Why We Work
A Framework for Job Satisfaction
I come from a financially stable home, do not have any loans or dependents, and am overall very financially free. Additionally, I have a degree in electrical engineering that provides a relatively higher level of job security and job quality. This is important to say, as it affects my decision making process. I acknowledge that not everyone is in the same position as me.
I worked at my first full time post-graduate job for about a year. I learned a lot, my manager and coworkers were fantastic, I had a comfortable income, short commute, and was overall doing really well at the company. I even enjoyed the actual work I was doing. But something just wasn’t quite right. Somehow, I found myself filled with the excitement of an 8am lecture. I couldn’t get out of bed, I couldn’t wait to get home, and I stayed up late to prolong the inevitable morning when I’d have to do it all again.
I quit my job last week. It wasn’t a hot-headed, emotionally fueled decision, but rather a culmination of a lot of thought over the course of a few months. I knew I had it good, so I had to have a damn good reason to leave it. I plunged into my emotions and found the logic, the value system, and the priorities hiding underneath. The results of my introspection are a simple framework for job satisfaction. Many (if not most) of the conclusions are obvious, but I’m an engineer, and I need to show my work.
Why Do We Work?
Employment. All at once a point of pride, frustration, enthusiasm, and necessity. Why do we work? Why do we spend so much of our life working? We spend 40 hours a week at our jobs, and many people clock in even more time. Yeah, we need money to get by, but is that all that’s driving us? What about achieving a goal or a dream, contributing to something meaningful, or helping our communities? What is our incentive?
Some people work for an outcome, while others see it as a means to get by. Maybe the lawyer is seeking to help the downtrodden, the engineer simply loves designing circuitry, and the financial analyst is seeking riches. As I see it, a job consists of a balance between two core elements: finding fulfillment and making a living.
Ideally, a job is what a person does to find fulfillment and make a living.
Everyone values these two factors differently, from only caring about money to not caring about it at all. Most people likely land somewhere in between, striking their own balance. I want to explore what configuration sets us up to achieve these goals. If I care about making a lot of money, should I have a job that gives out bonuses or commissions? If I care about fulfillment, what’s the right balance of enjoying the work I’m doing and how it impacts the world?
After defining the model for each independently, we can apply it to a person by varying the importance of each factor and summing it all up (for the electrical engineers out there, yes, I’m using the principle of superposition mwahaha). Obviously other things like commute time, work environment and more contribute to job satisfaction, but I believe that making a living and finding fulfillment matter far more than the rest, and fulfillment can be a fairly robust catch-all for many other considerations.
Making a Living
Note: Throughout this section, I ask you to keep in mind that I am looking at things through a strict economic lens. The broader scope of fulfillment is captured later on. Additionally, I understand that much of this is based on personal value judgments and is highly idealized. the question of how one actually measures an individual’s output is an incredibly difficult one, and I do not pretend to have the answer.
This is a person. They require some income as an input (I), and output “effort” (Oe). Their job is something they do that allows them to acquire that input, while converting their output effort into output value (Ov). These are not explicitly defined variables, but input and output value are essentially dollar amounts. Output effort (Oe) is difficult to define, as it is a matter of perception and has an emotional aspect to it. It’s essentially a measure of how hard you’re trying.
Let’s assume that an individual primarily aims to maximize their input or at least meet some minimum input level. As a second priority, let us also assume that they want to minimize their output effort. This is synonymous with “I’ll take as much money as I can get for as little effort as possible, but I’ll be happy if I at least have enough to live”.
This is a company, which in this model is the same as a group of people. Typically, a company aims to both make money and achieve some goal. As an example, Netflix aims to make money while providing a fantastic video streaming service. A company can view an employee as a unit that requires input and produces an output. An ideal employee has a larger output than input and is aligned with the mission of the company.
Let’s assume that the company primarily wants to maximize the overall company output. Let us also assume that for a given input to an employee, there is a minimum acceptable output value before a company terminates the employee. This is synonymous with “I’d like to pay you as little as possible for as much of your work as you can perform, and if you do less than what I’m okay with, you lose your job”.
All For One, One For All?
For the Company
A company (or any group of individuals working together) is useful because for a group of employees, the total output can be higher than the sum of their individual outputs. It’s all about efficiency! If you’re faster at making the lemonade and your friend is a better salesperson, then it’s likely more efficient for each of you to perform the role you’re better at. A company is, by measure of economic output, more efficient. This is why companies often have distinct roles, such as a software engineer, electrical engineer, accountant, salesman, etc. This helps maximize the company’s output value.
