# Do DB Pensions breed mediocracy in the workplace?



## mind_business (Sep 24, 2011)

Being in my mid-forties, and having worked for the same company for the last 21 years, my Defined Benefit Pension is becoming more necessary to provide us with a comfortable retirement, as I'm sure it does for many workers my age or older. However I'm seeing a negative side-affect to DB Pensions. When I look around at my colleaques of approx the same age range, I don't see much appetite for risk taking or to make critical decisions. I work in an industry that requires calculated risks and innovation to continue to grow. It seems like people in their 40's right up to 55 are more concerned about maintaining status quo (don't rock the boat), than taking risks to grow the business. 55 is the early retirement age under our pension rules.

The trend for companies is to move away from DB Pensions to Defined Contribution plans. The obvious advantage is less risk for companies to maintain guaranteed payouts. However, I believe there's an unspoken benefit that I'm assuming companies have recognized ... that DC Plans don't limit the employee in their growth as they get closer to retirement, by having this magical age target that they 'must safely get to'. 

Is anyone else noticing the same thing?


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## Sampson (Apr 3, 2009)

DB pensions could contribute to this, but so could age. I 'm no nearly as rowdy or adventurous as my colleages 10 years younger than I, and I sometimes forget how I could even live my life the way I used to.


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## Daniel A. (Mar 20, 2011)

I don't think there is any correlation between the two.

I was in much the same situation a long term employee. In my twenties when people retired I didn't take notice at all, in my thirties I looked at people retiring as an opportunity to advance, I had drive in my forties, in my fifties I was tired and counting the years.
Lifetime meaning changes as we get older.
I've known people who bounced from job to job every five years and when they hit their mid fifties the desire had changed and they use to comment that I was lucky to be going into a good pension and not worry about finding the next dollar. They had no choice at that point but to keep competing for the next job even though their heart was not into it.

Priorities do change .


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## DanFo (Apr 9, 2011)

While I do agree as you get older you seem to appreciate the pension more and more. I find the younger ppl we hire seem to be lazier to work for the benifits provided. When I ask them to do the work I just want to punch them in their face when they try to argue their way out of it. Is it the genertation gap or just the next next generation is less capable?


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## crazyjackcsa (Aug 8, 2010)

Mediocracy: As the following definition? The purpose of mediocratic ideology is the same as that of Marxist ideology: to make life impossible for genuine intellectuals, i.e. those who might generate real cultural progress. To mask the issue, an ersatz system of high culture has been built up, designed to perpetuate and reinforce the ideology, and to ensure no assistance is given to those whom the system carefully excludes.

No, I don't see it.

Mediocrity? Nah, I don't see it either.


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## praire_guy (Sep 8, 2011)

I wil enjoy a Db pension, and am employed by the public sector. 

Personally it does not effect my work output. 

My job is pretty much the same thing day in day out and depends on being able to do what you are supposed to do or all hell breaks loose. 

I will agree that the younger "millennial generation" has a different expectation on life and always questions "why do I have to do that?"


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## mind_business (Sep 24, 2011)

I should clarify that I'm not comparing older worker's performance to today's younger workers, but rather the current older worker's performance compared to what I've seen their own performance was like when they were 10 or more years younger. It's not across the board, but I would say there are quite a few people that used to perform at a much higher level that are just 'coasting' to their early retirement date. A common saying at our workplace is 'once you reach 55, everything after is just gravy'. 

Perhaps this can all be attributed to just getting older, however I personally doubt it. There are many factors at work, including their experiences in the workforce (ie: sense of loyalty after going through tough projects or perhaps layoffs, etc). And with that, I see the DB Pension as being a de-motivator to taking calculated risks that may jeapardize their employment if something goes wrong. For example, if I lost my job today, I would have to completely re-think my retirement plans, basically having to start saving at a much higher rate. With a DB Pension, the final worth of your Pension at your early retirement date is much higher than if you retired / laid off just a month prior (assuming you were going to take your retirement as a lump sum payout). If I was in a DC Pension, I wouldn't be so focused on getting to that magical early retirement date, and a layoff wouldn't be as devastating to my retirement plans ... aside from having to find new employment.


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## mind_business (Sep 24, 2011)

Daniel A. said:


> I don't think there is any correlation between the two.
> 
> I was in much the same situation a long term employee. In my twenties when people retired I didn't take notice at all, in my thirties I looked at people retiring as an opportunity to advance, I had drive in my forties, in my fifties I was tired and counting the years.
> Lifetime meaning changes as we get older.
> ...


This goes to my point that those who are not in a DB Pension have to keep competing for the 'next job'. Some will be forced into having to compete, while others who aren't burnt out will embrace the competition. Either way, competition results in innovation, risk taking and development of true Leadership in an organization.


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## praire_guy (Sep 8, 2011)

I see your point. Very valid observation. 

In my profession (firefighter) if you are not "pulling your weight" I.e "coasting", you get jumped on very quickly. 

This corrects the problem 99% of the time, but with ALL professions, there are some slacker that slip through the cracks. 

Fortunately, my profession has a very high level of pride, and and commitment that either weeds out at an early stage, or "corrects" problems as they arise. 

