To benchmark or not to benchmark…?

Posted on December 16, 2012 by admin

I have been thinking a bit lately about using benchmarking in conjunction with Give Freely Receive Freely offerings. This could potentially address a number of challenges people have with GFRF.

Challenges

Perception of value

One of the challenges with GFRF in this status driven, money oriented, marketing focused, accumulation crazy, money centric society we live in is that a lot of the time people take price as an indication of quality or value of something that is offered. All too often price is an entirely inadequate indicator, but nonetheless it is there deeply rooted in a lot of peoples psyches.

With this deeply entrenched thinking, when people encounter something which they can have for ‘free’ (GFRF), unfortunately I think many of them assume a lower quality or value is being offered. This can lead them to not take full advantage of what is being offered – instead going for something that has a price that matches their expectations of the value they wish to receive.

I think with time and exposure people can overcome this bias as they realize that just because they can get what is offered for free, this does not equate to low quality or value. In fact GFRF provides the ultimate conceptual counterbalance to this perception – there is no upper limit to what you can choose to pay (give in return) for something received on a GFRF basis either. In a way I think over time this could lead to perception of higher value for GFRF offerings than offerings with set prices because the offerer is also giving you something else – Freedom to assign value as you see fit. What price do you put on freedom in any of its forms? I think it is very valuable.

But still, this shift requires a change from what is the predominant mode of current thinking and having a benchmark price can give a receiver a starting point in determining value. They still then have the freedom to choose to assign a different value to it outside of the benchmark indication if they wish.

Input costs

This leads to another challenge with GFRF that benchmarking can address. A customer (receiver) generally does not have a full appreciation of the cost of the inputs involved in providing what they receive (rent, labour, materials, R&D, taxes, administration, communications etc etc), so they don’t know if what they pay for it will even cover the cost of provision or whether it may actually cover the costs many times over.

Benchmarking can address this by giving an indication of an exchange level that covers the givers costs and provides them with what they need to be able to comfortably continue providing what they offer. Receivers can still choose to give less or more than this according to their personal circumstances and their desire to provide additional support, see the venture grow and expand, express gratitude etc.

Freedom discomfort

In my experience a lot of people like the idea of GFRF, but when confronted with actually doing it find it very uncomfortable – perhaps due to some of the reasons discussed above. They don’t want to rip off the person giving to them but don’t know how to assign a value to what they have received without some kind of external direction. In the end I usually help these people out by giving them some kind of idea of what I used to charge when I had set prices, what other people charge for similar services etc.

A benchmark would probably help these people to come to a price point they are comfortable with a lot more quickly and easily, but this then leads into some of the downsides of having a benchmark for GFRF offerings.

Less engagement required

By giving someone a benchmark price they no longer have to think as much about what has gone into what they have received, they no longer have to think as much about the welfare of the person or people they have received from, basically if they want to they can just take things on face value and go back to thinking more about themselves and less about others.

I think overall this leads to less understanding, care, compassion and to use a cliched term – ‘connection’ between parties to the exchange. It is easier for people to be wrapped up in their own world, selfish and self centred because they are not required to put as much thought into their interactions with others.

Of course just because there is a benchmark doesn’t mean people will think/act in this way, just as with set prices people don’t always think/act in this way. But the thought required to decide for yourself what or how much you will give to someone else in return for what they provide you acts as a great prompt for people to think in a caring, compassionate way for the people around them. I think this benefit is weakened by having a benchmark in place.

Intrinsic Value Identification

In my mind this is probably the biggest downside to having a benchmark. People don’t have the same level of stimulus to identify and appreciate the intrinsic value of something. It becomes much easier for them to rely on an externally imposed indicator of value and assign their own internal value and appreciation accordingly.

I think many of us do not come close to fully appreciating so many of the most valuable things in our lives. The people we love and have close relationships with. Nature and the environment (a beautiful sunrise, clean air, fresh water, trees, etc). Freedom to act, think, change and grow.

These things are FREE yet have infinite value. Also while being FREE, they are not without cost. Relations require time, people require communication and support, our environment requires that we take care not to destroy it, our freedoms have been defended repeatedly with the lives of soldiers fighting those who would control us.

We can’t really assign a price to these things. Money may be involved in supporting and protecting them, but it does not represent their value. Somehow putting a price in dollar terms on these sorts of things cheapens them and causes us to miss their true value. One of the big problems in our world today is people focusing so much on money and what they can get for it that they do not appreciate or make full use of what they already have.

