Back in the original dot-com bubble, I worked at a place that had the most amazing coffee machine I've ever seen. It was the size of a Coke machine and made ten thousand varieties of boutique coffee, most of which I'd never even heard of, all made to your specifications. It was incredible.
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.
It goes a bit further than that - you're asking people to make the shift from a non-monetary transaction to a monetary (quantifiable) transaction. This shift is one-way; once you get people thinking in monetary terms, it's very hard to get them to stop[0].
[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.
Right, but I might make the determination that I'm willing to pay that extra on a given day. If that's the market price for it, then I get to say if I'm willing to pay that price. And now my kids' teacher has to stay an hour later.
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.
Exactly. I think it's interesting how high the cost had to get to roughly equal the cost of breaking the "social contract". As in, to end up with roughly the same number of occurrences of late pick ups.
However, one could argue that such an agreement would only represent a codified social contract. Ie it's still "You aren't holding up your end of the bargain" rather than "the contract is for 2 hours/day with an optional extension of $100/hour each day."
My doggie daycare[1] 'closes' at 7pm, but charges $25 per dog per 15 minutes that I'm late. After 7:30pm, they board the dog at the standard "no notice" rate (which is something like another $50).
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 $25-50 to stay on this work call, knowing I may be late?" rather than,"I have to go, because I'll be inconveniencing the people that I trust to look after my dogs."
(Usually, it's more "I want to see my dogs," but you get the point.)
[1] Don't judge. I'd rather have them run around all day with a dozen people, a fountain to splash in, varied toys and 'playground' equipment, and a bunch of well-socialized dogs in their own size range than sit at home all day. :-)
Let's say once a week someone is late and there staff is paid 20$ an hour including all overheads. For that extra 30 minutes it's going to cost them 50$ a week which is about what they do. However, if they instead only pay people when there actually late that's 40$ a week in profit * 52 weeks = ~2k/year which for a low margin business may be significant.
I would say at least as important is that the sodas disappeared without any input from the people using them.
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.
I'm not sure market norms vs. social norms apply here (as long as money isn't explicitly mentioned) but it's definitely a shift in the relationship. The "free" stuff is a signal that the company cares about you and when it's taken away you feel like they no longer care.
The other thing that happens here is loss aversion. Losing that "free" coffee or soda is painful.
>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.
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.
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.
Hindsight bias. What if the GP told you he was lying, and that the people who didn't notice were the last ones to get laid off, because they were so absorbed by their work that they didn't have time to notice the cups? Does that make more or less sense than the alternative?
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.
There's a big difference between cutting soda because you're flaming out, and cutting soda because the company hired "professional management". The former is penny stupid, but the latter is pound dumb.
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.
I'm not management, but I've had it described to me like this: cutting soda, while it may be insignificant and certainly isn't going to change a damned thing money-wise for the company, makes the management feel better about the situation. It makes them feel like they're doing something and something is better than nothing. It's also a CYA tactic. If the CEO wants to hold somebody personally accountable, the CFO can say "look, we did everything, we even cut back the soda!"
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.
I started putting my resume out when the free soda ended too. funny thing was my old boss got angry when I mentioned that as one of the reasons I wasn't happy any longer. He said they didn't take it away they just stop providing it. for the life of me I cannot tell what the difference is.
Maybe he meant it in a way of "The coke is still there, you still can drink it, i just don't pay it for you"? I think that could be a way of thinking about it if you really want to justify it.
"Free Soda" is a perk of the job. That perk was removed. It was 'taken away.' In the end, it's academic to quibble over whether or not the free soda was 'discontinued' or 'taken away.' It doesn't really matter. Free soda is no longer there, and this upsets him. His boss arguing the correct wording isn't going to make him happier.
Exactly. But why would he be touchy about an employee providing feedback? Where I work that's the escalation path, talk to your manager about things that bother you or that you're not comfortable with. A manager refusing to take my criticism means either the manager is failing at his job or that he's incapable of doing his job.
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.
Having had to manage the worst possible situation (multiple rounds of layoffs), it's a shitty situation for everyone.
