All I can think of when I read about things like this in the App Store is one of my first jobs: I was a busboy at a country club. Waiters would get tipped (usually pretty generously, as these were wealthy people who were repeat customers and developed relationships with the wait staff over many years), and they would usually in turn tip out the bussers pretty generously too.
Until one day, when tipping was "replaced" by a 15% "service fee" that was tacked onto the bill. This was sold to members as a convenience: rather than need to carry cash to tip the waiter, you can sign for it and take care of it with your monthly bill. This was misleading because the "service fee" did not go to the waiters (or the bussers), but instead was simply kept by the business office.
To make this all legal, we did all get a raise to the actual minimum wage (rather than the "tipped" minimum wage). This was still a big wage cut, and they lost most of their long-time staff, leading to huge churn. I left shortly after this happened for a better job, but the club closed down completely a couple years later (after 80+ years in operation). I suspect but can't prove that these things are related -- most likely they drank the waiters' milkshakes out of desperation, knowing they were eating their seed corn (to mix a metaphor).
I'm quite curious if there is some tenet of MBAology that essentially comes down to a more sophisticated version of 'ignore the side effects and likely future consequences of your actions.' It's so weird seeing so many companies just implode by carrying out actions that are negative to the point of verging on antagonistic towards their employees and customers.
I don't know, but it seems pretty easy to come up with a theory here - a large portion of executive compensation is from company stock, and short term actions that drive up the value of that stock will always be preferred, because as long as they aren't holding the proverbial hot potato when the thing collapses, they'll be fine - (and likely even if they are left holding it, they'll be fine - golden parachutes and all that).
So people making the decisions tend to incentivize the things that will maximize the return for their time.
Exactly.
Case in point: I worked on an investment team that had a product that at the time would close at $2b in assets. We were top 5% on 1/3yr performance, so we had incoming demand.
The dept head was paid on sales per calendar year, so he forced us to accept the last $300m of assets in December at 0.60% fee. Our average fee on the existing $1.7b? 1.25%. If we had waited for the other pipeline biz to close in Jan-March, it would have been at least 1% fee.
Many dumb buisness decisions are just logical decisions for a individual based on incentives that you can't see. They happen to be at odds with the goals of the firm as a whole.
That’s not how small businesses work. If we’re going to speculate we can list many other scenarios; some which aren’t as accusatory towards the management.
In this case the "management" was theoretically answerable to the "customers" themselves, since it was a private club, but my understanding was that in practice the "board" basically just rubber-stamped whatever the management wanted (very similar to how "shareholders" in big public companies are treated).
There were other reasons to think that the club was in trouble (elderly membership literally dying off, dilapidated facilities, laying off beloved long-time staff, rust-belt economy not minting a ton of new rich people) so my best guess is that it was as simple as that: they needed short-term cashflow to stay in business, so they took it from the waiters and bussers. Either this wasn't enough and they had to close up anyway, or it actually brought the ultimate failure point forward.
This is a pretty good explanation. I never thought about it like that. But the short term benefit of aggressive executive action is in tune with short term stock increase. It is not the market but the shareholder that decides. And short term the shareholder and the market are antagonists.
They can't even seems to think a day ahead. Last Friday I got removed from the project I was consulting for, effective in three weeks. On today's daily, the PO who got my head asked me progress about my current ticket and told me "to do my best" during my remaining time on the project.
A second later he was the embodiment of the surprised pikachu face meme when I told him that it won't be happening. Of course he went crying to my boss an hour later.
Even in a country where you can get a sick leave for burn out for weeks, paid 100% of your salary, by speaking 5 minutes to a doctor, the management is treating employees like slaves. This is a really fascinating mindset.
You're still on the project for another 3 weeks, so they'll be paying you for that time. Why are you refusing to work on it? Are you going on PTO during that time?
My company and the client decided to remove me from the client's project in three weeks, and I have to work on the project until there, most of that time on support (which is a kind of punishment in itself).
Somehow they expected that knowing this I would finish my current ticket and just happily work on that pile of technical debt called a project with a smile. Instead a 5 minute call with a doctor got me a work break, which is compensated like work days (but doesn't consume vacation days, is effective immediately and can't be opposed to).
Why not working on that three more weeks? Because I hate that project that got me in a burn out state since a few months. Their decision was sudden and brutal, with no formal warning and no effort to try getting my point of view and improving things. Since management decided to play asshole game it's fair game.