Similarly having a benchmark is putting a dollar value on what is offered – and I think can take the mind away from understanding and appreciating the true value received, regardless of money being exchanged to support the provision of the offering.

Less Freedom

Basically putting a monetary value on what is offered makes the whole exchange less free. People are inclined to base their value perception and exchange behaviour around the indicated value even if they don’t have to because it is a benchmark rather than a set price. The fact that a number has been put on it causes them to begin to think in a certain way about it relative to the benchmark.

In essence the canvas for the exchange is no longer blank it has a mark on it that participates are likely to evaluate things in relationship to. They no longer have full freedom to determine and define their own parameters.

This can lead to them feeling inadequate or ‘cheap’ if they pay less than the benchmark, and conversely it may restrict them from giving as much as they would like because they don’t want to overpay too much above what something has been deemed to be worth.

Much as with the other downsides discussed, having a benchmark doesn’t necessarily mean people will behave in this way. They can still choose to do what they like, even with a benchmark they have great freedom in the exchange under GFRF. The situation just doesn’t encourage the same level of freedom. Essentially to obtain it they have to first ‘paint over’ the established benchmark on the ‘blank canvas’ so that it does not influence their own thinking and perceptions. It is one more step to full freedom in their own mind which most people won’t take, most people will leave the benchmark there and evaluate in relationship to it.

Does the idea have merit?

In the end I think the idea of benchmarking alongside GFRF offerings is not ideal, but does have merit. It makes the idea of choosing your own price for exchange more accessible to many people so that they will feel more comfortable doing it. It could act as an entry point to GFRF for people, and once they get comfortable with GFRF with a benchmark they might be able to move on to a more ideal type of GFRF exchange without benchmarks – much like taking the training wheels off a bike.

I know that many people struggle with the practicality of GFRF exchange, even if they like the concept, and having an easier version for them could be a good way to start them experimenting in exchanging in this way.

Someone who attended one of my qigong workshops recently told me about her experience with a cafe in Auckland that used to operate ‘gift-economy’ (very similar to GFRF). She said much as she liked the idea she couldn’t bring herself to go in and eat there because she didn’t know how to come up with a price. Now that cafe no longer operates on ‘gift-economy’ it has set prices, probably because lots of other people were also uncomfortable exchanging in that way without reference point. Benchmarking could have been some intermediate ground that might have worked and encouraged their ‘gift-economy’ principle to grow.

A friend of mine who is a lawyer operates in a way similar to this (yes a lawyer with a heart and conscience… they do exist). His firm tells their clients what their full chargeout price for work is, but because they work with a lot of startups recognizes that they may not be able to pay the full price and allows them to come up with a price they can afford. In this way they allow the client to use their services at a price they can afford, without the client perceiving those services as lower quality due to the lower cost. The expectation is set that when the client can afford to pay more they will come up to the full pricing. This helps the law firm earn the money that it needs across different clients and avoids clients jumping ship to another more expensive firm due to perceiving the lower cost services they have received as lower value.

It is a practical solution that also allows compassion, and one that I respect greatly.

Scale of GFRF approaches

Practicality is important, great ideas are only valuable if you can actually get them to work. Along these lines I think there is a scale of ways that GFRF can be implemented according what is most ideal vs what is most practical/workable. That scale probably looks something like this:

(Underground GFRF is another idea I’m toying with, I wrote about it in this post here)

I think that moving at least some way up the scale is preferable to staying stuck at conventional pricing.

Implementing a Benchmark

There are several ways you could go about setting benchmarks if you chose to.

The pie in the sky method. This is where you set a ridiculously high price on what you are offering, thus increasing the receiver’s expectation of what they should pay for it in the hopes that they will feel good about paying a reasonable price and that they have actually got far more value than this. This has been used extensively in high pressure sales environments, particularly infomercials and internet infoproducts. I guess they use these strategies because they have found that they work, but I feel like they are intellectually dishonest (why exactly are they selling you something of ‘over $5000 value‘ for the ‘low today only price of $27‘ again?).
The competitive market approach. This would involve comparing the prices that others in the market offer similar goods or services for and pricing according to the relative quality of what you offer.
The cost plus approach. This would involve adding up the total cost of providing what you do and then adding a margin so that you can make some kind of profit.
The end result approach. This would be where you decide how much you would like to earn and how many goods/how much service you are comfortably able to offer and divide the end sum by this to come up with unit pricing.

