Managing Business Through Human Psychology - “A Handbook for Entrepreneur” by Ashish Bhagoria - HTML preview

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Finance and Employees’ Psychology

In order to understand the psychology of the employees, one must keep in mind that employees are not investors. They are monetarily compensated for their services. How to decide the salary of an employee? First we decide the role and responsibility and accordingly we decide the compensation for the job. Then we also evaluate the financial benefits from that role. Sometimes when we hire someone we feel that we are not getting the desired yield. In such cases, we should look closely if we have over or under compensated the person. Hiring someone for a job which is higher or lesser than their abilities is a very common mistake made by companies.

In certain cases, entrepreneur expect too much from their employees. However, we must understand that ownership of business is something that the employees may never feel. For them they are compensated for their work and in case business is not doing well they will not share the financial burden. So we should be clear with our expectations from the employees. This is also a major reason for the differences in opinion between the management and the employees.

While deciding target based incentives another important aspect of financial psychology that should be kept in mind is that every person has a limit to his financial dream. For example, we have sales team on salary and we double their target while announcing three times the incentive. Now there will be people who will achieve this target and enjoy the incentive but there might be people who would not even try to get close to the target. The reason would be that the people who did not achieve are the people who cannot think about earning such high incentives and hence do not try to achieve big targets.

Financial Leakage

Financial leakage is a reality in every organization and it is bound to happen. Employees will use organizational resources for their personal use like, telephones, cars and stationary etc. If we put in a lot of check and control on resources and make it difficult for the employees to work, it can go against the organization as the staff may not like it. It is important to have control over the finances and checks should be in place but it should not look dictatorial and suffocating to the staff. Let’s say, there is someone who uses office phone to make lot of personal calls or uses office car for personal use. We should let the person know that we are aware of it and letting them do it to a certain extend rather than coming down hard on them for misuse of organizational resource. If we let the staff decide the use of organizational resource then there is a very high possibility that the misuse will reduce drastically. It’s a simple human psychology, if we stop someone from doing something they will do it even more but if we let them do it while letting them know that we are aware of it, the person’s conscience will stop them from doing it. It’s mainly because of the human psychology where no one likes to be controlled, be it a four year old child or a forty five year old employee.

We must also keep an eye out for the people who have the tendency to cross limits while using the resources and these people can do severe financial damages to the organization. For such people who cross limits, we must act strictly and set examples that organizational resources are privileges and should not be considered as fundamental rights.