Great Piece on the Failings of Incentives
Just about when I start thinking “Is Fast Company magazine relevant anymore, should I renew my subscription?”, a gem like this appears.
It's a very old lesson, tracing back through Dr. W. Edwards Deming, but it's yet another Deming lesson that wasn't listened to. Dr. Deming taught, amongst his 14 points:
10) Eliminate slogans, exhortations, and targets for the workforce asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.
11a) Eliminate work standards (quotas) on the factory floor. Substitute leadership.
11b)Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.
If you're a regular reader, you know I love stories about people gaming the system. Not because I think gaming the system is great, but because it illustrates that there's always a dysfunctional way of merely hitting the target. Click the “Gaming the Numbers” link at the bottom of this post for more examples and stories.
It's great to see Fast Company tackling this issue. Check out the full piece, but I'll quote this story in honor of Super Bowl Sunday:
Ken O'Brien was an NFL quarterback in the 1980s and 1990s. Early in his career, he threw a lot of interceptions, so one clever team lawyer wrote a clause into O'Brien's contract penalizing him for each one he threw. The incentive worked as intended: His interceptions plummeted. But that's because he stopped throwing the ball.
Is a story like this urban legend? Any Jets fans from that era willing to corroborate the story? If you look at his career stats, his interceptions did drop from 1986 to 1987. He threw 20 in 1986, which probably spurred the incentive deal.
But keep in mind that O'Brien only played 12 games in 1987 after playing all 16 in 1986. His interception ratio (percentage of pass attempts intercepted) dropped, which is probably the measure they should have used if they were going to use one. But, then his incentive is to try only “safe” passes, which could have a ton of side effects for a football team. Funny story, though, and food for thought.
The authors (the Heath brothers, authors of Made to Stick: Why Some Ideas Survive and Others Die) do a fantastic job of making the case that incentives, particularly those focused on a single objective, are dangerous. A good lesson for all managers and all organizations. But what can we do? Management by Objectives is so ingrained in most organizations…. have you succeeded in eliminating targets and incentives?