These are a few methods you could use to come up with a benchmark to use. Each has things in its favor and against it. I think I would be inclined to use a mix of methods 2. 3. and 4. to set a realistic benchmark and have faith that what is received comes out somewhere in that ballpark – with some paying more and others paying less, rather than setting an unrealistic benchmark to allow for people to consistently pay less than the benchmark.

The Decision…

So back to the question of whether to benchmark or not to benchmark.

I can see it as possibly being useful. I know that in the past I have tended to set my prices too low, I think I have tried to price for the lowest common denominator to make what I offer as affordable as possible for everyone. But this has meant that I have not always been able to offer the level of service I would like too due to having insufficient resources. It has also sometimes led to a lower perception of value – which can be very frustrating, knowing that often you are actually providing something of better quality than someone else charging several times your price and having people perceive the value based on the price rather than what is actually received.

Benchmarking could address some of these issues by giving people a pricing indicator in line with the quality offered while allowing those who can’t afford that to still pay what they can afford to receive the service. I prefer the purity of straight GFRF though. I think there are additional benefits to this that you don’t get with a benchmark.

I don’t know at this point if I will use benchmarking with my GFRF, but it is another useful compromise approach that I could use if needed as I continue to experiment with GFRF.

Is the love of money really the root of all evil?

Posted on June 13, 2012 by admin

You’ve probably heard the saying “The love of money is the root of all evil”. It comes from the bible in 1 Timothy chapter 6 verse 10. It’s quite a bold statement, identifying a single cause as the root of evil. But is it true? and if so why?

I think to understand the statement we need to look at it carefully. It doesn’t say the love of good food is the root of all evil. It doesn’t say the love of fast cars is the root of all evil. It doesn’t say the love of houses, clothes, fashion, jewelry, holidays, entertainment, international travel or art is the root of all evil. It specifically identifies love of MONEY as the root, not these other things which we sometimes associate with money implying perhaps that it is possible to love these other things without it leading to evil – but not money.

Whats wrong with money?

So whats wrong with money? Well money is pretty useful in many ways, it is hard to imagine a means of exchange that would allow the for efficient movement of goods and services without some form of money, whether that be printed pieces of paper, chunks of metal, beads, or more recently recorded electronic data. It would be hard to obtain many of the wonderful things we have available to us today if we had to directly trade goods and services with each other for everything we wanted. I am not sure what Lenovo would want from me in exchange for this laptop I’m typing this post on, and I have no idea what I would trade directly with my internet provider for their services which I will use to upload this post to my blog. Money allows us to participate in exchange for a wide variety of goods and services whether or not the provider of those goods and services wants anything we can provide because as long as we can exchange what we provide what someone else wants we can use money as a common denominator and medium of exchange.

When you think about it, money is actually pretty wonderful, so what is wrong with loving it? I think the problem becomes apparent when we dig more into what money actually is. Essentially money is ‘made up’, there is no intrinsic value in the electronic bits of data that represent money for most of us today. If you try to eat it, you will gain no nutritional value. If you try to use it to protect you from the weather, you will gain no shelter. Money is an abstract representation of underlying value, BUT it does not truly have any value itself.

How does a money focus obscure or detract from true meaning and value?

I think when we begin to love money, we begin to separate ourselves from understanding and loving REAL things with REAL VALUE in our lives. Essentially we start to miss the point and love something that is not real which leads us no longer understand the true value of things.

There are many examples of this in life which are easy to identify and for us to understand.

When an artist decides that they will create their art with a primary focus on how much money they will make from it, most people consider that this in someway debases and devalues their art. It no longer has the depth of meaning, beauty and integrity of art that has been produced with some other primary motivation. A classic example of this are the Hollywood movies where the decisions have made by executives with only money in mind, they may still be quite entertaining, but they end up being a bit bland and generic compared to a film where someone has been allowed to express their own authentic creative vision. Somehow they seem to lack soul.

The extreme example of this would have to be prostitution where sex is bought for money. While this is becoming legal in more and more parts of the world, most people still consider that this cheapens the experience of sex as it becomes separated from emotions of love, commitment and so on. What physically takes place may be exactly the same, but because the motivation is money, somehow the meaning changes.

I think this general principle carries over into all areas of our lives. Whatever we do purely for money is somehow cheapened and not as highly valued as the things we do for some other reason.

