Dealing with Scarcity Mentality in the Workplace

It is 2:05PM West African Time, five minutes past the deadline of his one-hour lunch break and he’s still never stepped out of his small-sized personal office since he resumed work today. Behind his desk and his personal computer, he bemoans the sudden stiffness of things. He has a wedding to do in a couple of weeks, and the bills are already coming in fusillades. The expectation is high and the remuneration is low. Yet he can only hope to reconcile the difference within the shortest possible time.

The customer service line has rung for the sixth time and he’s neglected the caller on the same frequency. He’d promised himself to be undutiful today and hopefully for the next couple of days. It’s deliberate. It’s a protest against the air of inequality and the politics in the office. Some folks take so much of the pie while he goes home every month with something closest to a zilch. ‘’The system is skewed,’’ he says to himself.

The telephone rings for the thirteenth time now, but this minute he receives the caller hesitantly. After hurling invectives, the caller who identifies herself as an investor wants to withdraw all her funds effectively immediately. For all he cares, the customer can breakneck.

Economic-Social Misalignment; Psychological imbalance

Scarcity mentality is a mental and attitudinal predisposition to immediate self-gratification that often emanates from an unbridled sense of wants. Human wants are limitless, and the resources to satisfy them are limited. Yet with this economic reality, the individual is expected to characterize psychological and emotional maturity including cognitive thoroughness, empathy and self-discipline in their day-to-day social relations. Scarcity mentality is the psychological imbalance that is activated by a misalignment of the individual’s economic reality and social awareness or cultural expectation.

The psychological imbalance can be analyzed as a function of the relationship between the three elements of the unconscious mind (i.e id, ego and superego) as explained in Sigmund Freud’s Psychoanalytic theory. The id is the innate or biological drive that propels the individuals to compete for scarce resources for economic survival, the superego entails the learned cultural values that promote a healthy social relations among individuals, and the ego aims to effect the equilibrium of the id and the superego. Scarcity mentality develops when the Id is stronger than the superego.

The zero-sum paradigm

Since scarcity mentality is highly likely in social relations, knowing how to deal with it is a sine qua non in people’s management. In his seven habits of highly effective people, Stephen R Covey identifies scarcity mentality as one of the great barriers of organisation performance. Covey defines scarcity mentality as the zero-sum paradigm whereby people see life as a finite pie, such that if one person takes a big piece that would leave less for everyone else. According to Covey, with a scarcity mentality, we operate from our lizard brain or in fight-or-flight mode, and this leads to conflict and behavioural issues in social relations.

Invariably, scarcity mentality in the workplace emanates from resource allocation. People suffer from a scarcity mentality in the workplace due to skewed allocation of resources or an awareness of the possibility of such happening. “When funds, promotions and pay raise are limited, managers hoard information, micromanagement abounds and generally short term thinking is the norm” argues Forbes‘ contributor, Coroline Castrillion.

According to Covey, managers or employees with a scarcity mentality have a very difficult time sharing recognition and credit, power or profit – even with those who help in production.

The HR-management Paradox

From the traditional management perspective that great businesses develop from efficient use of scarce resources, business managers are inclined to be parsimonious and minimize cost in all aspects of their businesses including people’s management. However, the HR-management Paradox raises a perspective that suggests managers can only hope to minimize operational cost and achieve economies of scale when they improve on human resource spending. The paradox emphasises the overarching influence of the employees’ psychological, social and economic wellbeing on the finance and the general wellbeing of the business.

Keeping the cost down and as manageable as possible is a desirable skill in business management. However, what is undesirable is a tendency of the employer and manager to trade off the best staff strength attainable while rationing. Many employers therefore tend to promote a scarcity mentality in their organisation by deliberately remaining miserly about their human resource spending. Meanwhile, attempting to attain organisational efficiency with the least labour cost possible can be counterproductive, and usually it is, however desirable this may be to managers and business owners.

‘’Managing labour costs isn’t a crazy idea of course. But stingy pay and benefits don’t necessarily translate into lower costs in the long-run’’ — Wayne F. Cascio.

‘’Our system has fallen into a self-reinforcing command loop constructs as follows; increase shareholder value at all costs without regard for the human factor. Sadly if you do not cure the cancer in the root of the tree, not only will the branches and leaves die; but so will the tree’’—Richard Branson.

The Price of Cheap Labour: What the data says

Case1

Wayne F. Cascio, a renowned American Economist and professor of management and organisational psychology at the University of Colorado Denver Business School, published his article, The High cost of Low wages on the Harvard Business Review in 2006. The article provides compelling data which challenge the assumption that labour rates equals labour cost. Using a cross-cultural comparative analysis of Costco and Wal-Mart Sam’s club, two leading brands in America’s warehouse retailing, the study enunciates the effects of labour cost containment on organisational efficiency.

Costco was reported to have 338 stores and 67,600 full-time employees, and was number one in the United States, accounting for about 50% of the market share, whereas, Sam’s Club with 551 stores and 110,200 employees came as number two, with about 40% of the market share. The average wage at Costco was $17 per hour, whereas, a full-time worker at Wal-Mart was making $10.11 an hour on average. On the benefits side, 82% of Costco employees had health-insurance coverage, compared with less than half at Wal-Mart. And Costco workers were paying just 8% of their health premiums, whereas Wal-Mart workers were paying 33% of theirs. 91% of Costco’s employees were covered by retirement plans, with the company contributing an annual average of $1,330 per employee, while 64 percent of employees at Sam’s Club Wal-Mart were covered, with the company contributing an annual average of $747 per employee.

Apparently, Costco’s culture was more expensive but its turnover was unusually low, at 17% overall and just 6% after one year’s employment. In contrast, turnover at Wal-Mart was 44% a year, close to the industry average. In return for Costco’s generous wages and benefits structure, the company had one of the most loyal and productive workforces in all of America’s retailing and probably the lowest shrinkage figures in the industry. While Sam’s Club and Costco generated $37 billion and $43 billion respectively in 2005, Costo raised its revenue with 38% fewer employees and selling to higher income shoppers and offering more high-end goods. Consequently, Costco generated over $21000 in US operating profits per hourly employee, compared with $11,500 at Sam’s club Walmart. ‘’Costco’s stable productive workforce more than offsets its higher cost’’ Cascio said.

Case2

A startup company in the financial service industry in Nigeria reported to have experienced its worst shock since the inception of the business. In addition to the impact of Covid-19, there were complaints about incessant turnover, employee disloyalty, leakage and shrinkage which compound an overwhelming overhead. However, a closer observation of the company reveals more people have been taken in than the subsisting structure is actually capable of positioning to create value. Then rationing became evident.

Majority of the employees complain about being underpaid and undervalued; some complain about not seeing any substantial improvement in their careers despite their loyalty, and about 27 percent of the observed employees say they are open to seeking opportunities for improvement elsewhere, suggesting more turnover in the future. Many of the employees at the firm demonstrate a loss of morale and lack of confidence in the system, and a few high flyers had to be checked out of the system on the grounds of financial and emotional misconduct despite impressive track records.

Thinking forward

Employees react differently to job dissatisfaction. However, when employee dissatisfaction becomes commonplace, a high sense of scarcity manifests in the organization, motivating the employees to leave or cheat the system.

To prevent the scarcity mentality, managers must adequately match talents with value, and ensure the psychological, social and economic wellbeing of their staff even though this may mean having few people on the payroll. When employees feel they are getting the best they could from their jobs, chances that they would work against the system are low.

Employers or business owners can encourage an abundance mentality in their organization by treating employees as their number one brand ambassadors. People assess the capacity and potential of a brand through the quality of the lives of the employees.