'Free agents' vs 'prisoners' at workplace: Nirmalya Kumar on rewards and punishments

Prisoners & Free Agents
An old school friend advised me that in the Indian context, it is better not to mention I have been fired to anyone as it would have a deleterious impact on my reputation and job.

Nirmalya Kumar. Wikimedia Commons

The events of the last few weeks reminded me about a concept that I used repeatedly in my teaching. It distinguishes between employees who are “free agents” versus “prisoners”. The concept flows from my research in the early 90s on dependence which was inspired by Emerson’s famous 1962 paper in the American Sociological Review.

Dependence of A on B is a function of the availability of alternatives. An employee’s availability of alternatives to the present employer can be conceptualized as how long it would take to find another acceptable job and how much it would pay relative to the current compensation. Clearly, the faster one can find another job at a salary higher or similar, the less dependent one is on the current employer. This led me to place all employees in two buckets those with high availability of alternatives whom I dubbed as free agents versus those with low availability of alternatives or prisoners in my terminology.

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Personally, one of the consequences of this conceptualization was to never negotiate too much on compensation. I always felt that too attractive a compensation package would turn me into a prisoner. My preference was to have the feeling that I could walk out any day if I didn’t like my employment. And, this freedom is worth a few bucks to me as it lets me be who I am and fearlessly share what is on my mind.

In contrast, those who had worked themselves into becoming prisoners by negotiating too high a compensation must behave differently. They have little choice but to make public displays of loyalty to the organizational leader. I vividly recall a meeting where a colleague told the boss: “My instinct is to always agree with you”. When the king is dead, such prisoners are the first to scream “Long Live the King!” In fact, how much an employee is a prisoner versus a free agent can be assessed from how speedily they publicly endorse the new leader.

Of course, the challenge is that some prisoners (perhaps, myself included) think that they are free agents. Such people can be hard to manage as they have a delusional evaluation of themselves. However, using my conceptualization, I found them relatively easy. All that is necessary is to confront them by saying that you should do what is best for you if you feel under-appreciated here. I promise to write you a great recommendation letter. Often, that is the last you hear them complain. Organizations are particularly susceptible to being populated by prisoners who believe they are free agents because it is hard to pinpoint how critical any individual is. The performance criteria are fuzzy and the ratio of individual’s input to organizational output is unclear.

From a management perspective, managing free agents requires a different approach than managing prisoners. Using carrots or rewards to motivate free agents may work, but these methods will not be as effective as they are for prisoners. Sticks or threats, which are extremely efficacious against prisoners, at least in the short run, are useless when deployed against free agents. Free agents will simply leave the organization if their managers ask them to obey under the threat of punishment.

The seductiveness of using threats and punishments as a way of managing people lies in the efficiency of this strategy. Unlike promises and rewards, where if the employee complies, there is a cost to the organization (price of fulfilling the promise and giving the reward), threats and punishments have no such explicit costs associated. If people comply, there is no need to levy the punishment, so it seems free. Over time though, threats and punishments have implicit organizational costs in terms of declining morale and fostering a corrosive culture.

Rather than rewards and punishments, influencing free agents requires more elaborate strategies. For free agents to comply with instructions from superiors, it requires providing information and arguments in support of such requests. Free agents will query why should they do what they are being asked to. Beyond using expertise and information, referent power is also effective on free agents. Referent power exists when free agents view the person who is trying to influence them as inspirational. For referent power to operate, the free agent must look up to the executive seeking to gain compliance from them as this reduces counter arguments on the part of the free agent. The difficulty with expertise and referent power in organizational settings is that it does not always flow with hierarchical positions.

Over my career, I have observed that most managers prefer to be prison wardens rather than viewing themselves as coaches of star teams. You may have noticed that when sports teams do not perform, it is the coach who gets fired rather than the players. Coaches are easier to find than talent on the field. Brilliant coaches deploy expertise and referent power to influence their players instead of rewards and punishments. As they are bound by contracts and hard to replace, it is not easy to let players go. Furthermore, successful athletes are too rich at a young age, limiting the value of monetary incentives.

The academic environment has dynamics comparable to sports teams. Faculty, especially the stars, have tenure (lifetime employment) and annual raises tend to be relatively small compared to what one can earn via consulting assignments. Thus, deans have limited reward and punishment powers. I once recall telling a dean that I do not respond to incentives because that is how you control rats in a cage.

Organization’s contend talent is critical to their success. But the relative proportion of free agents to prisoners necessary for success differs dramatically across organizations. One needs to reflect deeply on the business model and core competences to assess this.

Finally, I hope we reflect on our own managerial style. If you have only managed prisoners, then have you really managed anyone? Once you remove the ability to reward and punish, I find that most managers become naked.

Warmly

Nirmalya

(This article first appeared on nirmalyakumar.com. The writer is an academician and former GEC council member, Tata Sons. You can read it here.)