The number one stressor across the globe is money, and New Mexico is no stranger to financial pressure. New Mexico has one of the highest poverty rates in the United States, and policymakers have been trying to address this with different policies and programs.
Financial stress is driven by various economic factors, and, at the same time, the collective impact of this stress is affecting the broader economy. While financial stress has been shown to affect people's health and overall well-being, new research out of The University of New Mexico showcases how it can undermine how productive and engaged people are at work.
Trevor Spoelma, associate professor in the Anderson School of Management at The University of New Mexico, has new research finding the link between leaders facing financial stress and how that impacts their teams at work.
Spoelma, lead author of the research paper, "The cost of leader personal financial insecurity: implications for adaptive team performance," found that leaders' financial stress spills over to affect how well their teams perform at work.
"This occurs because when leaders are more stressed about money, they feel less in control, and then compensate for this at work by structuring their teams in a way that keeps more decision-making power for themselves instead of empowering their teams," said Spoelma.
This hierarchical decision-making structure slows teams down and reduces how well they adapt to change and uncertainty. The issue of financial stress has certainly been on the rise over the last few years with a global pandemic, rising inflation, and stock market uncertainty.
Spoelma also co-authored another study, finding that leaders were also more likely to display abusive behavior when under financial pressure.
"We found that when leaders were more financially stressed, they felt less in control, and because of this, they compensated and tried to re-gain control at work by engaging in abusive supervision, which includes hostile verbal and nonverbal behaviors like ridiculing or demeaning their subordinates," explained Spoelma.
This was more prevalent in male leaders than in female leaders, and Spoelma attributes this to gender stereotypes and societal expectations about financial aptitude and responsibility. Many men view being responsible and successful with money as core to their identities and, therefore, are more sensitive to cues that they are meeting or falling short of these stereotypes.
"Male leaders are more likely to view financial stress as a signal that they are not living up to gender stereotypes and worry about how others will view them because of this," said Spoelma, "So they are much more reactive to financial stress and likely to engage in abusive supervision because of it."
Most Americans live paycheck to paycheck, and as Spoelma points out, leaders are no exception. Even though many people might assume that those in leadership roles earn a higher income and are immune to financial stress, that is not necessarily the case.
"High earners also can experience financial stress because lifestyle costs, like a newer car or house, increase for many people as they start to make more money," said Spoelma.
This research shows that financial stress is not just personal, it can also spill over to affect others at work. While there is an emerging understanding of how people are impacted by their own financial stress, this research showcases that one person's financial stress can affect others in ways that researchers are just beginning to understand.
"This means we are likely underestimating the true cost of financial stress for organizations," said Spoelma.
Spoelma concludes by providing some recommendations for how to help reduce financial stress and its effects within the workplace. The number one recommendation he made is to make sure employers are paying a living wage. Although New Mexico does have a higher minimum wage than several states, the minimum wage here only covers a fraction of what is considered a livable wage.
"Not only are there costs to society when employers underpay their workers, but companies themselves get less engaged, satisfied, and productive employees," explained Spoelma. "And, as we find in our research, leaders impacted by financial stress treat their subordinates more poorly and their teams' performance suffers."
In addition, Spoelma recommends that companies should view financial wellness as part of their benefits package, just like physical and mental health support. Financial wellness needs to be addressed, and companies can help employees by providing services like financial coaching and financial literacy tools to help alleviate financial stress.