Now you might ask what if I get fired? Well I could enjoy my 1 year half vacation with unemployment benefits north of 2K€/month working on interesting projects like research papers and my video game. Very scary indeed. I hope the boss can see the light of economic rationality again.
My understanding of EU labor laws is limited, but generally even in the EU an employee refusing to work during the remainder of their term of employment can be used as grounds to deny both severance and unemployment benefits.
This might make a great story for fake internet points, but seriously, don't do this in real life.
I think that was implied well enough by the last paragraph, or rather the PO has no recourse to the threat of taking PTO.
The comment is more about how managers don't think about the obvious consequences of their actions when it's their job to do so.
Aside from that, saying "do your best" right after you removed someone from a project is hilariously tone-deaf. So is the work valuable and I need to give it 110%, or is it not and I have 3 weeks notice?
It's an incentive issue. As the average duration of employment at a single company for a manager has decreased, the time preference of a rational manager has changed to fit. The guy who made that decision will write on his resume that he increased profits by 10%, and the business went under after he left! He must have been vital!
> a more sophisticated version of 'ignore the side effects and likely future consequences of your actions.'
That reminds me of an oft-cited study regarding parents being late to pick up their kids from daycare [0]. Once a monetary fine was imposed, late-pickups actually got worse, presumably because parents felt their lateness wasn't shameful anymore since they were justly paying for extra staff-time. That switch in customer viewpoints to proved difficult to undo.
While I do not think that case was an MBA-tier mistake, there's a similar theme: Something looks fine for sociopathic homo economicus but fails in the real-world of social relationships, implicit expectations, and long-term repercussions.
> actions that are negative to the point of verging on antagonistic towards their employees and customers
Besides raw greed, some of that may be from a quantitative/"McNamara" fallacy [1], where too much emphasis is put on easy numerical metrics when making decisions, and quarterly revenue is easier to have than measuring "customers resent us and our brand is recognizable but only in a bad way."
I've a parallel theory that there's a hidden wage decline in service jobs where the move to computerized and card-based payments severely reduced the opportunity for service workers to easily steal from their jobs.
I saw this firsthand with a pizza shop that went to computerized ordering from paper tickets. The drivers could no longer "lose" tickets and pocket the cash payment (resulting in a wage loss of ~$10/hour or more).
I've anecdotally heard similar from lots of folks that used to work fast food and service jobs.
Finally, we curbed the ability of the most fucked subclass of workers to edge their way towards a livable wage by mildly abusing existing systems of trust. Instead, we can now reduce them to a number and use massive data analyses to squeeze the last penny from every gig worker (or of course just straight up steal, like in the OP).
I agree it’s a good thing. But we should also try to understand why those scum stole in the first place, so we can know how to prevent hiring them in the first place.
Calling them "scum" seems pretty harsh. By value, wage theft is the largest economic act of thievery in the economy - I wouldn't call it strictly ethical, but there's a balance to it.
This is the same as what restaurants do now. They started charging a "service fee" or surcharge. You might assume those extra fees are for the workers but it goes to the business.
And this is why I will never understand why many think tipping is a practice upheld for the benefit of the restaurant. Cash in your hand is always better than cash in someone else's hand.
While that might theoretically be a benefit, it is one not realized. I have never seen a restaurant not hire staff as employees, as opposed to leasing the space to independent contractors, which means that the restaurant is on the hook for their compensation.
There is no realization of higher profit margins, though, which means that restaurants operating under that model also have to reduce their income in order to "save" on wages.
So, while a fun distraction, we're right back to you thinking that money in someone else's hand is better than money in your own. What is your rational? Conventional wisdom says that there is leverage in increased cashflow. Why is the conventional wisdom wrong?
Until one day, when tipping was "replaced" by a 15% "service fee" that was tacked onto the bill. This was sold to members as a convenience: rather than need to carry cash to tip the waiter, you can sign for it and take care of it with your monthly bill. This was misleading because the "service fee" did not go to the waiters (or the bussers), but instead was simply kept by the business office.
To make this all legal, we did all get a raise to the actual minimum wage (rather than the "tipped" minimum wage). This was still a big wage cut, and they lost most of their long-time staff, leading to huge churn. I left shortly after this happened for a better job, but the club closed down completely a couple years later (after 80+ years in operation). I suspect but can't prove that these things are related -- most likely they drank the waiters' milkshakes out of desperation, knowing they were eating their seed corn (to mix a metaphor).