Unfortunately, political correctness, and respectful work place legislation somewhat hinders the "way things work", to the point of "if you can't beat em, join em", and thus the "coast" mentality. 

In my experience the pension set up has nothing to do with it.


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## Plugging Along (Jan 3, 2011)

I left a company that had both the DC and DB option. I didn't really see a correlation in terms of the business decisions people made based on which pension they had. I think it is more closely with age. As people get nearer to retirement age, regardless of a pension, many are looking not to rock the boat as they know it is more difficult to find a job when you get much older.

I do think DB manage to retain more people, as once you get past a certain number of years, you are less inclined to leave the company, as it's took costly in terms of opportunity cost. I knew many people who would say I have 'Only' ten year, or seven years left before a pension. I always thought it was crazy to work in a job one hated even for a couple of years, forget about until retirement. I actually choose a DC when I was there. After 14 years, I left, it was a hard enough decision to do so, I think it may have been harder if I had a DB pension. Now, my new job, I have to have a DB pension, even though I know will leave mostly likely in less than 5 years. I wish I didn't have a DB to be honest.


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## mind_business (Sep 24, 2011)

In a profession like Firefighter, I can see how my arguements don't apply as well. I work in an Engineering / Manufacturing field where innovation is doubly important if we're going to succeed globally over the next decade. We need the people with years of experience to step up to take Leadership positions, and be willing to make decisions, and take some level of risk to innovate.

My thread tonight comes as a result of my frustration with some of the Managers at work that should be stepping things up, rather than just maintaining status quo. When talking with these individuals, it quickly becomes apparent they are more focused on getting to 55 than trying to improve things in their area for future growth.


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## mind_business (Sep 24, 2011)

Plugging Along said:


> I left a company that had both the DC and DB option. I didn't really see a correlation in terms of the business decisions people made based on which pension they had. I think it is more closely with age. As people get nearer to retirement age, regardless of a pension, many are looking not to rock the boat as they know it is more difficult to find a job when you get much older.
> 
> I do think DB manage to retain more people, as once you get past a certain number of years, you are less inclined to leave the company, as it's took costly in terms of opportunity cost. I knew many people who would say I have 'Only' ten year, or seven years left before a pension. I always thought it was crazy to work in a job one hated even for a couple of years, forget about until retirement. I actually choose a DC when I was there. After 14 years, I left, it was a hard enough decision to do so, I think it may have been harder if I had a DB pension. Now, my new job, I have to have a DB pension, even though I know will leave mostly likely in less than 5 years. I wish I didn't have a DB to be honest.


And that's my point. A DB Pension is like a trap for most people once they get enough years in. In North America, for the most part, our DB Pensions are not transferable to other companies, so as we get enough years in, say 20 years, we are more apt to just 'stick it out' till retirement if we can. Once we're in that mindset of trying to get to that early retirement date, are we really motivated to take risks or make out-of-the-box decisions that may not pan out??? For some yes, but for quite a few I'd say no.


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## Daniel A. (Mar 20, 2011)

It's possible that some of the folks who are not keen to step up have already seen what happens to the risk taker. Everyone is happy as long as the decision worked out well.
I've watched many teams spend day's of productive time pressuring someone to jump and take the bullet for the team.
Loyalty is a mixed bag at the best of times I can show you many examples.

Vision has to be sold to the right group and it starts at the top.
I do know of cases from my years where a few guy's coasted but only for a couple of years as they still needed raises to have an impact on their DB pensions.
This is one thing about a DB pension those final years earnings are what determines the pension.


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## mind_business (Sep 24, 2011)

Good points Daniel. At our workplace, risk takers that are successful are usually rewarded, those that are not rarely see any dire consequences. You have to really cause financial harm to the company to be fired for bad decisions.

It's interesting that you used the word 'vision'. This is what has been lacking at our workplace for some time now. It's hard to work towards a common goal, if we're not sure what that goal is. But that's another beef for another day


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## sags (May 15, 2010)

The corporate culture in many companies discourages risk taking by lower level management, and rely on a top down decision making process.

Unapproved risk taking is not considered an asset towards advancement.

Older, more experienced people have come to understand this, and their "lack of risk taking" probably has more to do with that understanding..........rather than any pension considerations.

From an upper management level view, who gets to clean up the possible mess created by decisions made independently by hundreds or thousands of employees?


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## financialnoob (Feb 26, 2011)

What sags just said.

It's like that in pretty much any organization regardless of pension options. It's more a function of age and experience.

Or as one colleague said, when I started, I was an idealist. After a while, I became a realist. Now I'm a survivalist.


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## DanFo (Apr 9, 2011)

It could just be complacency. You get so used to doing things a certain way each day it's just hard to change up the routine. As you age you seem to value that db pension more and more but for the younger workers with a family things like medical benifits may be more important. 

Regardless of pension or no pension i think it would be hard to decide to leave a job after being there 14 years, you'd miss the people if not the work. The thing about the DB pension is you know the specific "date" when you can retire well in advance and the date is the goal whereas with a DC or no pension plan the goal is some $$ figure which is tougher to reach in your mind when you first start working.


