Lately, I’ve started noticing a lot of actions that have unintended consequences.
Last week we were putting together an incentive plan for a prospective new employee. It was an interesting plan design, combining tactical activities with revenue growth while maintaining profitability – the usual attempt to pay for performance. This can sometimes have unintended consequences.
I have completed hundreds of bonus and incentive plans. Every time I complete a bonus and incentive plan I recall W. Edward Deming’s views on incentives: “The best use of money as a motivator is to pay people enough to take the issue of money off the table.”
Deming was a firm believer that, regardless of how much thought went into an incentive plan, an employee could always figure a way to make it work best in their favor, often at the expense of the company.
A football quarterback was throwing a lot of interceptions. So the team manager developed an incentive plan that would penalize the quarterback over time when he threw an interception. This led to unintended consequences: Fewer passes and (ultimately) fewer touchdowns.
On a more somber note, New York State embarked on a program to improve patient outcomes in cardiac surgery. The program simply graded the cardiac surgeon on the success or failure of the surgery — a simple program that was easy to administer.
Unfortunately, the program backfired. Before the report card, an extremely talented surgeon would attempt surgery on a high-risk patient. After the report card, because of the risk of receiving a failing grade, the most talented surgeons refused to operate on high-risk patients.
Patient outcomes actually declined. (Here is a link to the article in the New York Times – “Giving Doctors Grades” by Sandeep Jauhar.)
Creating intrinsic motivation is really the key element to a high-performing organization.
As Wayne Gretzky said, “You have to shoot the puck to score goals.” For years Gretzky led the NHL in shots on net, and also led the league in missed shots.