Wednesday, 18 July 2018

Perpetual Guardian, four-day workweeks and the Hawthorne effect

Back in February, the trust management company Perpetual Guardian caused a bit of a media stir by announcing that it would trial moving all of its employees to a four-day week (with no salary reductions). Importantly, they also announced that they would evaluate the trial. We were let in on the results of that trial today, as the New Zealand Herald reported:
The Kiwi boss who trialled giving his staff a full salary for four days' work says it was a success and that he wants it to become permanent at his Auckland company.
Andrew Barnes, the chief executive at Perpetual Guardian, says he's already made a recommendation to his board to take the policy beyond the initial eight –week trial...
During March and April, Perpetual Guardian conducted what was essentially a corporate experiment in allowing the company's 240-person staff to retain full pay as well as a three-day weekend.
To ensure an objective analysis, Barnes invited academic researchers Jarrod Haar, a professor of human resource management at AUT, Dr Helen Delaney, a senior lecturer at the University of Auckland Business School, into the building to observe the impact of the trial on the workforce.
From the outset, there was always the risk that reducing work hours would increase the stress on staff to achieve objectives while also leading to lower levels of output as working time was cut by a fifth.
But, as the trial rolled on, the researchers found quite the opposite to occur. 
"What we've seen is a massive increase in engagement and staff satisfaction about the work they do, a massive increase in staff intention to continue to work with the company and we've seen no drop in productivity," said Barnes.
You can read Jarrod Haar's report (or at least a brief version of it) here. The key point though, that makes me skeptical that we can take too much away from this trial, is that the data are based on surveys of staff and supervisors.

Think about the incentives here. Your boss offers to reduce your workweek to four days as a trial, with no decrease in your pay, and announces that they will be evaluating the impact of that trial. You're then asked to fill out a survey just before the trial starts, and then again just after the trial ends. The survey asks a bunch of questions about how you feel about your job (and other related stuff).

You know this is just a trial. If the trial goes well, then it's likely your boss will want to make the change permanent. If the trial doesn't go well, then you're probably back to working a five-day week. What would you do?

It doesn't take a PhD to work out that staff survey data is basically worthless here. You want something that the staff can't game. The supervisors' survey answers are no more valuable. They have the same incentives to game their responses as the staff do. Maybe you could observe behaviour, or measure workplace productivity? Nice try, but if the staff know what you're measuring they will game that too.

This is an example of the Hawthorne effect, which The Economist does a great job of explaining:
The experiments took place at Western Electric's factory at Hawthorne, a suburb of Chicago, in the late 1920s and early 1930s. They were conducted for the most part under the supervision of Elton Mayo, an Australian-born sociologist who eventually became a professor of industrial research at Harvard.
The original purpose of the experiments was to study the effects of physical conditions on productivity. Two groups of workers in the Hawthorne factory were used as guinea pigs. One day the lighting in the work area for one group was improved dramatically while the other group's lighting remained unchanged. The researchers were surprised to find that the productivity of the more highly illuminated workers increased much more than that of the control group.
The employees' working conditions were changed in other ways too (their working hours, rest breaks and so on), and in all cases their productivity improved when a change was made. Indeed, their productivity even improved when the lights were dimmed again. By the time everything had been returned to the way it was before the changes had begun, productivity at the factory was at its highest level. Absenteeism had plummeted.
The experimenters concluded that it was not the changes in physical conditions that were affecting the workers' productivity. Rather, it was the fact that someone was actually concerned about their workplace, and the opportunities this gave them to discuss changes before they took place.
The Perpetual Guardian situation isn't quite the same as the original Hawthorne experiments, but in general we refer to the potential for Hawthorne effects as occurring whenever you conduct an experiment in a workplace and the workers know they are being monitored more closely than usual.

How do you get around this problem? You need to find something that the workers will find more difficult to game. For instance, if you think the four-day week will reduce workplace stress, you could test workers' cortisol levels before and after the trial. It is much more difficult for workers to game a biophysical response than a survey response.

So, the takeaway message here is: don't read too much into the Perpetual Guardian trial. If they roll out the four-day week on a more permanent basis, it will be interesting to see if they still think it's a good idea after a year or two.

[Update: Jarrod Haar wrote an article about the research on The Conversation. No limitations such as those I have highlighted are mentioned.]

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