Economics

Productivity suffers when employees become emotionally disconnected from their work. Could this be why the world economy is in the doldrums, asks Richard Telofski?

When I taught economics, I would start off the first class of the semester by telling my students that economics is actually more of a social science than a business subject. In response, I would see many puzzled faces staring back at me and other faces pointed down at notebooks (yes, notebooks; it was that long ago), or the obligatory few hands in the air whose owners had on their lips the ever-popular question “Will this be on the exam?”

Despite the confusion at the beginning of the semester, I believe that by final exam day most of my students came to understand what I meant. And what I mean is that economics, around which business revolves, is influenced by people’s feelings and beliefs. Those feelings and beliefs inform their actions which in turn affect the economy. We can see this happening today.

Today there appears to be a free market malaise hampering the recovery of the world's economy. The expected recovery just doesn't seem to be happening. We're in the doldrums. What's the cause?

Well, one theory is that we have the doldrums because businesses are holding back on expansion due to unpredictable governmental policies, causing hesitation in the marketplace. (Witness the current uncertainty in the United States over the healthcare act.) Such a hazy view of the future causes company management to become nervous, unsure, making them think that the free market, with all the benefits that market can hold, might be coming to a close, or is at least threatened.

Such fears prevent companies from making significant decisions. One of those decisions is that they don't invest in their businesses, which in turn puts the “kibosh” on hiring, giving us . . . ta da . . . the doldrums. This economic theory based in social science might be true, although I fear that if you strung together on this issue, head to toe, several hundred economists, they still wouldn't reach a conclusion on it. There is no definitive answer. And since there is no definitive answer to this theory on uncertainty, what I'll offer up here is yet another theory on what's really behind the current economic blues—lousy attitudes.

Late last year Gallup put out a poll that said the majority of American workers are “not engaged” in their jobs. Now, before you think that most American workers are taking three hour lunches and are over-experiencing the advantages of coffee break time, please know that the poll also said that the majority of American workers aren't “actively disengaged” from their jobs either. In that “actively disengaged” category fell fewer than 20 percent of the respondents. So apparently, at least according to the poll, there is no mass misbehavior going on in American companies. But what's disturbing, what's behind my lousy attitude theory is this.

The Gallup poll findings indicate that over 70 percent of American workers are either “not engaged” with their work or are “actively disengaged” with their work. I think we can all agree that such opinions can be characterized as “lousy attitudes.” Could these lousy attitudes be what are behind the economic doldrums? To be consistent with my theory that I espoused to my students on their first day of the semester, I say yes. Here is why.

The results of the survey imply that Americans are largely “emotionally disconnected” from their work. And when people are emotionally disconnected from their work, you know what happens. Companies get less work, or poorer quality, from them. Productivity falls.

As my students came to learn, when productivity falls a company's costs go up, the company's revenue goes down, and profits . . . well, you know the rest. And from profits come expansion, growth, and jobs. Does this sound like the economic doldrums we've been experiencing?

You betcha.

If my lousy attitude theory of economics is true, how do we get out of this mess? Is there some light at the end of this tunnel? Will people's lousy attitudes suddenly change, raising productivity, lowering costs, increasing profits and hiring, making the economy better?

If my theory is true, the bad news is that the doldrums are likely to be with us, at least for the near future. But the good news is that improvements are possible later on down the line. Why?

Before we get to the good news, let’s explain the bad news first. The Gallup poll also indicated that as education and income rise, along with age, emotional engagement with one's job decreases. (I know. It seems counter-intuitive, but that's what the folks at Gallup said.) In a global economy that is becoming more technical and more complicated by the day, employers are requiring more knowledge, more education. As those requirements become standard, income must also rise in order for employers to attract the folks with the knowledge. So, the business environment is driving two of the three factors, education and income, associated with emotional disconnection, and therefore a lack of productivity. What's driving age, the third factor? The inexorable march of time.

The economic downturn has decreased hiring, which has decreased opportunities for new entrants, young people, into the job market. The net effect of this is that older workers, aging workers, remain in the job market, postponing early retirement, or any retirement. And as they age, according to Gallup, their emotional disconnection grows and their productivity shrinks. But, and here comes the good news, this bad behavior occurs only up to a point.

Strangely, when folks cross the magical age of 65, the age of traditional retirement in the United States and many other countries, their emotional connection to their work grows, by almost 50 percent. (Yes. Again, I know that this seems counter-intuitive, but this is what the poll said.) The lousy attitudes disappear and presumably so does their lack of productivity.

I can see your puzzled faces out there staring at your screens. I can also see some of you taking notes (not scribbling in a notebook, but instead typing furiously on your Mac Book.) Is any of this social science-based economic theory true? Well, if you believe that people's attitudes affect the economy and if you believe the results of the Gallup poll, then yes; it must be true.

Will this “lousy attitude theory of economics” be on the exam? If that exam is the test you face in everyday life, then the comprehension of this theory is already on the exam.

So, for best results in your business, study up.