Why Does the US Keep Minting Pennies? For All the Same Reasons Every Organization Resists Change.
Grow Your Business, Not Your Inbox
I can tell you why your company won’t change, but that advice comes at a price. It will cost you a pretty penny. You won’t receive a bill for my services. It’s not worth my time to send an invoice and not worth yours to pay it. You will, however, need to find a penny. No, I mean it. Go ahead and look for one. The top drawer, the curb outside the office, the car cup holder or the sofa are all good places to start.
The truth is, a penny isn’t worth, well, a penny. At a 1.4-cent production cost for a 1-cent value, the 2.4-gram coin will be more of an annoyance than a useful practicality. To further add to the uselessness dilemma, producing the penny also has non-financial ramifications that may exceed the monetary expense, including such factors as environmental issues associated with mining and manufacturing. Yet, we continue to mass-produce this little nuisance. Why? The answer lies not solely in economics, but in organizational psychology as well. In fact, the same factors that keep the penny alive may very well be the factors that keep your organization from succeeding.
The penny can teach us a great deal about human and organizational behavior, particularly as it relates to change. Many of the factors that deter change in your organization can be traced back to the same inhibitors acting on the penny.
So, my two cents. When confronted with stalled change initiatives, take a look at what we can learn from the penny, and watch for some key phrases and practices that tell you the change is likely to fail.
We’re making progress! Look how far we’ve come already.
The penny: According to the U.S. Mint, pennies, despite their copper-ish color, are made mostly of zinc. The major costs to mint and distribute the penny can be attributed to metal, manufacturing and transportation. From 1837-1857, the cent was made of bronze: 95 percent copper, with five percent tin and zinc. Copper content was gradually reduced over the years until it settled on the current alloy makeup of 97.5 percent zinc and 2.5 percent copper. Due partly to process improvements and changes in alloy composition, the cost of the penny has actually decreased over the past decade, despite the fact that the cost of metal has increased. This reduction in costs has led some to excuse the penny’s loss, justifying the costs with the excuse that expenses are trending downward.
Business: Some organizations use trending in finances, manufacturing, employee engagement and other key measures to cover up the fact that things aren’t going so well. For these organizations, holding on to the hope that a (very unlikely) solution will be found, while continuing to do what they’ve always done, holds about as much promise as tossing a penny in a wishing well.
The numbers don’t lie.
The penny: Here’s a fun fact. You probably already know it’s not financially worth your time to pick up that penny on the street in front of you. With a federal minimum wage of $7.25 per hour, you would need to stoop down 5,800 times per workday -- every 12 seconds -- to hit that base compensation mark. That’s over 1.5 million deep knee bends per year. On paper, you would be far better off kicking that discarded penny into the storm drain than looking to accumulate more. Critics of the toss-the-penny school of thought point out that, without the penny in circulation, merchants will simply round up, automatically raising the price of goods and services purchased. Yet, some people (like me) feel a sense of duty and thrift when picking up a penny in the street. (Actually, I’ve graduated to nickels and above, but you get the picture.) It’s not just about the numbers. True, numbers don’t lie, but they also don’t tell the whole story when it comes to change. There’s a degree of emotional attachment to the current state, and that emotional grasp is hard to break by simply presenting the numbers.
Business: Spreadsheets and numbers may make sense to the brain, but change involves capturing the heart as well. Many organizations ignore this notion when attempting to create change that requires engaging the hearts and minds of employees.
We need to study this more.
The penny: In 2010, Congress directed the U.S. Mint to find a cheaper way to manufacture the penny. The Mint soon concluded there wasn’t one, or at least one that would bring the manufacturing cost of the penny to lower than its face value. The fact is, we’ve known for many years that the penny was costing us more than the face-value of the coin, and that it was highly unlikely that changing the composition, manufacturing process and distribution would change that fact. More research and study won’t change the basic issue, particularly if all signs are clearly pointing to the problem.
Business: We often use the “let’s take a better look at this before we make a final decision” approach to prolong or avoid the needed change, even though the problem is staring us in the face -- and everyone knows it.
It’s not a priority for us right now.
The penny: Because of the penny’s low value, consumers neglect it. As a result, pennies stack up in glass jars and sofa cushions, rather than being saved and used for purchases. And as more and more purchases are being made without cash -- don’t even get me started on Bitcoin -- the preference to ignore the farthing is likely to increase. The issue is further exacerbated by the fact that the Mint must now produce more pennies because a significant number are quickly removed from circulation or are discarded. Last year, it put out 9.1 billion pennies, more than all other coin denominations combined. In fact, if we really want to get technical, it may be better to address the nagging nickel nuisance before addressing the perpetual penny problem. The five-cent piece costs as much as a 9.4 cents to produce. Yet, even fewer people are looking to throw the nickel on the chopping block.
Business: Organizations focus their attention on the problems screaming for attention at that moment. With the deluge of tasks and initiatives facing most employees, change initiatives that don’t receive time and attention throughout the organization, including from the top, are quickly deprioritized.
It’s a problem, but we’re making up for it in other areas.
The penny: It’s easy to ignore a problem when profit is still generated overall. In the case of the penny, a loss of tens of millions of dollars per year doesn't put the U.S. Mint in the red. The Mint operates off the revenues received through selling coins to the Federal Reserve Banks, as well as through collector’s coins known as “numismatic products.” The revenue received through the latter is more than enough to direct some of the attention away from the loss incurred by the penny’s shortfall.
Business: Today’s companies have become adept at putting off or ignoring a problem when the bottom line looks solid, even if current practices can be quite costly over time. Until the potential outcome of change is viewed as significantly greater than the cost of remaining at the status quo, the likelihood of change success is small.
That won’t work here. We’re different.
The penny: U.S. history shows examples of when the U.S. Mint has eliminated minimal-value coins, including the half-penny which, at that time, had the same buying power as today’s dime. A dozen countries have recently dropped coins of questionable worth. Five years ago, Canada began efforts to phase out its penny, estimating this move would save consumers $11 million Canadian. Australia and New Zealand haven’t had one- or two-cent coins in circulation since the early 1990s. Even the U.S. Department of Defense has abandoned the penny oversees, claiming they aren’t cost effective. Yet, proponents of the penny are quick to suggest that the U.S. is somehow different. Most evidence doesn’t support these claims, yet we tend to ignore best practices elsewhere “because we’re different.”
Business: Organizations quickly point out that “we’re different” when it comes to solutions proven to be effective outside of their domain. They discard best practices from other departments, companies or industries because they don’t match the organization’s situation exactly. The truth is, even though you might tell yourselves otherwise, your organization probably isn’t all that special.
Perhaps the penny is valuable, if for nothing more than to help us see our own resistance to organizational change. So, a penny for your thoughts, even if that’s not saying much. In fact, both of us may be losing money on that deal.