Great Piece on the Failings of Incentives

Why Incentives Are Effective, Irresistible, and Almost Certain to
Backfire | Fast Company

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?