Change the world

17/04/2020

The results of an experimental study carried out among formal and informal traders in East London selling “slap” chips and ice-cream bring a small ray of hope to financially-stretched  small business owners.

Research by Nelson Mandela University Department of Economics Prof Syden Mishi and University of Fort Hare final year masters student Kelvin Tantsi shows that small business owners can use methods other than money to boost employee productivity.

The study compared the effects of giving a cash tip or a compliment on portion sizes at fast-food outlets - and found that a compliment given with a smile led to a bigger helping of slap chips and ice-cream.

“It was mainly small formal businesses, and a food caravan at the end of the street,” Mishi said of the research conducted at four Buffalo City eateries.

“One of our aims was to show how to motivate companies, given that they are mainly small businesses who may not be able to pay any more.”

The Faculty of Business and Economic Sciences associate professor, who started this National Research Foundation funded research while at the University of Fort Hare in 2018, said the experiment had particular relevance now.

“We are in lockdown, and there is no doubt this will negatively affect business, especially the small to medium micro enterprises which are already struggling, and to which the government has pledged support.

“However, our findings bring a ray of hope to the informal sector and to the broader business community.

“Firms can do better by complimenting their work force on how they soldiered since the first case of COVID-19 in SA, for example, and let them know what it means to the firm for them to be safe and stay healthy.

“Tell them the critical role each employee plays in the recovery path of the firm, and at all possible, assure them they will receive full pay during April and beyond amidst work disruptions.”

Tantsi, 32, said six students undertook the research on the streets of East London, but he had stepped in personally as well.

“I had to go myself because I needed to ensure that every one of the students used the same words and same methods,” he said.

“For the compliment, I would walk in, show a smile and say ‘you sell the best chips in town, please can I have a large chips’.

“If I was giving a tip, then I would give them R30 and say ‘keep the change’.”

Mishi and Tantsi said they had presented their results at a conference where it was “well received” and now were working on a paper for academic publication.

Mishi said the experiment was part of ongoing research into the economics of reciprocity.

“Experimental research is very popular in other parts of the world and this experiment has been done in countries like Germany and Austria but it is relatively new in South Africa.”

In classic economic theory, Mishi said employers needed to incentivise through higher wages. In this model, employees put in the least possible effort and demand higher wages, while employers asked for extra effort and wanted to pay the lowest possible wage.

However, these opposing goals “would not be good for recovery … hence our results are exciting”.

He said most businesses, formal or informal, would need to work extra hard to recover from lockdown and recoup lost revenue.

The Faculty of Business and Economic Sciences results specifically showed that:

  • Complimenting increases effort as measured by weight of product a shopper would receive, for example, by pressing harder or for much longer on the ice cream machine, or giving a huge scoop of fried chips or chicken livers;
  • Compliment brings more effort than monetary reward or tip;
  • Not complimenting or giving a tip produces the least effort.

“A quick observation is that it is possible to motivate your team to greater effort without having to necessary part with additional cents,” Mishi said.

“The reward in this study is done privately as compared to publicly made awards like certificate of ‘best employee’.

“Most often they think that a bonus or a higher wage is the only way to reward staff, or public rewards like an ‘employee of the year’. 

“People have different characteristics, and some do not like public recognition, it can also lead to competition in the workplace.”

Behavioural insights like this are key to unlocking productivity and growth in South Africa, said Mishi.

“Take care of your employees now, for they shall be there to rebuild your business to fully recover from the COVID-19 effects and the depressing general macroeconomic environment.”

The study showed how the weight of chips served changed depending on, from left, no tip or compliment given, a tip only, centre, and a compliment, right. 

Contact information
Mrs Bridget De Villiers
Lecturer
Tel: 27 42 504 3885
bridget.devilliers@mandela.ac.za