Gift Giving

The New York time’s article “How to Get the Rich to Share the Marbles” shed’s light on the phycology behind gift giving and sharing rewards.  Applying the information gained from the article to an organization or team production could be extremely useful. The idea is that verbiage emphasizing competition, “to each their own”, or “eat what you kill” may not be the best way to curb wealth inequality in America. The study found that when children work together and feel as though they are working towards a common goal they are much more inclined to share the reward, more so than if they were just given an unequal amount of the reward. One might take this information and say that organizations should focus more on team building and striving to meet a common goal rather having an “every man for him” mentality in the work place. As we learned in class, employers do their best to create incentives or give gifts to works to help increase productivity. In an ideal situation, the incentive or gifts perfectly align giving the worker that much more motivation to do the task well. Thinking of the classroom as an organization, the gift Professor Arvan gave us to motivate us to do better on the next exam was 25 points. In class he made us feel as though we were working together, with his help, to achieve the 3 goals we talked about on the first day. This shows that the phycology behind working together to achieve something goes further than simply giving people more points so they can individualistically achieve their desired course grade.

 

I will attempt to apply this framework to an experience I saw this summer at William Blair, first some background: For a long time investment banking was all about receiving a very high end of the year bonus, which varies from employee to employee based on their contributions to the firm. This created an environment where everyone competed against each other to receive the highest bonus. To add more color, these bonuses do not stem from how much revenue you generate for the firm, but are an attempt to quantify how hard you worked during the year usually measurable in terms of how many hours you were in the office. This is important to note because unlike selling stocks or trading, in M&A you are constantly working in a team and you really need to help one another to complete a deal. The competition became so high that the firm was actually losing productivity as people were less inclined to help one another. 

 

This past year the industry has undergone a huge transition. Most investment banks are trying to create a more collaborative environment and are changing the compensation structure. The banks are raising base pay, preventing analysts from working 7 days a week and are monitoring management to make sure the competitive culture is changing. In other words, the banks is gift giving by letting analysts have more free time and less “face time” and rewarding them with higher base salaries to decrease focus on winning that big bonus. They hope this new system will encourage analysts to lend a hand to a coworker even if they won’t get recognized for it or cover for another employee if they are feeling ill. This is much more beneficial for closing deals compared to the “eat what you kill culture” This example has many moving pieces and was simplified to make sure readers from all backgrounds can grasp the main concept.