For the Employee
But how does working for a company benefit an employee? The above-mentioned efficiency, regular compensation, and necessary tools or resources to actually do one’s job are often provided by a company. But this isn’t an absolute rule. All a freelance writer or software developer needs is a computer and the internet. They also need to take care of their own marketing, accounting, and more. As with most things, there are trade-offs.
When it comes to the question of what structure incentivizes a person to make as much money as they can, I would tend to think that a dominating factor is the feedback mechanism. We’ll look at no feedback (salary), direct feedback (bonuses/commissions), and indirect feedback (equity or cooperative ownership).
First, the case of a company with no input feedback. What this means is that an employee’s output value has no effect on their input. Let’s assume Persons X, Y, and Z all occupy similar positions at Company A. Let’s assume that since they occupy similar positions, they all have about equal input.
Note: Many salaried positions give periodic raises or merit increases, but these just tend to stay on par with inflation. I acknowledge the possibility of a merit system that beats inflation, but as it is not the norm right now, I will choose to ignore it.
Let’s assume that Person Y produces more output value over a given time than Person X or Person Z. This absolutely benefits the company, as the overall output value is higher. But does it benefit Person Y? Given a salaried payment structure with no feedback, it does not. There is no economic incentive for Person Y to achieve a higher output value apart from the prospect of losing their job (which is an important prospect to keep in mind). They get nothing for their increased output, but the company does.
What if we assume that Person Y produces less output value over a given time than Person X or Person Z? This hurts the company, as the overall output value is lower. Does it benefit Person Y? It can, but there is still no economic incentive for Person Y to achieve a higher output value apart from the prospect of losing their job. If Person Y can get away with outputting less effort without negatively impacting their input, why wouldn’t they? The employee is essentially incentivized to produce as small an output as they can (without getting fired) for a given input.
What if there is direct, performance-based feedback? One would think that commissions and bonuses as feedback for income would incentivize Person Y to produce high output value. The higher your individual output value, the higher your input! Seems ideal, doesn’t it? However, research shows that such incentives are only effective for the short term, and typically do not result in sustained high output or sustained growth of output.
Notably, this Harvard Business Review (HBR) article referenced earlier does not discuss the effects of equity or cooperatively owned business models on sustained employee productivity. Equity is derived from the indirect success of the company as a whole, as opposed to a single employee’s direct output. Therefore, an employee is incentivized to maximize the output of the company. Is this different from the direct feedback mechanisms of bonuses and commissions? I would argue that it is.
The Endowment Effect, which is the behavioral economics idea that “people place a greater value on things once they have established ownership”, can be interpreted to suggest that equity would result in sustained high output from an employee. Nobody wants their house to lose value, right? I would hypothesize that if employee input is tied to the well-being of the company (as measured by economic value), then the employee is incentivized to sustain high output (resulting in Person Y being a high performer), or at the very least is incentivized to sustain adequate output (avoiding the possibility of Person Y being a low performer).
It is important to note that as the number of employees gets larger, a low or high performing employee’s performance is less noticeable at the company level (each employee’s contribution to the whole becomes a smaller and smaller fraction as the company gets larger). It is also important to note that research (that the HBR article references) shows that after a baseline of income is met, increasing income does not meaningfully incentivize employees to sustain high performance. So we have the following take-aways:
- No feedback incentivizes employees to minimize output value and maximize input, thereby minimizing employee efficiency for the company
- Direct, output value feedback is not a sustainable method of maximizing output value
- Ownership or equity related feedback may provide incentive to at least perform adequately, if not sustain high performance, due to the Endowment Effect
- The larger the number of employees in a company or group, the more likely it is for any one employee to minimize output without getting fired
- After a point, increasing employee input has diminishing returns on output value
What about working for oneself? The input is now directly related to the output value. This incentivizes maximizing individual efficiency (maximizing Ov while minimizing Oe) to at least meet the point at which an individual has high enough income to live comfortably. But remember that an individual will likely be less efficient than a team of more specialized individuals, so this is likely a suboptimal approach, though still entirely possible and certainly not the worst. It all depends on the capabilities of the individual.
Therefore, the following configurations would incentivize a person to maximize their income, or at least meet a minimum acceptable input:
- Slacker: An employee can earn an acceptable input while minimizing output effort at a large company with no performance related feedback, thus meeting the goal of minimizing output effort and achieving adequate input. This is not ideal for a company. An example of this is probably that slacker at work who’s always playing candy crush and takes hour-long bathroom breaks.
