball season is ending, and fans are starting to wonder which players will wear their team’s uniform next season. Each year, some players will jump ship from one team to another as part of the free agent market—and disappoint fans when their favorite players show little loyalty to the team.

This tension between the player’s desire to get paid his worth and the fans’ hope for loyalty is at the root of a key insight into human social relationships. In a classic 1992 paper (PDF), Alan Page Fiske describes four elementary forms of social relationships, basically: families, neighborhoods, hierarchies, and markets.

In a good family, everyone shares to the best of their ability. Parents give food, clothing, and shelter to their kids unconditionally. As kids grow up, they shoulder more responsibilities and sometimes take care of their parents. Nobody is keeping score.

Neighborhoods don’t share equally, but they do tend to strive for equality. If you have a flat tire, your neighbor might lend a hand. It would be strange to pay him, but you might lend him something as a way to say thanks. This kind of relationship can go bad when one neighbor consistently asks for things from others without giving back.

In hierarchies, everyone takes on a role. Those high in the hierarchy get more privileges and more rewards. Those lower down have to do what they are told. The hierarchy can be hard on those people who are consistently at the bottom and don’t have the ability to move up.

Finally, in a market, everyone is paid what they are worth. Your grocery store is a market: You bring home a basket of goods in exchange for a price that you think is fair.

Where does your company fall?

I would argue that no company can survive as a market. The amount of compensation that an employee can get on the open market is generally higher than the actual wage they earn. Just look at what companies pay outside consultants relative to what they would pay an employee to take on a similar task.

Market environments also promote behaviors that benefit the individual at the potential expense of the company as a whole. Recall rogue traders at investment houses who gamble huge sums of money. While these individuals are the worst offenders, a market system that rewards people for their portfolio performance only creates loyalty to the portfolio, not the company.

A family relationship with your employees isn’t optimal either. Many families have at least one wayward member who is loved unconditionally, but draws more from the family than she returns. That kind of relationship is just not sustainable within a company. Everyone has to shoulder a fair share of the burden. Indeed, this is one reason why many companies have strict rules about nepotism. Hiring family members (or treating employees like family) blurs the lines between relationships in ways that can cause trouble down the line.

Instead, successful companies often have elements of both hierarchies and neighborhoods. That is, most companies establish levels of management with the expectation that higher levels take on more responsibility for guiding the company—in exchange for higher pay and benefits. The hierarchy can be particularly effective when people can work their way up through the organization. That part isn’t surprising.

But what’s less expected is that a successful company also has to have elements of a good neighborhood. When you walk down the street near your home, you might pick up some trash or set a neighbor’s flowerpots upright after a storm. You do that because you think of your neighborhood as an extension of yourself. You put in effort for the greater community, of which you are an essential part.

Likewise, a company cannot succeed unless employees start to think of themselves as part of something bigger than themselves. An employee will only stay late a few times out of fear that a manager is watching. But people are likely to put in consistent extra effort when they are truly part of the neighborhood and feel like everyone is pitching in.

To have a neighborhood culture, the company has to respond in kind. Seemingly small actions like supporting families going through difficult times and providing education opportunities for employees create a general sense of community. This investment in community is repaid in behaviors that ultimately affect the company’s bottom line.

Fairness matters, because it supports the creation of a community. Ultimately, the loyalty of a neighborhood helps a company to avoid the ills of the market economy that characterizes major league professional sports.

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Markman is the Annabel Irion Worsham Centennial Professor of Psychology and Marketing at the University of Texas at Austin. He is currently editor of the journal Cognitive Science, and consults regularly through his company Maximizing Mind. Follow him on twitter @abmarkman.

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