OED's Entrepreneur Blogline

Paternalistic Pitfalls

 

Paternalism  “A policy or practice of treating or governing people in a fatherly manner, esp. by providing for their needs without giving them rights or responsibility."

While paternalism has all but vanished from larger companies and diminished in mid-sized ones during the last decade, it still exists  in to many organizations with fewer than 100 employees [and some with as many as 200 employees].

 There are many pitfalls in being paternalistic, the worst of which is the lack of consistency which ultimately comes from using such a style or of a manager being paternalistic. Other problems which occur are over-staffing, over-compensating, allowance for "empire building", and allowing poor performance to be the norm.

 Paternalism is often easiest to see in smaller companies, and usually in those just starting out. The OWNER/MANAGER in their misguided way believes that they must actually over-compensate in order to attract the most qualified people. Then, in order to retain them, they also must provide every benefit the company can (or cannot) afford.

 Paternalism is also a favorite tactic of the totalitarian owner/manager.  They destroy the potential of their company and demoralize their good employees by treating them like children and allowing them to make only very minor decisions on their own.  This “tactic” feeds the ego of the owner/manager but creates a company that will never reach it’s full potential.

 Paternalistic managers/owners are most noted for making promises to keep people “happy”.  A paternalistic owner/manager tells the staff that, "One of these days, we're going to have a retirement plan, and all incumbent employees will be vested from date of hire." If the company doesn't make a profit and no plan is instituted then people are disappointed and “de-motivated” … the opposite of what the owner/manage tried to do.

 What if the owner/manager says, “You will be given a bonus at year-end" and no obligation on the part of the employee or employees - other than continued employment - is implied or expressed, then there is a promise and a contract does exist. The payment of that bonus is costly. To prove that a contract does not exist is costly. Either way, this style of management usually and ultimately produces more costs than profits.

 Do any of these sound familiar?

 The OWNER/MANAGER finds his Secretary as indispensable. He gives the secretary promotions, salary increases, and bonuses rather indiscriminately. Another executive's secretary, who happens to be a minority employee, is not paid at a comparable rate. Discrimination. Over-compensation.

 In order to keep staff "happy", there is an across-the-board Christmas bonus. Some of the employees have not been performing up to (unwritten and sometimes unknown) standards. Poor performers at a particular level or with particular lengths of service are given as much, proportionately, as those who are excellent performers. Lousy management.  TIP: Never, never, never … give a bonus … only give incentives that are EARNED!!

One manager rates his employees as "outstanding" on a regular basis. Without any investigation as to why these outstanding performers haven't contributed to the company’s profits, the "fair-haired" manager's employees are given merit increases which may not be based on merit, which are inconsistent with known productivity and performance, and which puts the entire wage and salary system out of kilter. In addition, such inconsistency leads to dissension and other employees complain. Taken to an extreme, one could again have discrimination.

The costs of paternalism can be staggering in relationship to the income and size of the organization.

Rather than freezing wages for those who have been overrated, the correction is usually to raise salaries and grades to match. If the discrepancy is 7.5%, this will mean a hugh  additional operating expense even for a smaller company. Further, by giving such increases, even though we call them adjustments most employees think of them based on merit.

Performance ratings by a paternalistic owner/manager are selectively higher than what they should be. Because of that, salary increases may be higher than what written policy [when it rarely exists] calls for.

Paternalistic owners/managers usually avoid negative situations, including that of rating the poor performer. Aside from the disparity (unintentional discrimination, but intent has nothing to do with winning or losing a claim) in the resulting aftermath, not only are wages too high, and other employees upset about disparate treatment, but in order to have a company or individual department be productive, one must hire three poor performers to do the work of one excellent one. This has a snowballing effect which ultimately often leads to layoffs.  When the company must decide who to lay off, and based upon all these “outstanding” performance evaluations (and not one negative one on file), this is a difficult choice.

Perhaps the saddest words to hear from the paternalistic OWNER/MANAGER is, "After all I've done for them, and this is the thanks I get!"

Appreciation is a fleeting emotion and most employees still ask, "What have you done for me lately?" Paternalism is a no-win style of management. Not once will anyone hear an employee say that they are under worked and underpaid.

So, what does all this mean?

Paternalism leads to:

·         unequal treatment of employees;

·         increased costs of running an operation;

·         a good possibility that monetary losses will be sustained;

·         incongruent and inconsistent performance appraisals will be given [if at all];

·         and perhaps even a retreat from the realities of the real world of business.

 

Eric W. Leaman

Trustee

eleaman@oedglobal.org

http://twitter.com/oed4smallbiz
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