- Self-Employed: An individual can work for themselves to meet their input needs, but an individual may be far less efficient at converting output effort into output value than a group of people or a company. So while an individual can achieve the goal of meeting an acceptable input, they are likely to output a large amount of effort. This can be an ideal solution, but it absolutely depends on the person and is likely not the best course of action for many people. Examples may include self-employed accountants, programmers, and more.
- Small Business: The best possible scenario for both a company and its employees to maximize employee input and company output value would be to have a small group of high output individuals with indirect feedback in the company. Examples include small, privately held businesses, such as family businesses or startups.
Finding Fulfillment: Process and Outcome
Let’s explore the other side of work: fulfillment. I tend to think of fulfillment (F) as two pieces, the process (F_process) and the outcome (F_outcome). Someone fulfilled by the process enjoys doing their work for the sake of doing it. This could be a software engineer who might not care about what exactly their code does when it is done, but immensely enjoys the process of writing it.
Someone fulfilled by the outcome enjoys doing their work for the end result of their work. This could be a lawyer who might not enjoy the tedium of looking through old cases and interviewing people, but is exuberant when they prove that their client is innocent. These two pieces are obviously not mutually exclusive. You can care deeply about the outcome of your work while enjoying the process, or not care for either.
We can establish feedback loops similar to those for income. Output effort corresponds to fulfillment derived from the process. Output impact (Oi) and company impact (Oi_comp) correspond to fulfillment derived from the outcome. Taking this into consideration can alter what an individual deems as acceptable for input. For example, if I really value the service my company provides and am thrilled to contribute to it, I might be willing to accept a lower income due to my increased fulfillment.
Additionally, the HBR article cites research that demonstrates how regularly accomplishing meaningful tasks results in sustained high output effort. In an unsurprising turn of events, people tend to do better when they accomplish something that they enjoy or care about. Hiring people passionate about the process or the outcome can allow a company to obtain sustained output value and employee fulfillment. As Ilana Gershon (an associate professor of anthropology at Indiana University) says in her article The Quitting Economy: “In short, when one of the main reasons to work somewhere is because you feel passion, when you stop feeling that passion, it is easier to quit.”
Job satisfaction (S) is the weighted sum of input and fulfillment:
S = A*I + B*F
If you’re someone who doesn’t care about income at all, then A equals zero, and your satisfaction is entirely dependent on fulfillment. Similarly, if you only care about money, B equals zero, and your satisfaction is entirely dependent on income. Again, most people probably have a balance between the two factors.
Applying the Framework
Let’s apply this framework to my job. What is important to me? I have a hankering for wealth, so income is important to me. I definitely need to enjoy the process, and I strongly care about the outcome of my work.
First, the money. I was an employee at a large company in a salaried position (so no income feedback). I was not incentivized to perform well, but I was quite content with the pay and benefits. Not that I did, but I could have done the minimum required of me and been fine. I was content, but not thrilled, with the status of my income.
What about fulfillment? I was designing circuitry and testing it, which is something I thoroughly enjoy. So the process was fulfilling! But what about the end result? I was working for a defense company, and though I understand the necessary evil of it, I did not like being a part of it. My work was contributing to something I didn’t care about, to the point of even feeling slightly bad about it. This was the underlying issue. I got no fulfillment from the outcome of my work or the company’s collective effort.
Despite the pay and benefits, despite the cool stuff I got to do, I did not care about the final result of my work. The end product is very important to me, and here I was, not giving a damn about it. That was a problem. That is why I didn’t want to go to work. That is why I quit.
Why Do You Work?
I think having this logical analysis of job satisfaction is helpful. It helps identify the underlying issue, as opposed to a nebulous cloud of haphazard unhappy thoughts. Despite my desire for reason, it all starts with emotion. It is a matter of understanding why you feel the way you do, which is not always an easy task. I knew I didn’t want to work there anymore, but I feel a lot better about it now that I know why.
So where am I off to next? I’m joining my friend’s startup company. It’ll be a small team, doing work I thoroughly enjoy, with an end product I find pretty fascinating. The pay won’t be as great, but the incentive is present in the form of equity. I know I value fulfillment a great deal, and working on something that I have a vested interest in, both financially and otherwise, helps reinforce my satisfaction.
Enough about me. Why do you work? What do you value? What are you getting out of your job? It’s important to think about the things we take for granted. If you have the luxury to do so, don’t stay at a job you don’t want. It’s a huge part of your life and you ought to spend it as joyously as you can.
Our time is finite.
Don’t waste it.