Being “Norm”al

Joel Lazer, CPA, CA, CIRPLeadership, Misc

We function in two sets of norms.  There is the market norm and the social norm.  The market norm is pretty easy to define; it is the world of exchanging value (usually money) for service or product.  An example is our job.  We perform a service for our employer and the employer pays us.  We go to a restaurant, enjoy a meal and pay the restaurant.  Social norms are a little more difficult to define. They are the world of doing things for non-monetary reward.  Volunteering for your favourite charity is in the realm of social norm.  Partaking of a meal at a friend’s or relative’s home is in the social norm. And then there are those activities that can be either or both at the same time.

Dan Arielly in his book Predictably Irrational has a chapter on these norms.  His experiments yield the following results: 

  1. Paying for work will result in a level of activity.  The work will equate to the value of the pay.  More pay will result in more work.  Insufficient pay will result in less effort and less work. (Market)
  2. If the work is performed for no pay, a favour, the effort will exceed the paid-for work. (Social)
  3. If the reward for the work is a gift the value of the gift does not change the effort. (Social)
  4. If the reward for the work is a gift and the value of the gift is published the effort will vary with the gift. (Market)
  5.  In the social norm we are cognizant of the other party to the transaction and take them into account.  The thought is, there is long-term commitment or investment.
  6. In the market norm we make decisions independent of the other party.  The thought is the ledger is balanced with each transaction.
  7. Once a transaction moves from social norm to market norm, it is difficult to cross back.

So what does this mean? 

If you are a charity you are better off with volunteers with no stipend rather than a small stipend.  People from all walks of life will volunteer in a soup kitchen and many of us would balk at being paid minimum wage for our efforts.

If you are an employer you get more commitment in the social norm.  If you are supportive of the individual’s goals and concerns, both personal and professional, you will get commitment outside nine to five.  Fair remuneration, by the way, is a given.  You will get more commitment for personal rather than monetary rewards, and do not harbor on the value.  If you ask employees, they will ask for the monetary reward while the personal and the personalized will mean more.

If you are a business, promote community and friendship in your relationships.  The customers will be more loyal.  If you cross over from social to market, you do so at your peril.  The consequences of crossing over will be harsher than starting in the market norm.  We all understand market and are disappointed to think we are in social when, in fact, actions move us to market.  Consider where you want to be and act accordingly. With consistency.

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Lazer Grant in conjunction with the Royal Bank of Canada will be presenting a breakfast seminar on fraud, how to detect it and some tips on how to avoid it.  The seminar will be on September 28th at Canad Inns – Polo Park.  Registration will commence at 7:30, the seminar starts at 8 am with the conclusion before 9:30.

If you would like to attend please respond to this email or call Cynthia Borges at 977-3507 or Tracy Koster at 957-8200.  Seating is limited so please RSVP at your earliest convenience and in any event before September 17th.  We look forward to seeing you there.