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 view the free soda not so much as a perk, than an indicator that the folks in charge "get it." Without the soda, I can just as well get some from the store, and bring in my own snacks for a negligible amount of money. But the cost to the business due to time wasted doing this must be gigantic. The fact that management doesn't see this is a clear sign that they don't merit respect.
Back in the original dot-com bubble, I worked at a place that, when it was time to flame out, flamed out so fast that management didn't even have time to empty out the break room.
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.
I think you're reading a little too far into what the parent post said. I can't speak for him, but I'm fairly sure he's not saying that the state of the breakroom is a valid, tested, and factually accurate rule for determing company state. I'm pretty sure that he's saying it's more of a rule of thumb.
In the case of your company, it seems that the loss of the coffee machine was just the start of an impending death spiral (er...or am I judging too much from the preface of "in the original dot-com bubble")...but what about more moderate scenarios?
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.
If you worked on the editorial team, it was a death spiral for you even if the rest of Tumblr went on to a big exit. (And off-topic, but: I bet those folks who used to work on the editorial team are cheesed they got canned right before the big payday.)
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.
That's like saying it's be a bit awkward if they laid off a bunch of employees but kept all the salaries of the remaining employees the same. Because by removing the little perks they're trimming everyone's salary just a little. You're already asking your remaining employees to work a little harder to make up for the loss. No need to add insult to injury and ask them to do it for a little less as well. In a time of turmoil I'd rather keep as much as possible familiar.
Very good point. This goes hand-in-hand with "cut deep so you cut once." You can't leave that sword hanging over the heads of individual contributors or they'll activate their network and start entertaining offers.
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.
That's also a really good point. I knew someone in that position and he didn't last much longer before bailing on the company. He had no problem getting new offers.
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."
I am curious about how much a coffee machine really costs. I don't think it can be that much to merit getting rid of it. People that try to save a few pennies usually waste much more elsewhere...
Typically not that little in bulk, unless you stock your own entire soda machines with syrups and carbonation systems and such. If you had people stocking up from sam's club or a similar 'bulk' store, you'd be looking at per unit costs of 25-60 cents per bottled/canned drink, depending on size.
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.
Let's say 50c per soda. Even if everyone drinks 6 sodas a day you're looking at an increase of $900/year/employee. Call it $100k/year for an engineer and you're talking less than 1%. And that's 6 sodas a day, every day. I bet even with free sodas you average maybe 2 a day.
And if you have an entire team of engineers drinking 6 sodas per day each, your health insurances will balloon (as will their waistlines) in the next couple years.
It's amusing, because a 2L from a supermarket is the same price as a 20oz from a convenience store. Clearly the price is not driven by the cost of the soda.
In the case of Coke, I think the cost of packaging is bigger than the cost of the product, but either way its almost irrelevant to the price - they charge what people are willing to pay. I wouldn't buy a big bottle from a convenience store, a small bottle is more convenient for walking around with. I wouldn't buy a small bottle from a supermarket, I want a big bottle to put in the fridge at home.
Typically the smaller ones are also refrigerated whereas the 2L aren't, precisely because you're expected to grab the former when you're on your way from A to B and are busy.
I remember when Harvard, which had a $25.6 billion endowment at the time, stopped offering free breakfasts for upperclassmen (this was 2009, I don't know if they have reinstated it). It was a big deal at the time; it even made the New York Times.
Trhtrsh, you have been hellbanned as of this [‡] comment. I'm not really sure why; HN might have changed their algorithm for banning, or you might have been banned for a bad submission.
It is always sad when these things happen, but it is not surprising. Many startups spend so much time optimizing for survivability, that they don't optimize for happiness[1, 2].
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.
Another canary example.. if you ever go to an small independent restaurant and they start using grocery store cheap napkins at the tables when they hadn't before, chances are its days are numbered.
A sure giveaway is to monitor the job board of the company. If they are bullish, they're constantly posting jobs and you can tell exactly what area of the company is growing or shrinking.
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.