Of course there is no reason why you can’t earn money from doing the things you love, and I think this is true of the happiest people in this world. They have found things that they love and feel good about doing, and found a way to be paid the money they need to get by in this world while doing it. But if you asked them why they do what they do – they would not say it is for the money. You might get answers along the lines of that they are following their passion, they like making a difference in people’s lives, it makes them feel good, they have a creative vision they want to fulfill and so on. In fact you would likely find that these same people would be doing the things that they do even if there wasn’t any money involved because they appreciate the intrinsic value of it and happily they also get paid to do it.

The problem comes when money becomes the prime motivator, and this can occur even in areas where the individual previously had a non-monetary motivation. When the focus shifts to the money, the value and meaning of the activity goes out of focus. This often results in people doing things they don’t really want to do – for money. They feel they just have to. How many people work at jobs they hate and which seem to have little meaning for them, but they do it for the money? It is likely that the job has value, and that they may even enjoy the job if they were able to reconnect with that value as their motivation; but the money focus takes the meaning out of it.

Also how many people would take food away from hungry people, or take someones house from them? Very few, when these things happen there is usually an outcry because people sense the injustice of the situation and do not wish others to be harmed. But how many people will allow someone to buy a product they cannot afford, or charge fees for services at a level that people who need them cannot pay? Many people do every day. Somehow the layer of abstraction and separation from meaning that money provides makes these things much more palatable as the effect on the other person is not as obvious.

And then of course there are those people who actively embrace their love for money and make it their prime objective. Are these people happy? They can seem that way at least for a while as they achieve a measure of success within their own definition. But what are the things that really make us happy in this life? The exact details are probably different for different people but I would guess there are a few common factors: good food, adequate shelter, good health, loving relationships with family and friends, a means of expressing yourself and believing that what you do has purpose and meaning. I think all too often those who put money as their goal find at some point that they have sacrificed one or more of things in their pursuit of money.

How do we overcome this problem?

So how then do we overcome a love for money? I think we need to connect or reconnect with the value and meaning of our actions. When we do this we are more likely to act with integrity, compassion and passion. I am sure that many people are able to do this within an ordinary job or payment system, but for many of us it is a real challenge as the constant need for ‘money’ even just to pay for the basics of food, shelter, clothing etc can cause us to take our eye off the real value of things.

Various religious orders have addressed this issue by swearing vows of poverty, renouncing all property and wealth and living only on the donations of others. In this way they can be sure that their actions are not motivated by money. These same religious orders tend to isolate themselves from the rest of the world so that they can concentrate on their prayer and meditation.

I think the ‘give freely, receive freely’ concept can give these same benefits without the same need for religiosity or isolation from the world. In fact it encourages us to engage fully with the world around us and focus on giving as much of value as we can to the people we interact with, but as we do not know what we will receive in turn, it helps us to keep our focus on the true value of what we are doing isolate this from the exchange of money which may or may not take place as a result of this.

My experience

I know for myself as I have begun to experiment with giving and receiving freely in my clinical work I have found that it is easier for me to focus purely on the client and the treatment they are receiving. I do not feel the same need to keep track of time, to make sure I don’t go overtime or equally to make sure that I fill the whole appointment time up so that they will get good ‘value for money’. Instead I am able to focus more on exactly what they need. If I have done all I feel is best for them at the moment and there is still time left, I don’t need to pad out the treatment – as they are only going to pay me what they want to anyway. Equally I no longer have to think of my ‘time as money’ and make sure the client doesn’t take too much of it either. Of course I still need to keep track of time from the point of view of scheduling and allowing the client to get to other appointments they may have as well, but not having a set price somehow removes this strong association between my time and money.

I really like that aspect of it. Time really isn’t money, it is far more precious than that. Removing money from the time equation makes each moment of life more alive and meaningful.

Conclusion

So is love of money really the root of all evil? I think there is a really good case for saying that it is, especially if you put it into context as robbing actions of their true meaning and value as the root of all evil.

Does this mean we have to forsake money and all the good things we can obtain with it in order to overcome evil? I don’t think so. I want the good things in life, and I think it is healthy to have them, money makes exchange so flexible I think it can make it easier for more of us to obtain those good things. They key is to find a way to be connected with the meaning and intrinsic value of what you do and not let the abstracted value of money take your focus away from what really matters in life and what really makes you happy.

I have painted a few things in pretty broad brushstrokes in this post. I may have got a few things wrong, and hey – I’m just new to this concept of exchange myself, I’m sure there is a lot more I will learn as I continue to experiment with it and my views on things may change. But what are your thoughts on this topic? Please feel free to leave comments below.