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## Plugging Along (Jan 3, 2011)

For those who are nearing closer to retirement 50's and 60's I don't think the DB has as much to do with it, as at point it may be more difficult for them to find another job. 

However, I don't necesarily think that it's because of a DB that people make less risky decisions. I don't think the risk or decision making in terms of business decisions has anything to do with the type of pension.


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## OhGreatGuru (May 24, 2009)

Plugging Along said:


> For those who are nearing closer to retirement 50's and 60's I don't think the DB has as much to do with it, as at point it may be more difficult for them to find another job.
> 
> However, I don't necesarily think that it's because of a DB that people make less risky decisions. I don't think the risk or decision making in terms of business decisions has anything to do with the type of pension.


And it should be noted that the majority of organizations with DB pensions tend to be either risk-averse organizations (like public service) or heavily labour/management divided (like autoworkers) where risk is not delegated workers.

The DB pension has been referred to as "golden handcuffs", because after investing a number of years in it people feel they are tied to a job they may no longer like or are frustrated with, not because the DB pension is making them mediocre workers. It's not the DB pension that's making them mediocre, it's the organization. The DB pension just keeps them from leaving, resulting in bad morale & low productivity.


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## Spudd (Oct 11, 2011)

I agree with the golden handcuffs mentality. I think the DB keeps people in a job they may otherwise have quit, which leads to low performance since they're no longer motivated by the work.


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## Daniel A. (Mar 20, 2011)

The vast majority out there don't have DB pensions in the private sector.

If any organization has done a good job of managing people there should not be much dead wood.
Anyone 55 or older in a DB can walk and if they are really a problem for a company their decision to stay or leave can be influenced.


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## Sustainable PF (Nov 5, 2010)

If you had asked if unions breed mediocrity I would answer, yes.
DBPs are often found in work places that are unionized. I work in such an environment and I get pretty annoyed at those protected by a CBA who really shouldn't have a job at all. The position these folks are in would be happily scooped up by someone willing to do the work they should be doing.


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## mind_business (Sep 24, 2011)

I hear what you're saying S_PA, however I'm hoping to keep this discussion to DB Pensions only, not Unions. Those discussions can get nasty, and will sidetrack this discussion.

To all that posted, thanks for the input. Just to clarify my thoughts, since I originally posted this on a day that I was frustrated by the in-action of some at work, I don't believe DB Pensions are the sole cause of poor performance, however I do still believe they play a part as one gets closer to the magical early retirement date. 

I'm a strong believer in natural human responses to protect oneself, as opposed to taking risks. If a person has only 10 years left to obtain a much more secure future by playing it safe, then I believe that 75% or more people will take the safer option. This belief is backed up by my observations at my workplace. Not necessarily the norm at more innovative, high tech companies.


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## fraser (May 15, 2010)

I came from a company that had both.

My experience is that mediocrity is a mirror of the management style or management team that exists within the company. 

I was unfortunate enought to see my employer move from a work environment that promoted excellence, measured risk taking etc. to a centralized command and control environment where employees would not take risks for fear of ending up on a downsizing list.


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## Eclectic12 (Oct 20, 2010)

mind_business said:


> I should clarify that I'm not comparing older worker's performance to today's younger workers, but rather the current older worker's performance compared to what I've seen their own performance was like when they were 10 or more years younger. It's not across the board, but I would say there are quite a few people that used to perform at a much higher level that are just 'coasting' to their early retirement date. A common saying at our workplace is 'once you reach 55, everything after is just gravy'.
> 
> Perhaps this can all be attributed to just getting older, however I personally doubt it. There are many factors at work, including their experiences in the workforce (ie: sense of loyalty after going through tough projects or perhaps layoffs, etc). And with that, I see the DB Pension as being a de-motivator to taking calculated risks that may jeapardize their employment if something goes wrong.
> 
> [...]


I suspect the factors at work and at home are being underplayed.

For example - take the older work who isn't performing as they used to. Is this because they are "coasting" or because they are running appointment to appointment to deal with their parent's health issues? Or maybe their own? Or is because when they were younger, their three kids didn't have a lot of activities compared to the sports tournaments or music lessons/competitions?


As for the DB being a de-motivator, speaking from experience, seeing the gap between what management says (ex. take risks or work together as a team, etc.) and what managment does (ex. let everyone who sabotaged the risk taker complain endlessly or cow-tow to the prima-donna) has changed my approach. This includes what type and how much of extra effort I'm willing to put in. If 90% of the rewards can be earned with 55% of the effort, avoiding a lot of hassle, why put in the extra effort?


Your statement about the DB being a de-motivator to take a calculated risk is a good example. If a calculated risk could result in a loss of employment - once the employee knows this, whether they are young, middle aged or old, not many will take the risk without a strong sense that action taken will work out.


BTW - another factor that is probably more important which isn't mentioned is how easy the employee thinks or knows it will be to get another similar paying job. It's like when IBM offered incentives to get the lower performing employees to take early retirement. When reviewing those who took up the offer, they discovered that the employees they wanted to keep, knew they could get another job and were taking advantage of the incentive program.


Cheers


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