The Hawthorne Effect on Your Cashflow

In order to shed light on how I could motivate my staff during difficult times, my father told me a story about a factory where the lighting was gradually reduced.  As a career-lifer of Corning, he worked with many electrical and lighting companies, so his insight went a bit deeper than the famous research done at Western Electric in Chicago (known as the Hawthorne studies which evaluated worker interactions).  His point was to demonstrate that once people get used to having something, they respond in a negative way when it is removed.  It makes me think of a word I generally dislike – deserve.  As an example, during 2001, the brokerage firm I worked for froze pay raises and cash bonuses.  My staff went from working hard and making very good money, to still working hard and making substantially less money. 

After I recently wrote about the importance of honing the skill of managing individual cashflow, I thought about my father and his lighting story.  After the recession of 2008-2009, many people lost sources of income and saw the value of assets plummet.  In essence, the lights were dimmed.  During a difficult personal financial time or struggling larger economy, the ability to turn down the spending faucet is critical.  These decisions can have a significant influence on how you end up financially in the long run.  So, if you go from a position of wealth to a position of less wealth, be sure to make adjustments accordingly.  If you continue to act entitled to the lifestyle to which you had become accustomed, you may end up in the darkness of financial distress later down the road.

© 2012 Pawleys Investment Advisors, LLC.  All rights reserved.

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