How Fear Collapses An Economy & Employee Morale In An Instant

You may have lived through the great global rice crisis of 2008 without even knowing it.

For Americans, rice is not the key to cuisine. In fact, in the land of beef and bread, a lack of rice may not have seemed like a crisis at all.

But, for many people in Asia and Africa, a four-month spike in the price of rice from $300 a ton to $1,200 a ton was something to lose your lunch over (literally).

“Before that, I used to eat rice every morning,” Ben Flores, a janitor in the Philippines, told NPR Planet Money.

“I really lost weight because of [the rice crisis].”

So why this sudden increase in commodity price? It comes down to rumor and fear.

See, in an effort to keep rice cheap for its government food-distribution programs, India blocked all exports of non-Basmati rice. In October 2007, just one day after the Indian decision, the market (over)reacted.

The stop of all exports of rice from India signaled the potential for a global shortage.

In economics, a shortage of a product results in an increase in price. Although there was never actually a shortage in the production of rice, the Indian policy decision triggered a chain reaction purely from the fear that a shortage might occur.

Soon, people started hoarding. Even countries started hoarding. Panicked government officials in the Philippines went so far as to tell its citizens in a televised announcement to eat less rice.

National reactions like this one only exacerbated fears about the future availability of this food source.

The price of rice continued to rise. Egypt, Pakistan, and Vietnam started limiting exports.

An underground market for rice emerged, where government officials of import nations made bargains with export nations to get “sweetheart deals” for exclusive rights to its rice, explains NPR.

“People panicked everywhere,” Peter Timmer, an emeritus professor of economics at Harvard who is one of the world’s leading experts on the rice trade, said to NPR.

“In Ho Chi Minh City, for heaven’s sake, the center of the second-largest rice exporting surplus in the world, supermarkets and rice markets got cleaned out in two days.”

Keep in mind, this crisis had nothing to do with bad crops. The crisis was not due to unexpected or even expected shortages. The only thing that spurred hoarding was fear. And, the only thing to cure the crisis would be a signal of  restored security.

That’s exactly what two American economists did.

It turns out, that due to a complicated mandate by the World Trade Organization, Japan has been stockpiling rice.

So, economists Peter Timmer and Tom Slayton create a lobbying campaign that put Japan at the negotiating table. Once the country announced it would release this stockpile of rise, the price of rice dropped.

In fact, Japan never distributed its rise stockpile. The simple assurancethat it would, however, was enough to stabilize markets, according to NPR.

Law firm professionals should heed the many morals of this geo-political story (and not just for the benefit of your next sushi lunch). Like in any business, law firm managers are responsible for the signals that a firm sends to its employees.

Rumors about upcoming firings, whispers in the hallways about the next partner nomination, or the general, circulating belief that a firm is making cutbacks on salaries or bonuses can derail the productivity of an office.

One isolated incident—misworded memo or internal e-mail—is enough to trigger a firm-wide frenzy.

To avoid a rapid and possibly instantaneous decline of morale,

  1. Monitor workplace gossip closely
  2. Respond to workplace rumors immediately in a firm and confident manner
  3. Create a management-level policy that outlines steps to address workplace gossip
  4. Make hiring and firing a transparent process
  5. Implement frequent and consistent employee performance reviews

When employees know where they stand and what managers think of the quality of their work product, they’re less prone to panic. In addition, as firms implement consistent and transparent workplace policies and habits, employees will trust in the formal mechanisms in place more than the rumors that question them.

Put an end to fear in order to boost morale at your firm.

-WB

Effective Management of Workplace Gossip: Guide to Handling and Minimizing Toxic Talk is a no-fluff, plain-English report by The Center For Competitive Management that you can use to take control of toxic workplace situations and end negative gossip and rumors circulating within your firm.

This report includes the following BONUS material:

  1. Sample Social Media Policy
  2. Case Studies:
    • A Smiling Backstabber
    • Whose Collection of WHAT?!
    • The Athlete & The Commentary
  3. Sample No Gossip Policy
    • Individual
    • Corporate
  4. Sample Written Warning for Gossip
  5. Ways to Avoid or Deflect Gossip in the Workplace

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